Guide for global SMEs: How to file tax for local and cross-border profits in Hong Kong

For many small and medium-sized enterprises (SMEs), especially those operating across multiple markets, tax filing is often manual, time-consuming, and prone to errors. This article explains how SMEs can simplify tax filing, and explores how Airwallex, an all-in-one financial and payment platform, can help your business embed compliance and automation into day-to-day operations through its comprehensive suite of financial features, including Bill Pay, Corporate Cards, Expense Management, and Global Accounts.

Does your company need to file Profits Tax?

Under the Inland Revenue Ordinance, whether you operate as a sole proprietorship, partnership, or limited company, if you earn profits from a trade, profession, or business in Hong Kong, you generally need to report and pay Profits Tax on profits “arising in or derived from Hong Kong.” In other words, where you register your company is not the only deciding factor. What matters more is whether your profits come from business activities carried out in the city.

Tax filing timeline and key steps

If you want to avoid last-minute firefighting during tax season, you should treat tax preparation as an ongoing project throughout the year rather than a one-off annual task. 

You can start by setting a clear financial year-end date and building an organised framework for your financial statements and document management. 

Then, build a systemic expense management workflow by centralising receivables, payables, corporate card spend, and reimbursements to record and categorise every transaction and receipt as they occur. 

Finally, review and reconcile all accounting records on a monthly or quarterly basis. Prepare your profit and loss statement, balance sheet, and cash flow statement to keep everything in sync with your accounting system.

What new companies should know about their first Profits Tax Return

If you have just set up a new company, you can usually expect to receive your first Profits Tax Return around 18 months after you commence business. Once you receive the form, you must file it by the deadline shown on the return, or you can enjoy an additional one-month filing extension beyond the original due date if you choose to file it electronically via eTAX.

Standard filing deadlines and extensions

The Inland Revenue Department (IRD) usually issues Profits Tax Returns on the first working day of April each year, and the standard filing deadline is one month from the date of issue. Even if your business has not yet made a profit, is still in the preparation stage, or has already ceased operations, you generally still need to complete and return the form on time once you have received it.

If your company needs a longer deadline, your appointed tax representative can apply for an extension under the “Block Extension Scheme for Lodgement of Tax Returns,” following the circular letter that the IRD usually sends to tax representatives in March each year.

How is Profits Tax calculated?

From the 2018/19 year of assessment onwards, Hong Kong has adopted a two-tiered Profits Tax rates regime. The current rates are:

• Corporations (Limited companies): 8.25% on the first HK$2 million of assessable profits, and 16.5% on any remaining amount.

• Unincorporated businesses (sole proprietorships or partnerships)：7.5% on the first HK$2 million of assessable profits, and 15% on any remaining amount.

For example, if a corporation records HK$3 million in assessable profits for the year, it pays 8.25% on the first HK$2 million (HK$165,000) and 16.5% on the remaining HK$1 million (HK$165,000), bringing its total Profits Tax bill to HK$330,000.

Note that separate companies within the same group cannot all benefit from the lower band at the same time. The group must designate one entity to enjoy the reduced rate on the first HK$2 million of profits to avoid double-claiming.

Which expenses are tax-deductible?

Under section 16 of the Inland Revenue Ordinance, you can deduct operating expenses that you incur in earning your profits. These expenses may include staff salaries, rent, refurbishment of business premises, and purchases of computer hardware and software. However, you cannot deduct domestic or private expenses, or any spending that does not relate to generating business profits. After filing your return, you should keep and properly organise the relevant receipts, contracts, and payment records so that you can substantiate your claims if the IRD reviews your case in the future.

How to manage cross-border expenses for tax deductions?

Once you understand the basic tax rules, the next step is to tighten how you manage day-to-day expenses and cross-border transactions. For example, reducing situations where employees pay out of pocket with their personal cards and avoiding multi-currency invoices from overseas suppliers becoming scattered and disorganised, which can result in lengthy reconciliation and FX calculations, or even penalties if you file your Profits Tax Return late.

With Airwallex, you can address these challenges end to end through Bill Pay, Corporate Cards, and Expense Management:

• Bill Pay: Streamline the entire payable process – from uploading invoices and capturing data with optical character recognition (OCR) technology, through approval, to final payment – while syncing transactions to your accounting system so you maintain a traceable audit trail for tax.

• Corporate Cards: Issue virtual cards instantly, record employee spending in real time, and set card-level limits and merchant category code (MCC) controls to avoid mixing up personal and business expenses

• Expense Management: Let employees snap and upload receipts on mobile while AI OCR automatically recognises and categorises each transaction, turning them into review-ready reimbursement records for compliant tax reporting.

Additional tax challenges and solutions for global businesses

If your business operates across multiple markets, it could be significantly more complex when handling cross-border expenses. Below highlights three common issues that you may encounter and how to address them:

Set FX conversion rules for multi-currency income

If your company collects online payments via US-based payment gateways, and you have overseas customers paying you in various currencies, the gateway might first convert the funds into US dollars for settlement before you eventually report the income in Hong Kong dollars for tax purposes. This creates multiple FX conversions within a single transaction flow. 

To keep your audit trail clear and organised, your company should implement a consistent FX conversion policy, for example, using a fixed month-end date for conversions, and keep detailed records for every incoming payment, including the original currency, amount, transaction date, fees, and exchange rate applied. This can make it easier to verify your income from each market at tax time.

Set FX revaluation policies to avoid overstating profits

As exchange rates fluctuate, there can be gaps between your expected and actual FX gains and losses across different overseas markets. For instance, you might record a US$10,000 receivable using an exchange rate of 7.80 at month-end, but when your customer settles the payment later, the rate moves to 7.75. This FX difference not only affects your actual profit, but can also cause you to report a higher level of assessable profits at tax filing if you do not update your figures in time.

That’s why it’s important to store all FX transaction records, timestamps, and rates on a single platform, and run regular revaluations on foreign-currency assets to reduce the administrative cost of reconciling FX differences.

Prepare documentation for offshore income exemption

Businesses generate offshore income when they earn profits from activities outside Hong Kong. However, not all offshore income is automatically exempt from the Hong Kong Profits Tax. To claim an offshore profits exemption, your company needs to provide proof that the income does not arise in or derive from the city, for example, by stating where you signed contracts, where your team performed services, and how you arranged logistics.

It’s best to prepare a complete document pack in advance to support any offshore profits exemption claim, so that when the IRD asks for a review, you can submit the supporting documents immediately.

How Airwallex helps you tackle local and cross-border tax challenges

The table below highlights common challenges that Hong Kong SMEs face, and shows how Airwallex can solve your everyday pain points to help you simplify tax preparation and reduce compliance risk:

As a one-stop financial platform, Airwallex helps Hong Kong SMEs embed tax compliance into day-to-day operations, turning tax filing into a traceable, automated routine rather than a once-a-year fire drill. For instance, with Airwallex Bill Pay, you can fix scattered payables and duplicated payments by centralising invoice uploads for your team, while the system automatically extracts key details with AI OCR and sets payment due-date reminders to avoid missed or delayed payments.

To get better control over company spending, you can use Airwallex Corporate Cards to set card limits and MCC controls in real time, record each transaction, and receive real-time notifications to ensure each payment follows your internal approval and control policies. 

For multi-currency income and FX tracking, you can open Global Accounts with local account details in your key markets to receive payments in more than 20 currencies, then centralise your funds and export statements directly to speed up tax handling.

Make your finance operations ready for every tax season

Integrating tax preparation into your day-to-day operations is one of the most effective ways to stay ahead of your tax obligations and reduce last-minute stress. When your receivables, payables, FX, reimbursements, bills, and accounting all run on a single platform, tax filing becomes an ongoing, automated process rather than a once-a-year scramble. Keep your audit documents ready so you can export invoices, payment records, and attachments in just a few clicks for submission to the IRD.

Turn monthly close into your best preparation for the next tax season by bringing together payments, FX, expense management, and accounting into a single workflow! Open an Airwallex Business Account today to explore how we can support your business. 

Frequently asked questions about SME tax filing

If my company is running at a loss, do we still need to file a tax return?

Yes. Even if your business records a loss for the year, you still have to complete and submit your Profits Tax Return on time once you have received it from the IRD. However, you can generally carry forward verified tax losses to offset future assessable profits to reduce your tax burden, so make sure you organise and keep your audit reports and profit-and-loss records ready for submission later.

What happens if we file our Profits Tax Return late?

Late filing or failure to file a Profits Tax Return may lead to penalties or even prosecution in more serious cases. If you need more time, you should arrange an extension in advance through your tax representation under the IRD’s Block Extension Scheme, or file your return via eTAX to get an additional one-month filing period.

Are stock investment gains subject to Profits Tax?

This depends on whether your stock investment gains form part of your core business activities. If your company regularly trades stocks or other financial assets as part of its day-to-day operations, the related gains are generally considered taxable profits. However, if these gains arise from infrequent, one-off transactions that are more capital in nature, they may fall outside the scope of Profits Tax, subject to how the IRD assesses your company’s specific circumstances.

How can I replace a lost Profits Tax Return?

If you lose your Profits Tax Return, you can request a duplicate copy from the IRD either in writing or by visiting the IRD’s Enquiry Service Office in person. You should also review and update your company’s correspondence address and contact details to avoid missing any documents in the future. If you use eTAX, keep an eye on electronic notifications and in-platform messages to stay aligned with the IRD’s updates.

Can I still claim deductions if I don’t have complete receipts?

You generally can’t. The IRD expects businesses to keep relevant receipts and records for at least seven years from the end of the relevant year of assessment so that they are available for inspection if the IRD conducts a review or audit later. Over the long term, the most effective way to reduce the risk of missing documents is to embed receipt collection and categorisation into daily operations. For example, using Airwallex Bill Pay to manage supplier invoices and payment records, and using Expense Management to capture and classify receipts digitally so that supporting documents are always on hand when you need them.

Sources:

Information on Profits Tax was retrieved as of January 2026, from below sources. Information provided is for reference only. Please refer to the official website for the most up-to-date details.

1. https://www.ird.gov.hk/eng/tax/bus_pft.htm

2. https://www.gov.hk/en/business/taxes/etax/faq_about_efiling_pfr.htm

3. https://www.gov.hk/en/residents/taxes/salaries/allowances/deductions/

4. https://www.gov.hk/en/residents/taxes/taxfiling/filing/types/index.htm

Disclaimer: This article was prepared in January 2026 based on voluntary online research and publicly available information. We have not personally tested every tool or provider mentioned. This article is for educational purposes only, and readers should independently evaluate each service provider based on their specific business requirements. Content is updated every six months. To request an update, please contact us at [email protected].