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Taxation In Hong Kong


Taxation in Hong Kong is both simple and predictable. Dividend income received is exempted in Hong Kong and capital gain generated from the disposal of capital asset is not subject to tax in Hong Kong. In addition, Hong Kong does not have sales tax and value added tax. Income tax in Hong Kong is not deducted at source except under certain limited circumstances; in general, income tax is payable only after notice of assessment is served to taxpayer. Previously, Estate Duty was levied on the value of Hong Kong property which passes from one person to another on the death of an individual but the Duty was abolished during 2006.

There are 3 kinds of income tax in Hong Kong, namely, Salaries Tax, Profits Tax and Property Tax. Since Hong Kong adopts a territorial source principle, all these income taxes are only charged on income which is derived from Hong Kong. As a result, if income does not have a Hong Kong source, such income is not subject to tax in Hong Kong.

Profits Tax

Unless exempted, every person including company carrying on business in Hong Kong is subject to Profits Tax but only on the profits arising in or derived from Hong Kong from such business. Therefore, a company is not subject to Profits Tax if its business is not carried on in Hong Kong or its profits are not derived from Hong Kong (i.e. offshore profits). Except under limited circumstances, the residence status of a taxpayer does not affect his tax liability.

Unless specifically prohibited, all expenses incurred for the production of assessable profits are fully deductible. In addition, generous allowance was given in respect of most capital expenditure such as plant and machinery. For certain capital expenditure such as the cost of computer and software, payment of the capital expenditure is fully deductible in the year of purchase.

In the year of assessment 2012/2013, the profits tax rate is 16.5% for company and 15% for sole proprietorship and partnership.

Salaries Tax

Salaries Tax is charged on every person in respect of his income sourced in Hong Kong and obtained from an office, employment or pension. However, Salaries Tax will not be charged on remuneration if all services are rendered outside Hong Kong. In addition, if an employee stays in Hong Kong for not more than 60 days within a year of assessment, he may be exempted from Salaries Tax in that year of assessment.

All taxpayers under Salaries Tax are allowed to deduct from their assessable income some specifically allowable expenses and losses, if any, so as to determine the “net assessable income”. The maximum Salaries Tax a taxpayer needs to pay each year is computed at the standard rate on the “net assessable income” after concessionary deductions such as certain approved charitable donation and home loan interest. For the year of assessment 2012/2013, the standard rate is 15%.

Property Tax

Property tax is charged on every owner of land and/or building (“property”) situated in Hong Kong. Property tax is calculated at the standard rate (i.e. 15% for the year of assessment 2012/2013) of the net assessable value of the property. Generally, the net assessable value of a property is the consideration actually payable to the owner for the right of use of the property less certain deduction.

Our Service In This Area

We provide suitable solution and comprehensive taxation services to meet our customer’s needs. Our service includes the following:

  • Acting as clients’ tax representative

  • Assisting the completion of different tax returns such as Profits Tax Returns, Tax Returns for Individuals, Property Tax Return and Employer’s Returns on remuneration etc.

  • Assisting the handling of enquiries from the Inland Revenue Department, field audits by the Inland Revenue Department, tax investigations and tax appeals

  • Providing advice to clients of their statutory tax responsibility and obligation

  • Tax planning and tax advice so as to minimize the tax liabilities of companies and individuals legally

  • Stamp Duty planning

For further information, please contact us.