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Hong Kong is considered tax heaven worldwide for its simple and low tax regime, making it one of the most business-friendly jurisdictions in the world.

Tax in Hong Kong is bifurcated in slabs and is levied annually. In the first slab, profit up to 2 million HKD is taxed at the rate of 8.25%, and profit beyond that amount would be subject to be taxed at 16.5% and for proprietorship and partnership two tax slab of 7.5% and 15% are laid down. The tax is levied only when corporations makes profit.

Companies in Hong Kong have the choice to decide upon their financial year end date. Maximum companies choose financial year end date on either 31 December or 31 March to adjust with Government’s financial year. Newly incorporated companies have maximum period of 18 months to file the taxation amount.

There is no taxation on goods or services which are being exported or imported except on liquor, tobacco and petroleum products.

All the corporations in Hong Kong have to declare their financial statements to the Revenue Department irrespective of whether the transaction takes place in the territory of Hong Kong or outside Hong Kong. In case, the company has source of income outside the Hong Kong, the company may apply for tax exemption to the respective department.

TAX GOVERNING AUTHORITY

Established on 1st April 1947, the Inland Revenue Department (IRD) is the tax regulating authority in Hong Kong with the Inland Revenue Ordinance being the governing statute for individual and corporate taxation matters in Hong Kong.

The IRD is determined to accumulate revenue with a systematic and economical procedure and also responsible for the administration of the Hotel Accommodation Tax Ordinance, Business Registration Ordinance, Tax Reserve Certificates Ordinance, Inland Revenue Ordinance, Estate Duty Ordinance, Betting Duty Ordinance and Stamp Duty Ordinance.

TAX RATES

Taxes levied in Hong Kong are on territorial principle of taxation. Taxes are levied only when income is derived or earned from Hong Kong. Any income derived or earned outside the territory of Hong Kong is not liable to tax even that person or corporation carries on the business in Hong Kong. There is no tax on an income or profit remitted to Hong Kong.

PROFITS TAX RATES

Hong Kong’s profits tax, or corporate tax system as it usually referred to, follows a flat-rate principle and territorial principle. Moreover, tax incentives have been announced to increase Hong Kong’s strength and effectiveness.

DOUBLE TAX TREATIES

Hong Kong has signed Double Taxation Agreement (DTA) with various countries that prevents residents of Hong Kong and DTA countries from paying double tax.

INDIVIDUALS TAX RATES

  • Income between 1 to 50,000 HKD is charged at the rate of 2%.
  • Income between 50,001 to 100,000 HKD is charged at the rate of 6%.
  • Income between 100,001 to 150,000 HKD is charged at the rate of 10%.
  • Income between 150,001 to 200,000 HKD is charged at the rate of 14%.
  • Income Above 200,000 HKD is charged at the rate of 17%.

WITHHOLDING TAX

In Hong Kong withholding tax is not imposed on dividend and interest. Only non-resident entertainers or sportsmen have to pay royalties and fees on their assessable profits on their performance in Hong Kong.

CAPITAL GAIN TAX

As such there is no tax on capital gain nor the capital loss is allowed for deduction for the tax assessment.

DIVIDEND TAX

Dividend income from Hong Kong or other countries is not taxable.

SALES TAX

There is no concept of GST, VAT or sales tax in Hong Kong.

PROPERTY TAX

Property tax is levied on land and buildings and is calculated at a rate of 15% on the net assessable value of the property.

HOTEL ACCOMMODATION TAX

HAT is fully waived by the government of Hong Kong since 1 July, 2008.

ESTATE DUTY 

Estate duty or inheritance tax is abolished in Hong Kong since 2006.

STAMP DUTY

Stamp duty is levied on certain types of documents pertaining to stock, share, debenture and other bonds as per the first schedule of the Stamp Duty Ordinance. It is fixed on some documents (varying from HKD 3.00 to HKD 100) while ad valorem on others (ranges from 0.1% to 4.25%).

Stamp duty is charged on transfer of stock at the rate of 0.2% of the market value by Stock Exchange of Hong Kong.

CUSTOMS AND EXCISE DUTY

In general, there is no tariff duty on imports except on alcoholic beverages, tobacco products, hydrocarbon oil and methyl alcohol. Tax or excise duty is not levied on exports from Hong Kong.

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