Unlimited company tax: BIR60, BIR52 and deductions

An unlimited company does not need an audit and only pays profits tax. Sole proprietorships file BIR60; partnerships file BIR52. If turnover exceeds HK$2 million, financial statements must be submitted together.

Key takeaways

Tax concession: two-tier profits tax
The tax rate on the first HK$2 million of profits is only 7.5%, and 15% thereafter
Tax returns are sent out around April each year and can be filed on paper or electronically
Sole proprietorships fill in BIR60; partnerships fill in BIR52
Office rent, salaries and the like are tax deductible
The owner's salary, private expenses and fines are not tax deductible

What taxes does an unlimited company pay? Key points on Hong Kong profits tax

The tax arrangements of an unlimited company are relatively simple. It mainly pays profits tax only and does not need to deal with salaries tax or other company-level taxes.

However, when calculating the actual tax, you still need to understand how “assessable profits” are calculated and the tier rules of the “two-tier profits tax”:

What are “assessable profits”?

Assessable profits means “the company's total income − deductible operating expenses = assessable profits”.

The IRD uses this figure to calculate how much tax you need to pay. Clearly distinguishing which expenses can be deducted is therefore the most important part of tax filing.

How the two-tier profits tax is calculated

To ease the burden on SMEs, Hong Kong has introduced a two-tiered profits tax”:

Profit tier	Tax rate	How it is calculated
Tier 1 (first HK$2 million)	7.5%	Enjoys a half-rate concession, so the tax burden is very low.
Tier 2 (balance above HK$2 million)	15%	Only the “excess portion” is calculated at the standard rate.

Example: suppose the company earns HK$2.5 million this year.

First HK$2,000,000 × 7.5% = HK$150,000
Balance HK$500,000 × 15% = HK$75,000
Total tax payable HK$150,000 + HK$75,000 = $225,000

Company tax filing timeline and the actual process

Date of issue and submission deadline

The IRD usually sends out profits tax returns every year on the first working day of April (around 1 or 2 April). After receiving the form, you normally have one month to complete and submit it.

For ease of administration, the IRD divides filing deadlines into three categories according to the company's “accounting date” (year-end date):

Code	Accounting date range (year-end date)	Deadline after extension
Category N	1 April – 30 November	No extension (usually early May)
Category D	1 December – 31 December	15 August of the year the return is issued
Category M	1 January – 31 March	15 November of the year the return is issued

How do I apply for an extension?

Extensions are not automatic. If you qualify under Code D or Code M above and want more time to prepare, you can apply to the IRD.

There are 2 ways to apply:

Apply yourself: submit an application to the IRD in writing.
Block Extension: a collective application made through a tax representative.

Filing method: paper vs electronic filing

Paper submission: complete the physical form, sign it and post it back to the IRD.
Electronic filing (eTAX): submit through the eTAX online platform.

Sole proprietors who file online (completing the BIR60) automatically receive an additional 1 month grace period (for example, the Code N deadline can be extended from early May to early June).

Unlimited company filing requirements: differences in completing forms for sole proprietorships vs partnerships

Sole proprietorships: key points for completing the BIR60

A sole proprietor does not receive a separate company tax return; the business information simply needs to be declared in the owner's personal “Tax Return - Individuals” (BIR60).

When completing it, note that the total income specified by the IRD refers to “total sales”, that is, the income figure before deducting any costs and expenses. Do not mistakenly enter the “net profit” after deducting costs, otherwise a data entry error may mean the requirement that “businesses with turnover below HK$2 million need not submit financial statements” is not met, triggering a follow-up review.

Partnerships: key points for completing the BIR52

A partnership business receives a separate “Profits Tax Return” (BIR52). This form is used to report the profit or loss of the business as a whole and is handled separately from the partners' personal tax returns.

Take particular care with the tax treatment of “partners' salaries” . Under the tax rules, salaries or interest on capital drawn by partners are treated as part of the profit distribution and cannot be deducted as a company expense. If the company's accounts have already recorded them as an expense, the amount must be “added back” to the assessable profits when filing, otherwise profits will be under-reported.

To show the differences in completing the two forms more clearly, we have put together a comparison table for your reference:

Comparison item	Sole proprietorship	Partnership
Form to complete	BIR60 (Tax Return - Individuals)	BIR52 (Profits Tax Return)
Where to complete	In the form's “Part 5”	The whole form
Signed by	The owner personally	The precedent partner
Key points to declare	Enter “total income” and “net profit / loss”	Must state each partner's profit and loss sharing ratio
Multiple businesses	If you have several sole proprietorships, on the same form you must list separately the figures for each	Each partnership is a separate entity and must each complete its own BIR52
Follow-up actions	Filing the form completes the process	Partners must still declare their share of profits in their personal BIR60

What documents does an unlimited company need to prepare for tax filing?

Before filing for an unlimited company, make sure the following are ready (even if they do not need to be attached to the form, they must be kept on file for inspection):

Balance sheet (showing the company's assets and liabilities)
Profit and loss account (showing the company's income and expenses)
All sales and income documents (invoices, receipts, contracts)
All expense documents (tenancy agreements, purchase orders, sundry expense bills)
Bank statement
Mandatory Provident Fund (MPF) contribution records

How to save tax legitimately? Deductible expenses for unlimited companies at a glance

Types of deductible expenses (operations-related)

In general, any necessary expenditure that is directly related to the business and incurred to earn profits is a deductible item:

Office rent, rates and management fees
Employee salaries, allowances and bonuses
Employer's Mandatory Provident Fund (MPF) contributions for employees
Cost of purchasing goods or raw materials
Water, electricity, gas, telephone and internet charges (must be shown to be for business use)
Repair costs for machinery and equipment
Accountant's fees or other professional service fees

Non-deductible items (owner's salary, private expenses, fines)

Many new business owners mistakenly assume that all expenses are deductible, but in fact, under the tax rules, the following items cannot be deducted:

The salary of the owner or partners themselves
Private expenses of the owner or partners (such as household utility bills and personal meals)
Traffic fines or fines for breaking the law
Travel costs between home and workplace

A reminder from SetupHK: watch out for these when completing your profits tax return!

Before filling in your profits tax return, we recommend first reading Complete guide to Hong Kong company profits tax to get to grips with the overall filing framework.

Common filing mistakes

Based on SetupHK's years of practical experience, an improperly completed tax return may be returned by the IRD or trigger a tax audit. Watch out for the following common mistakes when completing the form:

Missing signature: this is the most common reason for a return being sent back.
Entering the wrong total income: mistakenly entering “net profit” in the “total income” field (total income should be turnover).
Not ticking “declare in this part”: forgetting to tick the box in Part 5 of the BIR60.
Inconsistent information: the figures on the tax return do not match the company's internal accounts.

In which situations is it advisable to seek a professional accountant or tax adviser?

Filing yourself is feasible, but when a company's turnover is close to or exceeds HK$2 million, the IRD's requirements for financial statements become stricter, and it is more reassuring to leave it to professionals.

If you want to save tax legitimately but are unsure how, or you suddenly receive an enquiry letter from the IRD and feel at a loss, seeking professional help not only helps ensure your accounts are compliant but also reduces the risk of tax disputes and penalties, which in the long run is safer and better value.

FAQ

Does a company still need to file a tax return if it makes a loss?

Even if a company makes a loss, it must still submit its profits tax return on time, and the loss can be carried forward to later years to offset future assessable profits.

Can I skip filing if there is no business or zero income?

Whenever you receive a tax return, you must complete it and return it within the deadline. If there has been no business activity, you can enter “0” on the form or declare that the business has not yet commenced.

What are the penalties for submitting a tax return late?

The IRD is quite strict about late tax returns. It may impose a surcharge or penalty, and may also issue an estimated assessment higher than the actual tax. Prolonged delay may even affect the company's credit standing.

How do I check the progress of a tax return or submit missing documents?

You can check the progress of a tax return or requests for supplementary documents through the IRD's online electronic service (eTAX) or by phone.

Which unlimited company owners should consider personal assessment?

If the proprietor of an unlimited company has other income or heavy family responsibilities, consider Personal Assessment, which may work out cheaper than the standard rate. We recommend consulting a professional to run a comparison. To understand how provisional tax is calculated, see Provisional tax calculation at a glance.

Say goodbye to complicated tax forms and accounting work | leave your unlimited company tax filing to the SetupHK team

Faced with complex tax rules, you need a trustworthy professional partner.SetupHK Specialising in tax filing for unlimited companies, we help you organise your accounts and thoroughly review deductible items, ensuring compliant filing and maximum benefit. You can focus on growing your business without worry and hand over the tedious administrative work with confidence.