For the 2025/26 year of assessment, Hong Kong profits tax is reduced by 100%, subject to a ceiling of HK$3,000 per case, and the relevant legislation was gazetted on 22 May 2026 (Inland Revenue Department, 2026-27 Budget tax measures page, checked 2026-09-30). The reduction applies on top of the two-tiered rates that have been in force since 2018/19: corporations pay 8.25% on assessable profits up to HK$2,000,000 and 16.5% on any part over that, while unincorporated businesses pay 7.5% and 15% on the same two bands (Inland Revenue Department, Profits Tax page, checked 2026-09-30).

What does the one-off reduction actually apply to?

Four boundaries matter, and all of them come from the IRD's own budget measures page (checked 2026-09-30):

• The reduction is 100%, capped at HK$3,000 per case. Profits tax is computed for each business, so the ceiling operates at that level.
• It applies to the final tax for 2025/26, not to provisional tax.
• The enabling legislation was gazetted on 22 May 2026.
• The measure is described as one-off for 2025/26. The IRD page does not state whether any similar reduction applies for 2026/27.

A practical consequence of the "final tax only" wording: the reduction changes what is ultimately payable on assessment, not the provisional tax charged in advance for the same year.

What are the two-tiered rates?

Source: Inland Revenue Department, Profits Tax page, checked 2026-09-30. The two-tiered regime has applied from the 2018/19 year of assessment.

When do the two-tiered rates stop applying?

The two-tiered rates are not automatically available to every entity a person controls. Under the IRD's Q&A on the two-tiered regime (checked 2026-09-30):

• If, at the end of the basis period, an entity has one or more connected entities, the two-tiered rates apply only to the one entity nominated to be chargeable at those rates. The other connected entities are charged at 16.5% (corporations) or 15% (unincorporated businesses) on all of their profits.
• Where a natural person owns two or more sole proprietorship businesses, each business is treated as a separate entity, and the two-tiered rates are restricted to the sole proprietorship that has made the election.

So the question is not only "is this entity's profit below HK$2,000,000", but "has this entity been nominated, and does it have connected entities".

When does a newly registered business get its first profits tax return?

Timing, according to GovHK and the IRD (Profits Tax Return page, last revision July 2026, checked 2026-09-30):

• A newly registered business will generally receive its first Profits Tax Return some 18 months after the date of commencement of business or the date of incorporation.
• The IRD's bulk issue of Profits Tax Returns takes place on the first working day of April each year.
• Returns, together with any required supplementary forms, should generally be filed within 1 month from the date of issue.

The 18-month gap means a company incorporated in 2026 typically falls into the annual April cycle rather than receiving a return immediately, which is why the 2025/26 reduction and the standing two-tiered rates are usually considered together at the first assessment.

What is charged at incorporation alongside the tax question?

A company formation application is deemed to be an application for business registration as well, so the business registration fee and levy must be paid together with the Notice to Business Registration Office (IRBR1) (Companies Registry, incorporation FAQ, checked 2026-09-30).

Sources: Companies Registry, Major Fees page, checked 2026-09-30; Inland Revenue Department, Business Registration Fee and Levy Table (PDF modified 2026-02-27), checked 2026-09-30. The earlier 01.04.2025–31.03.2026 scale (1-year HK$2,200 with HK$0 levy; 3-year HK$5,720 with HK$300 levy = HK$6,020) has been superseded and no longer applies.

For a local company applying for business registration through the Companies Registry, the amount payable for the first certificate is determined by the date the incorporation submission is made, and the certificate commences on the date of incorporation (IRD fee table, checked 2026-09-30).

FAQ

Does the HK$3,000 reduction apply to provisional tax?

No. The IRD states the one-off 100% reduction for 2025/26 applies to final tax only, subject to a HK$3,000 ceiling per case, and not to provisional tax (checked 2026-09-30).

Can two connected companies both use the two-tiered rates?

No. Where connected entities exist at the end of the basis period, only the nominated entity is charged at the two-tiered rates; the others pay 16.5% or 15% on all profits (IRD two-tiered Q&A, checked 2026-09-30).

What are the two-tiered rates for a sole proprietorship?

7.5% on assessable profits up to HK$2,000,000 and 15% on any part above that, with a standard rate of 15% (IRD, checked 2026-09-30). If one person owns several sole proprietorships, only the one that made the election gets the two-tiered rates.

When will a company incorporated now file its first profits tax return?

Generally about 18 months after incorporation or commencement, and returns are issued in bulk on the first working day of April, with filing normally due within 1 month of issue (GovHK/IRD, checked 2026-09-30).

Is there a reduction for 2026/27 too?

The IRD material describes the 2025/26 measure as one-off and does not state whether a similar reduction applies in 2026/27 (checked 2026-09-30).

Sources

• 2026-27 Budget – Tax Measures, Inland Revenue Department
• Profits Tax, Inland Revenue Department
• Q & A for Two-tiered Profits Tax Rates Regime, Inland Revenue Department
• Profits Tax Return and Supplementary Form to Profits Tax Return, GovHK / Inland Revenue Department
• Business Registration Fee and Levy Table, Inland Revenue Department
• Major Fees under the Companies Ordinance, Companies Registry