|Taxable Income Band HKD$||National Income Tax Rates|
|1 - 45,000||2%|
|On the remainder||17%|
Tax rates and allowances:
The tax charge is the lower of:
a) the standard rate of 15% applying to net chargeable income before personal allowances;
b) the progressive rates applying to net chargeable income.
|Personal allowances||2017-18 HK$|
|Married person’s allowance*||7%|
|Child allowance (each) 1st to 9th child • Year of birth||200,000|
|Dependent parent or grandparent allowance (each) Aged 60 and above • Residing with taxpayer||92,000|
|Not residing with taxpayer||46,000|
|Aged 55 to 59 • Residing with taxpayer||46,000|
|Not residing with taxpayer||23,000|
|Dependent brother or sister allowance (each)||37,500|
|Single parent allowance||132,000|
|Disabled dependent allowance (each)||75,000|
* Granted to a married person whose spouse does not have any assessable income; or to a person who, together with his or her spouse, have elected joint assessment.
Three separate income taxes are levied in Hong Kong instead of a single unified income tax.
Profits tax: Corporations – 16.5% Others – 15%. Losses can be carried forward indefinitely subject to restrictions under the anti-avoidance rules.
Property tax is charged at the standard rate of 15% on 80% of the rent receivable on noncorporate owners of real estate in Hong Kong. Corporate lessors of real properties are subject to profits tax.
Salaries tax is levied on net chargeable income (assessable income less personal deductions and allowances) at progressive rates ranging from 2% to 17%, or at a flat rate (maximum rate) of 15% on assessable income less personal deductions, whichever calculation produces the lower tax liability.
Profits tax, salaries tax and property tax are assessed separately. If beneficial, a permanent or temporary Hong Kong resident individual may elect to be assessed under personal assessment on the aggregate of his or her income or losses from all sources.
Capital gains: Not taxable
Dividends: Not taxable
No withholding tax on payment
Approved charitable donations: Tax deductible up to 35% of assessable profits.
The Hong Kong government has an accessible and detailed website in English covering resident and non-resident taxation obligations.
Non-residents working in Hong Kong are liable to salaries tax. Salaries Tax is charged on every person in respect of their income arising in or derived from Hong Kong from any office or employment of profit and any pension.
Income includes all income, perquisites and fringe benefits from the employer or others. Residents and non-residents may also be liable to salaries tax in Hong Kong and are taxed in the same way.
Expat tax advice for Hong Kong is based on the following principles:
Income that arises in or is derived from a Hong Kong office or Hong Kong employment, or from services rendered in Hong Kong during visits of more than 60 days in any tax year, is subject to salaries tax.
Hong Kong observes a territorial basis of taxation; therefore, the concept of expat tax residency has no significance in determining tax liability, except in limited circumstances.
Expatriate tax advice on employment income - Taxable income consists of all cash emoluments, including bonuses and gratuities. Expat’s benefits in kind are largely non-taxable, unless they are convertible into cash or specifically relate to holiday travel or the education of a child. The provision of accommodation by an employer creates a taxable benefit.
An expat employee is subject to salaries tax if his or her employment income is sourced in Hong Kong, even if he or she is not ordinarily resident in the territory. However, except for directors' fees, a specific statutory exemption applies if an employee renders all his or her services outside Hong Kong or if an employee renders services in Hong Kong during visits to Hong Kong not exceeding a total of 60 days in a year of assessment. Conversely, if a non-resident engaged in non-Hong Kong employment renders services in Hong Kong during visits totalling more than 60 days in a year of assessment, he or she is taxed on a pro rata basis.
Self-employment and business income - Anyone carrying on a profession, trade or business in Hong Kong is subject to profits tax on income arising in or derived from Hong Kong from that profession, trade or business. Taxable income is determined in accordance with generally accepted accounting principles, as modified by the tax code and principles derived from case law.
Business losses of an individual are calculated in the same manner as profits and may be carried forward indefinitely against future income in the same business or may be offset against the individual's other sources of income under personal assessment. In both cases, losses cannot be carried back.
If an individual receives rental income but the rental activities do not constitute a business, the income is subject to property tax rather than profits tax. Property tax is charged on 80% of rent received from real estate located in Hong Kong at a rate of 15%, resulting in an effective rate of 12%.
Profits tax, salaries tax and property tax are assessed separately. If beneficial, a permanent or temporary Hong Kong resident expat may elect to be assessed under personal assessment (that is, under the salaries tax method) on the aggregate of his or her income or losses from all sources.
Investment income - Interest income not derived from investing the funds of a business and all dividend income are exempt from taxation.
No withholding taxes are levied in Hong Kong on dividends or interest paid to non-residents. However, royalties paid to non-resident individuals for the use of intellectual property rights in Hong Kong are deemed to arise from a Hong Kong business and are subject to an effective 4.5% withholding tax. The withholding tax rate is increased to 15% if the recipient is related to the payer and if the intellectual property rights for which the royalties are paid were previously owned by a person carrying on a profession, trade or business in Hong Kong.
Directors' fees - Directors' fees derived from a company that has its central management and control in Hong Kong are subject to salaries tax in Hong Kong. Otherwise, directors' fees are not taxable.
A trusted expat tax adviser should always be consulted with regards to taxation of employer-provided stock options.
There are no social security/social insurance taxes in Hong Kong.
Employers are required to make arrangements for all employees aged between 18 and 65 normally residing and working in Hong Kong to join a mandatory provident fund (MPF) scheme.
However, exemption from the MPF requirements is available to any person entering Hong Kong for the purpose of being employed or self-employed (i.e., on a valid employment visa) for a limited period (13 months or less) or who is a member of an overseas retirement scheme.
There is no inheritance or estate tax in Hong Kong.
However, do not assume that just because you've expatriated to live in Hong Kong that your estate will not be liable to inheritance tax (IHT) in your old home nation, or any nation where you hold assets.
For example, those domiciled in Britain remain liable for IHT on their worldwide estate.
If you are concerned about mitigating your IHT liability, we'd like to offer you a free initial consultation to determine whether we can help you.
An expat employee engaged in Hong Kong employment is exempt from salaries tax on income derived from services performed outside Hong Kong if the income is subject to tax in the foreign jurisdiction and if foreign tax has been paid on the income.
Unless provided for under a double tax agreement, no credit is given in Hong Kong for foreign taxes paid, but in certain circumstances, foreign taxes paid may be deductible for profits tax purposes under the tax code of Hong Kong. A foreign tax credit is available to Hong Kong expat residents with respect to income that is subject to double tax in all of the double tax agreements entered into by Hong Kong. Hong Kong has entered into double tax agreements with 28 countries. It has also signed double tax agreements with a further four countries.
We believe the above information is accurate, however tax rates and rules can change, and we are NOT tax experts. Therefore, please do not rely exclusively on the information to determine your liability for tax.
Speak to a local tax expert for personalised advice, or consult an international taxation consultancy.
If you'd like our help to source someone to assist you, please get in touch and we will do all we can to help.
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