Hong Kong Tax Advisory

Hong Kong Taxation Service
Hotline: 86-755-82143348, Email:anitayao@citilinkia.com

Hong Kong taxes are among the lowest in the world, and our tax regime is simple and predictable. Hong Kong's simple and low tax system is a great attraction to foreign investors. This low fiscal burden for all, domestic or international players, corporates and individuals alike makes Hong Kong attractive. In fact low tax is the most cited reason for regional offices to set up in Hong Kong! This tax regime makes Hong Kong one of the lowest tax environments among developed economies.

The following are broad insights into Hong Kong's main direct taxes:

Profits tax

Salaries tax

Property tax

Double taxation agreements

Taxation classification in Hong Kong
The Profits tax rate is the same for foreign and local companies - a low 16.5 percent. The actual tax bill is often even less after various deductions and depreciation allowances. There is no capital gains tax in Hong Kong, withholding tax on dividends and interest or collection of social security benefits. The salaries tax rate is at a maximum rate of 15 percent, imposed only on all salary income of individuals derived in or from Hong Kong. The salaries tax is demanded on a yearly basis and can be paid in two installments, usually between December and March.

Profits Tax in Hong Kong
Profits tax is charged only on net profits arising in or deriving from Hong Kong, from a trade, profession or business carried on in Hong Kong. Incorporated and unincorporated businesses are taxed at different rates - incorporated businesses at 16.5% and unincorporated at 15%.

Salaries Tax in Hong Kong
Salaries tax is charged on emoluments arising in or derived from Hong Kong. The basis of assessment and method of payment (including provisional payments) are similar to the system for profits tax Taxpayers receive their salary gross ie the tax is not deducted. Salaries tax is demanded on a yearly basis, and is normally paid in two instalments between December and March. Employees must remember to save their tax in preparation for this bill!

Salaries Tax Computation in Hong Kong

The Department has developed a simple Salaries Tax Computation Program to help you calculate your own Salaries Tax liability. All you have to do is to select the assessment year, marital status, input your income and the number of your dependants and then press the "Compute" button at the bottom of the input page. Another page will appear which shows you your exact Salaries Tax liability.   

Salaries tax is calculated in two ways and the taxpayer pays the lesser amount. The two methods are:
tax calculated at a stepped rate on the net income figure ie after tax allowances. The stepped rates are: 2% on the first HK$40,000; 7% on the next HK$40,000; 12% on the next HK$40,000 and the balance at 17%. tax calculated at the standard rate (15%) applied to the gross income figure.
Only around 40% of the workforce has to pay salaries tax

Proporty Tax in Hong Kong

Property tax is charged at a standard rate of 15% on rentals received less rates and an allowance of 20% for repairs and maintenance. Again the system of provisional payment of tax is similar to that for profits tax and salaries tax. For corporations, rental income is included in their profits tax calculations so they are not subject to property tax. Hong Kong's tax basis is territorial, therefore income derived by a resident from places outside Hong Kong will generally not face double taxation in Hong Kong.

Many countries which tax their residents on a world-wide basis also provide their residents who operate businesses in Hong Kong with unilateral tax relief for Hong Kong tax paid on income derived from Hong Kong. Hong Kong also allows a deduction for foreign tax paid on turnover basis in respect of an income which is also subject to tax in Hong Kong. Businesses operating in Hong Kong therefore do not generally have problems with double taxation of income. Hong Kong does however have two comprehensive double tax agreements.

Double Taxation in Hong Kong
Double taxation arises when two or more tax jurisdictions overlap, such that the same item of income or profit is subject to tax in each. Hong Kong adopts the territoriality basis of taxation, whereby only income / profit sourced in Hong Kong is subject to tax and that derived from a source outside Hong Kong by a local resident is in most cases not taxed in Hong Kong. Therefore, Hong Kong residents generally do not suffer from double taxation.

Many countries which tax their residents on a worldwide basis also provide their residents operating businesses in Hong Kong with unilateral tax credit relief for any Hong Kong tax paid on income / profit derived from Hong Kong. We allow a deduction for foreign tax paid on turnover basis in respect of an income which is also subject to tax in Hong Kong. Businesses operating in Hong Kong therefore do not generally have problems with double taxation of income.

Trade and Customs Regulations in Hong Kong
There are no customs tariffs in Hong Kong and goods imported or exported require minimal customs formalities. Excise duties are levied only on tobacco, liquor, methyl alcohol and hydrocarbon oil, whether imported or locally manufactured. Import/ Export declaration is required within 14 days after the importation/ exportation of any articles, other than exempted articles.

Import and export licenses, and certificates of origin are only required to enable Hong Kong to fulfill its obligations under international agreements or requirements of importing countries and for public health, safety or security reasons. Textiles and clothing products for export to certain markets are currently subject to quota restraint.

Contact Us
If you have further queries, don’t hesitate to contact ATAHK anytime, anywhere by simply visiting ATAHK’s website www.3737580.net , or calling Hong Kong hotline at 852-27826888 or China hotline at 86-755-82143422, or emailing to anitayao@citilinkia.com