Taxation in Hong Kong


  • simple, low-rate tax system
  • the most business-friendly tax systems in the world
  • only 3 direct taxes are imposed

The three taxes are:

Profits Tax


First HK$2 million — 8.25%

Over HK$2 million — 16.5%

unincorporated business (partnerships and sole proprietorships)

First HK$2 million — 7.5%

Over HK$2 million — 15%

Salaries Tax

15% standard rate

Property Tax



There are none of the following taxes in Hong Kong:

  • Sales tax or VAT
  • Withholding tax on dividend and interest
  • Capital gains tax
  • Tax on dividends

Profits Tax

Territorial Principles of Taxation

Persons undertaking any trade, profession or business in Hong Kong are liable to profits tax on profits arising in or derived from Hong Kong from such trade, profession or business.

Profits tax is based on the territorial principle. Only profits which have a source in Hong Kong are taxable here. Profits sourced elsewhere are not subject to Hong Kong profit tax. In simple terms, this means that a person who derives profits from elsewhere is not required to pay tax in Hong Kong on those profits, even if it is remitted to Hong Kong.

The territorial principle means that only income which meets the following 3 pre-conditions is subject to Hong Kong profits tax:

  • a person carries on a trade, profession or business in Hong Kong;
  • the trade, profession or business derives profits; and
  • the profits arise in or are derived from Hong Kong.

For more information about the territorial principle of taxation, please visit the Inland Revenue Department website.



Capital gains – No Tax

Dividends derived from either local or foreign subsidiary – No Tax

Rental income from foreign real estate – No Tax

Interest income on deposits in local or foreign banks – No Tax (except financial institutions)


Two-Tiered Profits Tax Rates Regime

The two-tiered profits tax rates regime was introduced as from the fiscal year starting on 1 April 2018.

Under the two-tiered profits tax rates regime, the profits tax rate for the first HK$2 million of assessable profits is lowered to 8.25% for corporations and 7.5% for unincorporated businesses (mostly partnerships and sole proprietorships). Assessable profits above HK$2 million continue to be subject to the rate of 16.5% for corporations and a standard rate of 15% for unincorporated businesses.

An entity can only use the two-tiered profits tax rates if no other connected entity has been elected to use them for that year of assessment. If the entity has one or more connected entities at the end of the basis period of the entity for the relevant year of assessment, then the two-tiered profits tax rates only apply to the entity that has been nominated to receive the two-tiered rates. Other entities do not qualify for the two-tiered rates and must pay the standard tax amount.


Withholding Tax

Dividend – No Tax

Interest – Not Tax

Technical service fees – No Tax

Branch remittance – No Tax

Royalties – 4.95% for corporate entities; 4.5% for unincorporated entities

If the royalty is paid to an associated non-resident for the use of intangibles that were previously owned by a person carrying on business in Hong Kong, the royalty is taxable at an effective rate of 16.5% (15% for an unincorporated person).

Salaries Tax

Salaries tax payable is calculated at progressive rates on net chargeable income (NCI). If tax calculated on the basis of NCI exceeds the tax charged at the standard rate on net total income (NTI), then taxpayers pay the lower amount of tax.

Net Chargeable Income (NCI) = Total Income – Deductions – Allowances

Net Total Income (NTI) = Total Income – Deductions


Progressive Rates

Net Chargeable Income, HKD

Tax rate

First 50 000 (1 – 50 000)


Next 50 000 (50 001 – 100 000)


Next 50 000 (100 001 – 150 000)


Next 50 000 (150 001 – 200 000)





Standard rate – 15%.

You can calculate your tax liability under salaries tax or personal assessment using a simple tax calculator developed by the Hong Kong Inland Revenue Department.


Employee Tax Obligations

Individuals are charged salaries tax on income arising in or derived from Hong Kong from any employment, office, and pension.

Salaries Tax Return is normally issued on the first working day in May of the following year of assessment. Taxpayers are required to complete and send the tax return back to the IRD within 1 month from the date of issue of the return.


Employer Tax Obligations

There is no obligation for employers to withhold salaries tax from their employees. An employer has to maintain certain records of employees, to inform IRD about the change of particulars of employees and report employees’ remuneration to IRD by completing and filing an Employer’s Report.


Employee vs Self-Employed

If an individual works for himself/herself and is not an employee, he/she is considered to be self-employed and can be charged Profits Tax instead.

For example, a person may be a partner of a partnership entity and receives income derived from a business of a partnership, thus he/she works for himself/herself and is considered as carrying on a trade, business or profession as a self-employed person.


60 Days Visit Rule

Employees working outside Hong Kong are not charged salaries tax. If an employee stays in Hong Kong for less than 60 days during the reporting period, the employee is not obliged to pay salaries tax in Hong Kong or make contributions to the Mandatory Provident Fund (MPF).


Other Taxes on Individuals

Interest income – No Tax

Capital gains – No Tax

Dividends – No Tax

Inheritance (estate) tax: No

Net wealth tax: No


Social Security

For employees whose monthly income is HK$7,100 or more, the employer is required to deduct 5% as the employee’s contribution to the MPF scheme and pay an additional 5% as its own contribution.

Property Tax

Property tax is charged to the owner of any land or buildings in Hong Kong at the standard rate of 15% on the Net Assessable Value (NAV) of such land or buildings.

NAV = (Rental Income – Irrecoverable Rent – Rates paid by owner) – 20% х (Rental Income – Irrecoverable Rent – Rates paid by owner).

A company that derives rental income from property is subject to profits tax and may apply for an exemption from property tax. If no exemption is applied, the property tax paid can be used to offset profits tax payable by the company.

Stamp Duty on Transfer of Hong Kong Stock

Stamp duty rates on documents connected with transfer of Hong Kong stocks and shares:

Nature of Document


Contract Note for sale or purchase of any Hong Kong stock

0.1% of the amount of the consideration or of its value (if it is higher)* on every sold note and every bought note

Transfer operating as a voluntary disposition inter vivos

HK$5 + 0.2% of the value of the stock

Transfer of any other kind


*The original copy of the latest audit report within 6 months or certified most recent management accounts within 3 months shall be provided to the Stamp Duty Office.

Persons liable for stamping: the transferor and the transferee.


Time Limit

Contract note for purchase or sale of Hong Kong stock

Within 2 days after the sale or purchase, if effected in Hong Kong;

Within 30 days after the sale or purchase, if effected elsewhere.

Instrument of Transfer of Hong Kong stock (not including gift)

Before the date of execution, if executed in Hong Kong;

Within 30 days after the date of execution, if executed outside Hong Kong.

Gift of Hong Kong stock

Within 7 days after the date of execution, if executed in Hong Kong;

Within 30 days after the date of execution, if executed outside Hong Kong.


Late Stamping Penalty

Length of Delay


Not exceeding 1 month

2 times the amount of stamp duty

Exceeding 1 month but not exceeding 2 months

4 times the amount of stamp duty

In any other case

10 times the amount of stamp duty