Paying taxes in Hong Kong
is straightforward and accessible for companies incorporated here. The Special Administrative Region has low taxation rates
and this is one of the key features that attracts foreign investors
The Hong Kong government allows for certain tax facilities
and preferential profits tax treatments
. Accelerated depreciation allowances are possible in a number of business fields, for expenditure and payments. These special deductions
are possible under certain conditions and our agents specializing in setting up a Hong Kong company
can help you benefit from them.
These tax benefits
are of real importance to investors who are interested in company formation in Hong Kong
. Apart from the benefits and allowances, Hong Kong has also signed a number of double tax treaties
with countries worldwide. These agreements allow for preferential tax rates
as well as other provisions for the taxation of individuals
and companies that perform business activities in Hong Kong and in the other country.
Taxes in Hong Kong
The corporate income tax rate in Hong Kong
is 16.5% (15% for unincorporated businesses) and the same applies for branches of foreign companies
. The city does not have a participation exemption, no tax consolidation, no controlled foreign company rules, and no thin capitalization rules.
The basis for corporate taxation is the residence of that legal entity. A company is a tax resident if it is incorporated in Hong Kong and the relevant income is produced in or earned from the city.
There is no withholding tax on dividends and interest. A withholding tax on royalties applies and it has a value of 4.95% to 16.5%. The real estate tax has a value of 15% and social security contributions have a value of 5%. Stamp duty is charged in Hong Kong and for the transfer of shares it has a value of 0.2% of the value of the transferred shares. Hong Kong has no Value Added Tax. Hong Kong does not impose any environmental taxes.
Other taxes can include the air passenger departure tax and a duty on bets.
The basis for personal taxation in Hong Kong is the personal income tax or salaries tax. It is levied on all income arising from or derived from Hong Kong-sources: employment, pension or others. The income tax rates range from 2% to 17%. There is no net wealth tax in Hong Kong.
Tax compliance in Hong Kong
Regardless of the type of business
, legal entities in Hong Kong are taxed on their Hong-Kong source income. When a company derives income both from Hong Kong and from other sources, then the expenses that can be attributed to the non-Hong Kong profits are not deductible.
The tax year in Hong Kong
is calculated from April 1 to March 31 the following year. Tax returns
are issued annually and companies need to report the profits made in the previous year. Companies in Hong Kong
that have a different financial year are usually awarded an extended period to file the tax returns
. Failure to comply with the Inland Revenue Department
Ordinance can result in penalties.
The same tax year applies for personal taxation and married individuals in Hong Kong can choose to file joint or separate tax assessments.