Hong Kong companies are subject to profits tax on onshore profits and not on offshore profits. But what if a Hong Kong company does part of its business onshore and part of its business offshore, that is, has both onshore and offshore business?
      If a Hong Kong company can distinguish between onshore business and offshore business, it can only pay profits tax on the onshore part and no tax on the offshore part of profits. To meet this need to do the following:
      1: Income can clearly distinguish which is onshore related income and which is offshore related income. If it is the same contract, then all of it needs to be counted as onshore income and subject to profits tax.
      2: Costs relative to revenue need to be clearly demarcated. Let's take A trading company as an example: If Company A has two transactions this year, one of which is purchased from the United Kingdom and sold to the mainland, and the other is purchased from Germany and sold to Hong Kong, then the income and cost of these two transactions can be clearly divided, and only the profits sold to Hong Kong can be calculated and paid profits tax. However, if Company A purchases from Germany and sells part of it to the mainland and part of it to Hong Kong, then all the profits need to be calculated and paid profits tax.