Available Jurisdictions


Hong Kong

Hong Kong

  1. Investment basics

 Currency – Hong Kong Dollar (HKD)

Foreign exchange control – No

Accounting/Financial statements – Hong Kong Financial Reporting Standards. Financial statements must be filled annually.

Business entities – These are the public and private limited liability company, partnership, sole proprietorship and branch of a foreign corporation.

  1. Corporate taxation

Residence – A corporation is resident if it is managed and controlled in Hong Kong.

Basis – Only Hong Kong – source income is subject to Hong Kong profits tax.

Taxable income – Profit tax is levied on the Hong Kong source profits of businesses carried on in Hong Kong.  Expenses generally are deductible to the extent they are incurred in the production of profits that are chargeable to tax. If a company’s profits are derived from both Hong Kong and non-Hong Kong sources that are not assessable to profits tax, expenses attributable to the non-Hong Kong source profits are not deductible.

Taxation of dividends – Dividends generally are exempt from profits tax.

Capital gains – these are not taxable. But, gains on the disposal of assets may be subject to profits tax if the disposal constitutes a transaction in the nature of trade.

Losses – there are attributable to a business that earns profits subject to profits tax may be carried forward indefinitely and set off against future taxable profits of the company. Losses cannot be carried back.

Rate – Profits tax is levied at a rate of 16.5% where the company is carrying on business in Hong Kong and the relevant income is earned in or derived from Hong Kong.

Surtax – No

Alternative minimum tax – No

Foreign tax credit – Where there is a double tax agreement, foreign tax paid may be credited against profits tax on the same profits, but the credit is limited to the amount of Hong Kong tax payable on the same income.

Participation exemption – No

Holding company regime – No

Incentives – A profits tax exemption for offshore funds is available for specified transactions if certain conditions are satisfied.

  1. Withholding tax

Dividends – There is no withholding tax on dividend distributions from a Hong Kong entity.

Interest – There is no withholding tax on interest payments from a Hong Kong entity.

Royalties – Royalty payments made to a non-resident are deemed to be taxable in Hong Kong if made for the use of intangibles in or outside Hong Kong, where the royalty payments are deductible for profits tax purposes. The amount deemed taxable is 30% of the gross amount of the royalties paid. If the royalty is paid to an associated non-resident for the use of intangibles that previously were owned by a person carrying on business in Hong Kong, 100% of the royalty is deemed to be taxable.

Technical service fees – No

Branch remittance tax – No

  1. Other taxes on corporations

 Capital duty – Was abolished on 1 June 2012

Payroll tax – No

Real property tax – Property owners are subject to property tax on rental income derived from property in Hong Kong. Is charged at the standard rate of 15% of the net assessable value of the property as determined by rent, service fees paid to the owner.

Social security – For employees whose monthly income is HKD 7,100 or more, the employer is required to deduct 5% as the employee’s contribution to the Mandatory Provident Fund scheme.

Stamp duty – is charged on documents connected with the lease, sale or transfer of immovable property in Hong Kong, and the sale of shares. Stamp duty on the transfer of Hong Kong shares is 0.2% of the value of the shares transferred, which is shared equally between the buyer and the seller.

Transfer tax – No

Other – Other levies include betting duty (25% – 75%) and the air passenger departure tax, which is levied on all air passengers departing Hong Kong (HKD 120).

  1. Anti-avoidance rules

Transfer pricing – There are limited provisions in the tax law governing businesses carried on with closely connected non-resident persons.

Thin capitalization – There are no thin capitalization rules in Hong Kong, but the deduction of interest expenses is limited, especially with regard to interest paid to non-residents.

Controlled foreign companies – No

Disclosure requirements – Certain related party transactions must be disclosed in the profit tax return.

  1. Compliance for corporations

Tax Year – The tax year starts on 1 April and ends on 31 March of the following year. The basis period of tax computation is the accounting year ended in the tax year.

Consolidated  returns – Hong Kong does not allow groups of companies to file consolidated returns and there is no group loss relief members of a group of companies.

Filing requirements – Tax returns are issued annually on the first working day of April for companies to report their profits in the accounting year ended in the previous tax year. Companies whose financial years end between 1 December and 31 March normally are granted an extended period within which to file their tax returns.

Penalties – may be imposed for failure to comply with the Inland Revenue Ordinance.

Rulings – Taxpayers may request an advance ruling from the tax authorities on the application of provisions of the Inland Revenue Ordinance.

  1. Personal taxation

Basis – Income tax covers all income arising in or derived from Hong Kong from an office, employment or pension. Interest income earned by an individual is exempt from tax in Hong Kong.

Residence – Foreign residents who visit Hong Kong for nor more than 60 days in a tax year (1 April – 31 March), are not liable to salaries tax on their employment income.

Filing status – A married couple may opt for joint or separate assessment.

Taxable income – Individuals are taxed on their total Hong Kong income from employment, less deductible expenses, charitable donations and personal allowances. The source of employment income is determined by a number of factors, including the place where the contract was negotiated and concluded and where it is enforceable, the residence of the employer and where the salary is paid. Taxable income includes commissions, bonuses, cost of living allowances, stock option gains, awards, gratuities, allowances and other perquisites derived from employment.

Capital gains – Capital gains are not taxable in Hong Kong.

Deductions and allowances – In arriving at assessable income, the only deductions permitted are expenses that are wholly, exclusively and necessarily incurred in the production of assessable income.  Allowable deductions include mandatory contributions to a recognized occupational retirement scheme, self-education expenses, home loan interest, elderly residential care expenses and donations to approved charities.

Rates – Personal income is taxed in Hong Kong at progressive rates. The marginal tax rates range from 2% to 17% (on chargeable income less personal allowances).

  1. Other taxes on individuals

Capital duty – No

Capital acquisitions tax – No

Real property tax – Property owners are taxed on rental income derived from property in Hong Kong. The tax is charge at the standard rate of 15% of the net assessable value of the property as determined by rent, service charges and fees paid to the owner, less an allowance of 20% for repairs.

Inheritance/estate tax – No

Net wealth/net worth tax – No

Social security – For employees whose monthly income is HKD 7,100 or more, the employer is required to deduct 5% as the employee’s contribution. Self -employed persons also contribute 5% of their relevant income and may choose to do so on a monthly or annual basis.

  1. Compliance on individuals

Tax year – The tax year starts on 1 April of each year and ends on 31 March of the following year.

Filing and payment – The Inland Revenue Department issues tax returns to individual taxpayers on the first working day of May each year.

Penalties – may be imposed for failure to comply with the Inland Revenue Ordinance.

Taxable transactions – Hong Kong does not levy VAT.

Hong Kong has signed 35 double tax agreements.