Hong Kong Tax Advisory Services
Hotline: 86-755-82147392 Email：info@citilinkia.com
Business related taxes:
The year of assessment in Hong Kong runs from 1 April to 31 March of the following year. Generally, people doing business or working in Hong Kong are subject to the following taxes:
1. Profits tax
Any parties, including corporation, partnership, trustee or organisation carrying on any trade, profession or business in Hong Kong deriving assessable profits from that trade, profession or business generated or originated in Hong Kong must pay profits tax. As from the fiscal year starting on 1 April 2008, the profits tax rate is 16.5%.Profits tax is levied based on the assessable profits, which is determined by excluding deductible expenses and tax-exempt incomes.
Tax-exempt incomes:
Dividends
Profits arising from the sale of capital assets
Interest on deposits placed in authorised financial institutions
Deductible expenses:
Expenses paid by the taxpayer for producing the assessable profits (excluding: domestic or private expenses, capital expenditure, cost of improvements, and various types of tax. Deduction of interest is subject to strict regulations).
Industrial and commercial buildings allowance:
Industrial buildings: the initial allowance in the year incurring expenses is 20% of capital expenditure; the depreciation allowance every year is 4% of capital expenditure, until all the expenses have been deducted.
Commercial buildings: the annual allowance is 4% of capital expenditure; capital expenditure incurred in renovating buildings or structures (with the exception of renovation for residence) can be deducted over a period of five years in equal instalments.
Plant and office equipment: an initial allowance of 60% on the cost is offered in the year of purchase; for the remaining amount, counting from the first year these assets start commissioning, annual allowance at the rates of 10%, 20% and 30% respectively each year are available by using the declining balance method. For expenditure incurred in purchasing plant and machinery as well as computer software and hardware for use in the manufacturing industry, outright deduction in full is allowed. For capital expenditure incurred on specified environmental protection machinery and installation, full deduction of capital expenditure is allowed. For environmental protection installation forming part of a building or structure, a deduction at 20% of the expenditure is allowed in each of the five consecutive years commencing from the year the expenditure is incurred.
Corporate losses: can be set off against other profits made by the corporation in the same year, regardless of whether such profits are derived from its business income. Hong Kong has in place certain rules and regulations preventing corporations from using their losses to evade tax. Group tax loss relief is not available and groups may not file composite tax returns.
2. Salaries tax
Incomes derived from work, employment and pension in Hong Kong are subject to salaries tax. Salaries tax is computed according to two rates, and the tax payable is the lower of the two:
Standard rate: this applies to the net chargeable income after allowances; the rate is 15%;
Progressive rate: this applies to the net chargeable income after deductions and allowances; the rates are: 2% for the first $40,000, 7% for the next $40,000, 12% for the next $40,000, and 17% for the remainder.
According to the law, there are allowances and deductions for salaries tax, which is computed according to the net chargeable income.
Allowances:
Basic allowance ($108,000)
Married person’s allowance ($216,000)
Single parent allowance ($108,000)
Child allowance (from the first to the ninth child, $60,000 for each dependant)
Dependent parent/grandparent allowance (aged 60 or above, $36,000 for each dependant; aged 56-59, $18,000 for each dependant)
Dependent brother/sister allowance ($30,000 for each dependant)
Deductions (maximum limits):
Self-education expenses ($60,000)
Mandatory contributions to recognised retirement schemes ($12,000)
Home loan interest ($100,000)
Elderly residential care expenses ($72,000)
3. Property tax
Property tax is chargeable to owners of land and/or properties in Hong Kong. The tax is computed at the standard rate on the net assessable value of the property. The net assessable value of the property is the amount of actual income less allowances. As from the fiscal year starting on 1 April 2008, the standard tax rate is 15%.
Double taxation avoidance agreements:
Hong Kong has signed double taxation avoidance agreements with several regions and countries, including:
Comprehensive Agreement for the Avoidance of Double Taxation: Hong Kong concluded this agreement with the Belgian government at the end of 2003, whereby a concessionary withholding rate applies to dividends, royalties and interest.
Income from shipping transportation: Hong Kong and the US have signed an agreement for double taxation relief in respect of income from shipping, under which Hong Kong ship owners’ income from international operation of ships is exempt from tax in the US.
Income from aircraft operations: Hong Kong has concluded agreements on income from aircraft operations with Canada, Germany, Israel, Korea, Mauritius, the Netherlands, New Zealand and the UK, under which the income of Hong Kong airline companies from international aircraft operations is exempt from tax in the signatory countries.
Contact Us
For further queries, please do not hesitate to contact ATAHK at anytime, anywhere by simply calling China hotline at 86-755-82148419, 86-755-82143512, or emailing to info@citilinkia.com.