When Hong Kong is mentioned, people immediately think of an offshore territory. But Hong Kong is not an offshore jurisdiction; it is a territory with low taxation. Income, capital gains, and dividends are not taxed, making this destination even more attractive for launching a business there. Relatively low tax rates and a favorable tax framework make Hong Kong a highly attractive place to generate income and hold assets.
Tax basis in Hong Kong
It should be noted that Hong Kong follows the territorial source principle of taxation. In other words, this means that income is taxed only if it arises from or is derived from commercial activities, a business, or a profession carried out in Hong Kong. Tax therefore does not depend on a person's nationality, domicile, or residence in Hong Kong.주요 taxes in Hong Kong
In Hong Kong, taxes are administered by "The Hong Kong Inland Revenue Department". Only profits, salaries, and rental income generated in Hong Kong are taxed. If you do business in Hong Kong, be prepared to pay various taxes:Profits tax
Profits tax is levied on profits earned in Hong Kong from carrying on a trade, business, or profession in Hong Kong. It is 16.5% of profits for companies.Income tax
Income tax is payable by anyone receiving income. Income tax is determined either by applying progressive rates of 2% to 17% to each income bracket or by applying a flat rate of 15%.- From 0 to 40 000 HKD: 2%
- From 40 000 HK$ to 80 000 HKD: 7%
- From 80 000 HK$ to 120 000 HKD: 12%
- Over 120 000 HKD: 17%
Property tax
Property tax is levied on income derived from real estate in Hong Kong. In addition to income tax, stamp duty is payable on chargeable instruments executing certain transactions. A special stamp duty may apply to the transfer or sale of residential property. In Hong Kong, the tax year runs from 1st April to 31 March each year.The absence of taxes in Hong Kong
Many taxes that exist in other jurisdictions do not exist in Hong Kong.VAT in Hong Kong
The positive aspect of Hong Kong is the complete absence of VAT! There is no VAT in Hong Kong. Taxes are certainly few and low, but the cost of living is high. But that is not all; there are no taxes on:- Capital gains;
- Dividends;
- Inheritance;
Social security in Hong Kong
It should be noted that no social security tax is due in Hong Kong. Employers and employees are required to contribute the lower of 5% of employees' salaries and HK$1,500 (approximately USD 192) per month to approved mandatory provident fund schemes, unless employees are covered by other recognized occupational retirement schemes.Double taxation agreements with Hong Kong
As of January 1, 2019, Hong Kong had concluded comprehensive DTAs with 38 treaty partners: Austria, Belarus, Belgium, Brunei, Canada, Korea, Finland, France, Guernsey, Hungary, India, Indonesia, Ireland, Italy, Japan, Japan, Jersey, Kuwait, Latvia, Liechtenstein, Luxembourg, the Czech Republic, mainland China, Malaysia, Malta, Mexico, New Zealand, the Netherlands, Pakistan, Portugal, Qatar, Romania, Russia, Saudi Arabia (ratification is pending), South Africa, Spain, Switzerland, Thailand, the United Arab Emirates, the United Kingdom, and Vietnam, as well as DTAs concerning air transport income, shipping income, and air transport income. Currently, further negotiations are underway with Bahrain, Bangladesh, Cambodia, Cyprus, Estonia, Germany, Israel, Macao, Macedonia, the Maldives, Mauritius, Nigeria, Norway, and Turkey. In summary, Hong Kong offers considerable tax advantages to those who decide to settle there or develop a business. These advantages can therefore be summarized as follows:- Taxes are extremely low by OECD standards;
- Taxes are levied according to the "territorial principle";
- A number of taxes that exist in most jurisdictions do not exist in Hong Kong.
