Tax System in Hong Kong
Low, Simple and Competitive
By aligning its tax policy with growth-oriented economic goals, Hong Kong has emerged as one of the most preferred locations for most global entrepreneurs and business enterprises.
With effect from 1 April 2018, the two-tiered profits tax regime has applied to both corporations and unincorporated businesses in Hong Kong by lowering the tax rate for the first $2 million of assessable profits. The two-tier profits tax rates are effective from the year of assessment 2018/19.
For corporations, the first HK$2 million of profits earned by a company is taxed at the rate of 8.25% whilst the remaining profits continue to be taxed at the rate of 16.5%.
For unincorporated businesses (i.e. partnerships and sole proprietorships), the first HK$2 million of profits earned is taxed at the rate of 7.5% whilst the remaining profits thereafter is taxed at the rate of 15%.
There are only three direct taxes which Hong Kong does impose; profits, salaries and property.
Hong Kong does not impose taxes on VAT, sales, capital gains, dividends and estate.
All salary earners are liable to report total income in Tax Return – Individuals form. You can be charged salaries tax for your income arising in or derived from any employment or pension in Hong Kong. However, personal assessment may advantage to you if you have income that is chargeable to profits tax and property tax. (Salaries Tax Rate: 15%)
Profits Tax is payable by every company carrying on a trade, profession or business in Hong Kong on profits arising in or derived from Hong Kong from that trade, profession or business. Profits which have a foreign source (often termed “offshore profits”) are thus generally beyond the territorial scope of Hong Kong’s taxation system, including those derived.
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