Hong Kong operates a territorial tax system and the concept of residence is irrelevant for the determination of tax liability. However, for the purpose of a tax arrangement (treaty), a company is a resident if it is incorporated in Hong Kong or it is incorporated outside Hong Kong but normally managed or controlled in Hong Kong
Tax base
Territorial
Corporate tax rates
8.25% (for the first HKD 2 million of corporate profits); 16.5% (for profits exceeding HKD 2 million)
Alternative minimum tax
No
Capital gains
No
Loss carry-forward
Yes, indefinitely
Loss carry-back
No
Unilateral double taxation relief
Yes
2. Non-resident companies
Corporate tax rates
8.25% (for the first HKD 2 million of corporate profits); 16.5% (for profits exceeding HKD 2 million)
Capital gains on sale of shares in resident companies
No
Capital gains on sale of immovable property
Profits tax is charged on gains from disposal of immovable properties in the nature of trading adventure
Withholding tax rates
Branch profits
No
Dividends
No
Interest
No
Royalties
4.95% (16.5% on 30% of profits)
Fees (technical)
No
Fees (management)
No
3. Specific issues
Participation relief
Dividends are exempt from taxation
Group treatment
No
Incentives
High value manufacturing
Qualifying debt instruments
Qualifying reinsurance business
Qualifying R&D expenditures
Offshore mutual funds
Offshore private equity funds
Anti-avoidance
Transfer pricing legislation
Yes
Thin capitalization legislation
No
Controlled foreign company legislation
No
General anti-avoidance rule (GAAR)
Yes
Other anti-avoidance legislation
No
B. Direct taxation: Individuals
1. Resident individuals
Residence
A resident is a person who ordinarily resides in Hong Kong (permanent resident), or stays in Hong Kong for a total period(s) of at least 180 days during a year of assessment and not less than 300 days in a year of assessment and the year immediately before or after (temporary resident)
Taxable income
Individuals are subject to salaries tax on all income arising in or derived from Hong Kong from any office or employment and pension
Income tax rates
Progressive
Top rate 17% (income over HKD 200,000)
Sole proprietors or partners of a business and property owners who receive rental income: 15%
Alternative minimum tax
No
Capital gains
No
Unilateral double taxation relief
Yes
Social security contributions
Employees who are covered by the Mandatory Provident Fund (MPF) System are required to make regular mandatory contributions, calculated at 5% of the employee’s relevant income. Self-employed persons are required to contribute 5% of income
2. Non-resident individuals
Income tax rates
Progressive
Top rate 17% (income over HKD 200,000)
Capital gains on sale of shares in resident companies
No
Capital gains on sale of immovable property
Profits tax is charged on the gains from disposal of immovable properties in the nature of trading adventure
Withholding tax rates
Employment income
Salaries tax is levied on a provisional basis
Dividends
No
Interest
No
Royalties
4.95% (16.5% on 30% of profits)
Fees (technical)
No
Fees (directors)
No
C. Indirect taxation: Value added tax (VAT)/Goods and services tax (GST)
Taxable events
No
VAT/GST (standard)
No
VAT/GST (reduced)
No
VAT/GST (increased)
No
Registration/deregistration threshold
No
VAT group
No
D. Other taxes
Inheritance and gift taxes
No
Net wealth tax (individual)
No
Net wealth tax (corporate)
No
Real estate taxes
15% (charged on income derived from the property)
Capital duty
No
Transfer tax
No
Stamp duty
Yes, on documents evidencing transactions in respect of stocks and bearer instruments: fixed duties vary from HKD 5 to HKD 1,500,000, whereas ad valorem duties range from 0.1% to 20%
A flat rate of 15% applies to residential property transactions since 4 November 2016 unless the transactions are exempt
Which an ad valorem stamp duty (AVD) at a flat rate of 15% chargeable on residential property transactions has been introduced
Special stamp duty (SSD) is levied on residential properties of all values acquired on or after 20 November 2010 and resold within 24 months after acquisition, in addition to the current ad valorem stamp duty
Buyer’s stamp duty (BSD) is levied on all residential properties acquired on or after 27 October 2012 by any person (including enterprises) except a Hong Kong permanent resident (HKPR) (15%, in addition to the existing stamp duty and the SSD if applicable)
Excise duties
Excise duties levied on liquor, tobacco and related products, hydrocarbon oil, methyl alcohol, etc
Other main taxes
Betting duty
E. General information
Sources of tax law
Inland Revenue Ordinance
Stamp Duty Ordinance
Tax Reserve Certificates Ordinance
Business Registration Ordinance
Main types of business entities
Private limited company, branch, subsidiary or representative office
