Starting business overseas or moving abroad as an employee is a great adventure! There is no escaping it – taxes are a big part of any professional activity you undertake. You may have already heard that Hong Kong, the “freest economy” in the world, has no tax? Well, that’s not quite true, but Hong Kong tax regime is rather “simple and low”. Here is an overview of the taxes you’ll pay in Hong Kong as an employee or business owner:
Charged on Hong Kong sourced remunerations. The charge will be the lower of:
- Standard rate of 15% applying to net chargeable income before personal allowances
- Progressive rates (2% to 17%) applying to net chargeable income
You may apply for some tax reliefs, such as:
- “60 days exemption” rule for both local and foreign employment contract (if you visit Hong Kong for 60 days or less during the year of assessment, you will be exempt from the tax).
- “Days-in-days-out” calculation rule for foreign employment contracts only (if you work both in and out of Hong Kong, your income from services outside Hong Kong is not taxable).
- Housing allowance provided by your employer is subject to preferential tax treatment
You also have to pay into the MPF government-run pension scheme while working in Hong Kong. The good thing is when you leave Hong Kong, the government will pay you back this contribution.
Hong Kong companies are charged on their Hong Kong sourced profits, according to territoriality principle. Hence, any foreign-source income is not taxed. Your business profits are arrived at after making any applicable tax adjustments on the accounting profits.
Current corporate tax is set at the bargain rate of 16.5% and tax losses usually can be carried forward indefinitely. Moreover, the new two tier tax rate is applicable starting from 2018/19 year of assessment, the first HKD 2 million profits will be taxed at only 8.25%.
Dividends and capital gains are not taxable.
Tax reliefs you may apply for:
- Non-Hong Kong sourced/Offshore profits are not subject to profits tax
- Approved charitable donations: Tax deductible up to 35% of assessable profits
As an individual owner you’ll be charged at the standard rate of 15% on 80% of the rent. If the owner of the property is a company, the rent is subject to Profits Tax.
Withholding tax in Hong Kong
Hong Kong does not impose withholding tax.
Tax Treaty Network
Hong Kong has entered into over 40 tax treaties with other countries, including the United Kingdom, China, France, Belgium, Canada, Russia, South Africa, etc. Under certain conditions you and your company may benefits form preferential withholding tax rates, such as:
|China||5%||7%||7% (5% for aircraft and ship leasing business)|
Turnover taxes: There is no sales tax e.g. VAT in Hong Kong.
Stamp duty: Share transfers: 0.2%; Land/Real estate transfer: different prescribed rates. Group stamp duty relief (i.e. exemption) is available for the transfer of immovable property or shares from one associated body corporate to another (≥90% shareholding).
Estate duty: No estate duty is charged in Hong Kong for the estates of those who die on or after 11 February 2006.
Customs duties: Various rates on liquor, methyl alcohol, tobacco and hydrocarbon oil.
Please contact us if you need further information on Hong Kong taxes.