Hong Kong has a simple and low tax rate system and attract many foreign investors. There are 3 main types of taxes in Hong Kong:
Hong Kong adopts a territorial source principle of taxation, which means that only profits sourced in Hong Kong are taxable in Hong Kong. Profits Tax is only charged on profits arise in or are derived from Hong Kong, which means that a person who carries on a business in Hong Kong but derives profits from another place is not required to pay tax in Hong Kong on those profits.
We are especially adept at assisting clients in the planning of their tax affairs and to structure tax efficient deals. We understand the business and economic environment and combine this with specialist tax knowledge. We help you navigate complexity to achieve business objectives by reducing tax risks and meeting your compliance obligations.
We can provide specific services such as:
Persons who are carrying on any trade, profession or business in Hong Kong are chargeable to tax on all profits arising in or derived from Hong Kong.
Corporations are charged to profits tax and provisional tax at the rate of 16.5% set out in Sch. 8 of the Inland Revenue Ordinance (Cap112) while individuals and unincorporated business (sole proprietorships or partnerships) are charged at the standard tax rate of 15% set out in Sch. 1 of the Inland Revenues Ordinance (Cap 112).
Since 2018/19, profits tax calculated under the Two-Tiered Profits Tax Rates Regime to reduce the profits tax burden of taxpayers in Hong Kong. For the first HK$2,000,000 of assessable profits, the tax rate will be reduced to by one-half, i.e. 8.25% for corporations while by 7.5% for sole proprietorships or partnerships.
Generally, tax reduction is allowed for outgoings and expenses arising from carrying on of a business such as rental fee, employees’ salaries, the contribution of mandatory provident fund scheme (only eligible for unincorporated businesses), and interests on borrowings.
Any income derived by an individual from employment, offices and pension in Hong Kong is taxable. If you received an Individual Tax Return (BIR60), you must declare to IRD for income declaration even if there is without chargeable income.
Taxpayers may claim allowances and tax reduction. A common allowance included approved charitable donations, contributions to MPF scheme or recognized occupational retirement scheme, outgoings and expenses that are wholly, exclusively and necessarily incurred in the production of the assessable income.
Salaries tax can be calculated at the standard rate and progressive rates.
Tax rate of the assessment year 2021/22
| Net Chargable Income (HKD) | Rate |
|---|---|
| On the first 50,000 | 2% |
| On the next 50,000 | 6% |
| On the next 50,000 | 10% |
| On the next 50,000 | 14% |
| Remainder | 17% |
Rents received from sole-owned rental properties of landlord(s) in Hong Kong are chargeable.
Currently, Property Tax is calculated on the net assessable value (i.e. net rental income) for the year of assessment at the standard rate of 15%.
Net rental income is defined as rental income less irrecoverable rent, rates paid by owner and repairs.
However, in order to simplify the administration of tax assessment, the IRD will automatically deduct 20% of the net rental income as the statutory allowance for repairs and outgoings.
The 20% statutory allowance includes expenses incurred in renting out the property, such as government rent, building renovation fees, rent-collection fees, building management fees, insurance and mortgage interest, etc. Landlords are not required to provide the IRD with any evidence of the actual expenses incurred.
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