Main taxes in Hong Kong
Hong Kong's tax system is one of its main advantages. It makes Hong Kong attractive to international groups of companies. If you are considering Hong Kong as an option for incorporation, it is important to keep in mind the key features of taxes and fees.
General information about taxes
Territorial taxation system
Personal income and gains are taxable in Hong Kong only if they arise from activities carried on in Hong Kong.
No VAT
Hong Kong has no value added tax, sales tax or similar taxes.
However, some types of goods are subject to excise taxes: tobacco products, alcohol, hydrocarbons, etc.
Non-standard tax period
In Hong Kong it runs from April 1 to March 31.
"For companies that are part of international groups, a fairly complex set of conditions applies to determine whether income is related to activities in Hong Kong (FSIE). Pay special attention to such types of income as royalties, interest on loans and credits, dividends and income from capital gains - for such income, a number of separate requirements must be met in order not to pay income tax" Roman Motorin. Senior юрист
Main taxes
Corporate income tax
Who pays?
- Companies registered in Hong Kong
- Foreign companies operating in Hong Kong
Tax base
Profits from activities carried out in Hong Kong
Bid
Depends on the size of the profit:
- 8.25% on first HKD2m profit
- 16.5% on all remaining profits above this value
Income tax for individual entrepreneurs and partnerships
Who pays?
- Persons who carry out business activities in Hong Kong without forming a legal entity
Tax base
Profits from activities carried out in Hong Kong
Bid
Depends on the size of the profit:
- 7.5% on first HKD2m profit
- 15% on all remaining profits above this value
Withholding tax (WHT)
Withholding tax is a mandatory withholding of a portion of the payment in favor of the state when paying to non-residents.
Who pays?
Withholding agents are Hong Kong companies that pay royalties from Hong Kong
Tax base
Royalties paid by Hong Kong company to foreign licensors
Bid
Depends on the size of the payments:
- 2.475% on first HKD2 million payout
- 4.95% on all remaining payments above this value
Personal Income Tax
Who pays?
Individuals employed in Hong Kong
Tax base
Income from employment in Hong Kong: from an employment contract with a Hong Kong employer or from employment contracts with a foreign employer if the work is performed in Hong Kong
Bid
Depends on the size of income:
- 2% up to HKD50,000
- 6% up to HKD 100,000
- 10% up to HKD 150,000
- 14% up to HKD200,000
- 17% over HKD 200,000
Social contributions
Who pays?
Employee and employer
Tax base
Monthly labor income of the employee
Bid
- 10% , which is divided between the employee and the employer:
- 5% is paid by the employee
- 5% is paid by the employer
“Hong Kong has a progressive income tax scale, and social obligations are distributed reasonably and balanced between employer and employee. This eliminates excessive tax burden on business and differs significantly from many Western systems, where employers are forced to bear significant social security costs. Our clients especially appreciate this model for its transparency, predictability and absence of hidden social costs." Ekaterina Koroleva. Senior юрист
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