Part 5 Profits Tax
Report sole proprietorship businesses [whether the business(es) had any activities or not] in
this Part. If you complete paper
return
and you had more than two sole proprietorship businesses, supply details in the same format on a separate sheet.
For Internet Filing, supply details of remaining sole proprietorship businesses in the 'Supplementary Information on
Tax
Return' text box. See Section B.
Complete 'Business Registration Number' and 'Name of business' and enter '0' in the items
from 'Gross income' to 'Mandatory contributions to Mandatory Provident Fund Scheme in the
capacity of a self-employed person' for sole proprietorship businesses which were dormant or
had already ceased business for the whole year.
Do not report partnerships of which you were a partner or sole proprietorship businesses
which had changed to partnerships and vice versa during the year. Separate Profits Tax
returns will be issued to the partnerships.
Do not report corporations of which you were a shareholder. Separate Profits Tax returns will
be issued to the corporations.
Declare the profits / (losses) from the businesses, trades or professions for the basis period.
'Basis period' means either the year ended 31 March during the relevant year of assessment
or the accounting period ending on a day within the relevant year of assessment.
Completion of items in 'Profits Tax' (Part 5 of paper return)
Gross income means all types of income, including ordinary business income, proceeds from
sale of capital assets and other non-taxable receipts, whether or not derived from the principal
activities. (boxes [44] & [56] of paper return)
Turnover includes amounts received / receivable from goods sold or services rendered.
(boxes [45] & [57] of paper return)
Gross profit / (loss) is the amount of turnover after deducting cost of goods sold. For a
business not involving sale of goods, enter '0' for this item. (boxes [46] & [58] of
paper return)
Assessable profits / (Adjusted losses) must be computed in accordance with the Inland
Revenue Ordinance. Add non-deductible expenses charged in the accounts onto the net profit
per account or deduct them from the net loss to arrive at the assessable profits / (adjusted losses).
Salaries paid to, benefits received by the proprietor or his / her spouse, proprietor's domestic
or private expenditure, capital expenditure and non-business expenses are not deductible.
For more details, refer to 'Related Tax Rules'.
(boxes [48] & [60] of paper return)
State whether the business is chargeable at two-tiered profits tax rates (applicable to the
year of assessment 2018/19 and subsequent years). If the business had no connected entity
for the subject year or no other connected entity elects to be so chargeable, the business
is chargeable at two-tiered rates. For connected entities, the two-tiered rates will only
be applicable to one of them. If your business had connected entities for the subject year
and elects to be chargeable at two-tiered rates, you are required to complete Section 6 of
the Appendix. (boxes [51] & [63] of paper return)
If you wish to claim profits tax concessions for profits sourced in
Hong Kong from eligible intellectual property income, you are required
to tick box [54] and / or [66] of paper return
(applicable to the year of assessment 2023/24 and subsequent years).
You are also required to download the supplementary form SP5 from the
Department’s webpage (
www.ird.gov.hk/soleprop_e) for completion. After completion, you have
to print and sign on supplementary form SP5, and submit it together
with the tax return.
You may use the PROFORMA
PROFITS TAX COMPUTATION FORM [IR957A(e)] and attach it to your
paper
return. Each business should have a separate computation. (Please see more information on
documents and information to be submitted).
Attention:
Election for Personal Assessment may reduce your tax liability.
Documents and Information to be Submitted in 'Profits Tax'
(a)
For each business with gross income not exceeding $2,000,000 for the basis period:Supporting documents listed in (b) below need not be submitted with the return. However, you must complete the return in accordance with the supporting documents. Retain these documents as you may be required to submit them later.
(b)
For each business with gross income over $2,000,000
for the basis period, provide:
(i)
A certified copy of the Statement of Financial Position / Balance Sheet and
Statement of Comprehensive Income / Profit and Loss Account for the basis period;
(ii)
A tax computation with supporting schedules showing how the amount of
assessable profits / (adjusted losses) has been arrived at;
(iii)
A Realization Statement if the business ceased during the year. If the business
was transferred to and carried on by another person, provide the name under
which the business is carried on by the transferee;
(iv)
In respect of interest paid, the names and addresses of the recipients
together with the purpose for which the money was borrowed and any security
provided to the lenders;
(v)
A list of all new capital items (e.g. plant and machinery, vehicles, furniture and
buildings) purchased during the basis period, the date of purchase and purchase
price of each item. For items acquired under hire purchase agreements, state the
purchase price and the number and amount of instalments paid, excluding interest;
(vi)
Changes in the method of valuation of opening or closing inventories or work in
progress if applicable;
(vii)
A list of properties rented. For each property rented, state full name and address
of the landlord or recipient of rent paid, the exact location of the property,
the total rent paid and the period covered;
(viii)
Payments made to contractors and / or subcontractors and commission paid
showing the amount, full name and address of the recipients and HKID Card
numbers or business registration numbers if available. [The information can
be supplied in Form IR56M which is available from this Department on written
request by quoting the business registration number of your business(es).]
(c)
Sufficient records must be kept for each business and retained for at least 7
years after the date of the transaction to which they relate.
(May 2026)