The territorial concept has always been fundamental to the taxation of profits tax in Hong Kong. Only those profits which arise in or are derived from Hong Kong are liable to profits tax in Hong Kong. Here are some examples where the profits derived by a Hong Kong company may be treated as offshore sourced and non-taxable in Hong Kong:

Trading profits:

A Hong Kong company sends employees to meet with overseas suppliers and customers to negotiate and conclude the terms of the purchase and sale contracts. It may be possible to claim that the trading profits so derived are non-taxable in Hong Kong.

Service income:

A Hong Kong company provides services partly in Hong Kong and partly outside Hong Kong. It may be possible to claim that part of the service income as attributable to the services rendered outside Hong Kong and therefore not taxable.