17 May 2019
Hong Kong’s Tax System
Hong Kong practises a simple, low-rate tax system. It is one of the most business-friendly tax systems in the world. Hong Kong adopts the territoriality basis of taxation, i.e. no matter whether the taxpayer resides in Hong Kong or not, only income / profit generated in Hong Kong is taxable and that generated outside Hong Kong is in most cases not taxed in Hong Kong.
Business related Tax
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; 2. Salaries Tax; 3. Property Tax.
|Business related Tax||Relevant Information|
|Profits Tax||Persons, including corporations, partnerships, trustees and bodies of persons carrying on any trade, profession or business in Hong Kong are chargeable to Profits Tax on profits arising in or derived from Hong Kong from such trade, profession or business.|
Profits Tax is levied based on the assessable profits, which is determined by excluding deductible expenses and tax-exempt incomes.
As from the fiscal year starting on 1 April 2018, the two-tiered profits tax rates regime has been introduced to lower the tax rate for the first $2 million of assessable profits for corporations and unincorporated businesses.
For more information on profits tax, please visit the following webpages:
• Profits Tax Rate
• Two-tiered Profits Tax Rates Regime
|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 standard tax rate and the progressive rates.|
For more information on salaries tax, please visit the following webpages:
• Salaries Tax Rate
• Basic and Other Allowances
• Allowances, Deductions and Tax Rate Table
|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.|
For more information on property tax, please visit the following webpages:
• Property Tax Rate
• Deductions against Rental Income
Double Taxation Relief
Double taxation arises when the same item of income or profit is subject to tax in two or more tax jurisdictions.
To minimise exposure of Hong Kong companies doing business overseas, as well as overseas companies doing business in Hong Kong, to double taxation, Hong Kong has concluded double taxation agreements / arrangements with its trading partners, including: 1. Comprehensive Double Taxation Agreement; 2. Limited Double Taxation Agreement.
|Double Taxation Relief||Relevant Information|
|Comprehensive Double Taxation Agreement||Hong Kong first concluded this agreement with the Belgian government in 2004. To date, 40 countries or regions have signed such agreement with Hong Kong, offering concessionary withholding rates on dividends, royalties, interest and technical fees.|
For more information on Comprehensive Double Taxation Agreement, please visit the following webpages:
• Comprehensive Double Taxation Agreements concluded
• Tax Rates for Dividends, Interest, Royalties and Technical Fees
• Negotiations in Progress
|Limited Double Taxation Agreement ||Due to the international nature of aircraft and ship operations, Hong Kong has concluded double taxation relief arrangements for airline and shipping income with its aviation and marine partners.|
For more information on Limited Double Taxation Agreement, please visit the following webpages:
• Air Services Income Agreements concluded
• Shipping Income Agreements concluded
• Airline and Shipping Income Agreements concluded