Tax Environment
in Hong Kong

Hong Kong offers a tax-friendly environment with no capital gains tax, inheritance tax, or VAT/GST, and divides direct income taxes into profits tax, salaries tax, and property tax.

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Hong Kong has a tax-friendly environment combining a territorial (or "source") system of direct taxes with no capital gains tax, capital transfer tax, inheritance tax or VAT/GST. Direct income taxes in Hong Kong can be divided into profits tax, salaries tax and property tax. The tax year runs from 1 April to 31 March of the following year.

Hong Kong has negotiated a tax treaty network with 45 jurisdictions, creating more international tax planning opportunities for cross-border investments. Its tax treaties contributes to Hong Kong being one of the preferred Asian gateways for foreign investors to enter Mainland China and for Chinese enterprises to access the global market.

Under the Hong Kong territorial tax system, persons or companies carrying out any trade, profession or business in Hong Kong are taxable on all profits arising in or derived from Hong Kong from such trade, profession or business. Consequently, income which does not have a Hong Kong source is not subject to profits tax.

Tax Environment in Hong Kong

  • Under the Hong Kong territorial tax system, persons or companies carrying out any trade, profession or business in Hong Kong are taxable on all profits arising in or derived from Hong Kong from such trade, profession or business. Consequently, income which does not have a Hong Kong source is not subject to profits tax.

  • The profits tax rates for companies are 8.25% for taxable profits up to HK$2 million and 16.5 percent thereafter. In addition, dividends received are not taxable in Hong Kong.

    Furthermore, interest income derived from deposits placed in Hong Kong and qualifying debt instruments may, under certain specific conditions, be exempted from profits tax.

  • Apart from the below case, no withholding tax is imposed in Hong Kong (e.g. on dividend distributions or interest payments).

    The sole exception is that royalty payments to persons not carrying out business in Hong Kong are subjected to a 4.95 percent withholding tax. As an anti-avoidance provision, a 16.5 percent withholding tax applies if the recipient of the royalty payments is a company associated with a Hong Kong taxpayer and the intellectual property rights were previously owned by a Hong Kong taxpayer.

  • According to the Hong Kong territorial tax system, all income arising in or derived from Hong Kong from any office, employment or pension is taxable in Hong Kong. In deciding whether income arises in or is derived from Hong Kong, it is necessary to establish where the source of income is located. Consequently, a person is exempted from salaries tax on his/her income which has not been derived from Hong Kong.

    “Income from any office and employment” may include different forms of advantages and allowances in monetary and non-monetary terms from the employer or any associated company of the employer.

    A husband and wife who are not living apart may elect to be jointly assessed for salaries tax on their aggregated income.

  • Salaries tax is charged on net taxable income at the lower of the standard rate of 15 percent or at progressive rates as follows (2022/23):

    HK$0 - HK$50,000                              2%

    HK$50,001 - HK$100,000                 6%

    HK$100001 - HK$150,000               10%

    HK$150,001 - HK$200,000              14%

    Above HK$200,000                           17%

  • Personal allowances for the year of assessment 2022/2023 can be claimed by taxpayers before determining the salary tax to be paid according to progressive rates.

    Allowances applicable to progressive rate taxpayers are as follows:

    ►   Single                                              132,000 HKD

    ►   Married                                           264,000 HKD

    ►   Single parent allowance              132,000 HKD

  • Owners of land and/or buildings in Hong Kong are subject to a property tax computed at the standard rate on the net assessable value.

    Companies carrying out business in Hong Kong are exempt from property tax but subject to profits tax.

  • The standard tax rate for 2022/2023 is 15 percent.