Main taxes and fees in Hong Kong
The tax system is one of Hong Kong’s main advantages. It makes Hong Kong highly attractive for international corporate groups.
If you are considering Hong Kong as a jurisdiction for incorporation, it is important to understand the key features of its taxes and levies.
General Information on Taxes
Territorial Tax System
Profits and personal income are taxed in Hong Kong only if they are derived from activities in Hong Kong.
No VAT
There is no value-added tax, sales tax, or similar levies in Hong Kong. However, some goods are subject to excise duties: tobacco products, alcohol, hydrocarbons, etc.
Non-standard Tax Year
The fiscal year in Hong Kong runs from April 1 to March 31.
“For companies within international groups, a rather complex set of rules applies to determine whether income is connected to Hong Kong activities (FSIE). Pay special attention to income from royalties, loan interest, dividends, and capital gains — for such income, a number of separate conditions must be met to remain exempt from profit tax.” Gennady Kurdiumov Co-founder
Corporate Profits Tax
Who pays
- Companies incorporated in Hong Kong
- Foreign companies carrying out activities in Hong Kong
Tax base
Profits from activities carried out in Hong Kong
Rates
- 8.25% on the first HKD 2 million of profits
- 16.5% on profits exceeding HKD 2 million
Profits Tax for Sole Proprietors & Partnerships
Who pays
Individuals carrying out business in Hong Kong without forming a legal entity
Tax base
Profits from activities carried out in Hong Kong
Rates
- 7.5% on the first HKD 2 million of profits
- 15% on profits exceeding HKD 2 million
Withholding Tax (WHT)
Withholding tax is a mandatory deduction from payments made to non-residents.
Who pays
Hong Kong companies acting as tax agents paying royalties from Hong Kong
Tax base
Royalties paid by Hong Kong companies to foreign licensors
Rates
- 2.475% on the first HKD 2 million of royalties
- 4.95% on royalties exceeding HKD 2 million
Personal Income Tax (PIT)
Who pays
Individuals employed in Hong Kong
Tax base
Income from employment in Hong Kong under a Hong Kong employer or under a foreign employer if the work is performed in Hong Kong
Rates
- 2% up to HKD 50,000
- 6% up to HKD 100,000
- 10% up to HKD 150,000
- 14% up to HKD 200,000
- 17% above HKD 200,000
Social Security Contributions
Who pays
Both employer and employee
Tax base
Employee’s monthly employment income
Rates
Total: 10% - 5% paid by the employee and 5% paid by the employer
“Hong Kong applies a progressive PIT scale, while social security obligations are reasonably and fairly split between the employer and employee. This eliminates excessive tax burdens on businesses and significantly differs from many Western systems, where employers face substantial social security costs. Our clients especially appreciate this model for its transparency, predictability, and absence of hidden social costs.” Alexandra Kurdiumova Co-founder
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