Hong Kong offshore profits claims: the evidence to consider.

The source of profits depends on the activities that produce the income and the supporting facts. Records of contracts, work performed and decision-making help advisers assess the claim and respond to IRD questions.

Identify the income and operations

Services, trading and other income require analysis appropriate to the activity. There is no universal three-question source test. An invoice address, overseas customer or destination bank account does not decide the source alone.

Identify what the taxpayer did to earn the profits and where those operations took place. Contract negotiation, performance, delivery and other evidence may be relevant depending on the activity. A Hong Kong contribution does not automatically prescribe a particular apportionment; the analysis is fact-dependent.

Keep contemporaneous evidence

1. 01

   Contracts, engagement terms, transaction records and correspondence explaining the work.

2. 02

   Project personnel, locations, travel and evidence of actual performance or delivery.

3. 03

   Records of decisions and responsibilities that agree with the accounting and business information.

4. 04

   A documented explanation of the position, assumptions and any unanswered issues, reviewed for the relevant period.

Consider FSIE separately

Specified foreign-sourced income received in Hong Kong by an in-scope MNE entity may require an FSIE assessment. The scope and exceptions differ by income type; an offshore source conclusion does not alone settle that separate regime.

IMSG’s dedicated contact can coordinate appropriately qualified tax advice and separately scoped support for IRD enquiries. Keep the actual correspondence and deadlines. Evidence supports an assessment; no article can guarantee that a claim will be accepted or predict when an enquiry will arise.