Territorial taxation

Hong Kong profits tax is an example. Its Inland Revenue Department says persons carrying on a business there are chargeable on profits arising in or derived from Hong Kong. It says no tax is levied on profits arising abroad, even if they are remitted to Hong Kong, and that it makes no distinction between residents and others for this purpose.

The label alone says little. Systems called territorial can apply to some taxes and not others, and each country defines where income comes from in its own way. Where income is sourced is often the hard question, and the answer depends on the facts and the local law.

Territorial taxation in one country does not change what a residence country or a citizenship country taxes. The same income can still be taxed elsewhere.

Not to be confused with

• Remittance basis. A remittance basis taxes foreign income when it is brought in, while Hong Kong profits tax does not tax foreign profits even when they are remitted.
• Citizenship-based taxation. Citizenship-based taxation reaches citizens' income wherever it arises, the opposite end of the spectrum.

Sources

• IRD : Profits TaxOfficial guidance

Related

Countries covered

General

Sources

1 sources

Tax year

Current rules as checked

Review

Not professionally reviewed
Sources checked November 8, 2026