Tax rates in Hong Kong SAR, China

Company Tax

A two-tiered profits tax rate is in force in Hong Kong

Tax Rate For Foreign Companies

Hong Kong SAR operates under a territorial tax system where profits tax is imposed on any entity, including corporations, partnerships, and sole proprietorships, engaged in trade, profession, or business within Hong Kong SAR, based on profits generated within or derived from the region. Generally, tax residency holds little significance, and there's no differentiation between residents and non-residents regarding profits tax liability, except within the context of tax treaties. Non-residents conducting trade, profession, or business within Hong Kong SAR are subject to tax on profits generated within or derived from the region, unless they originate from jurisdictions covered by tax treaties with Hong Kong SAR, where they enjoy treaty protection.
Foreign-source dividends and disposal gains on equity interests also may be exempt from profits tax if the participation exemption applies. 

Capital Gains Taxation

Long-term capital gains are not taxed in Hong Kong. Nevertheless, capital gains deriving from the disposal of assets may be subject to profits tax if the disposal constitutes a transaction in the nature of trade (especially in the real estate industry).
Starting from 1 January 2024, Hong Kong SAR-source disposal gains on equity interests held for at least 24 months by an investor entity, where these interests constitute at least 15% of the investee entity’s total equity, will be regarded as capital in nature and non-taxable. However, certain foreign-source disposal gains are subject to profits tax unless specific conditions are met: the economic substance requirement (for property other than intellectual property), the nexus requirement (for intellectual property), or the participation exemption (for equity interests).

Main Allowable Deductions and Tax Credits

Deductible expenses must be wholly, exclusively and necessarily included in the production of taxable income, including depreciation, debts, repairs to plants, trademark rights registration costs, etc. Other deductions that are allowed include mandatory pension contributions (up to 15% of the employee's total emoluments) and donations of more than HKD 100 (capped at 35% of the assessable profits).
The tax deduction for voluntary contributions made by employers to the Mandatory Provident Fund for employees aged 65 or above has been increased from 100% to 200% with the 2023-24 budget.
Special deductions are provided for R&D expenditure (100%; or 300% deduction on the first HKD 2 million and 200% on the excess, according to the type of investment), purchases of patent rights, rights to know-how, copyrights, registered designs and trademarks, capital expenditure on the provision of prescribed fixed assets including manufacturing machinery and computer software, etc. Capital expenditure, start-up expenses, internal expenditure and any other spending that is not incurred to earn income are not tax-deductible.
Net operating losses can be carried forward indefinitely, whereas loss carryback is not allowed. Capital losses are not tax-deductible.
For further information, consult the dedicated page on the website of the Inland Revenue Department.

Other Corporate Taxes

Stamp duty in Hong Kong SAR is charged on documents related to the lease, sale, or transfer of immovable property and shares. If property or shares are transferred below market value, stamp duty is based on the market value at the transfer date. For Hong Kong SAR shares, stamp duty is 0.2% of the transfer value (0.1% for each of the bought and sold notes), reduced from 0.26% and 0.13% as of 17 November 2023, with exemptions for certain intragroup transactions. Lease stamp duty rates are 0.25% for leases up to one year, 0.5% for leases between one and three years, and 1% for leases over three years. Ad valorem stamp duty (AVD) on non-residential property sales is capped at 4.25%, while for residential properties, AVD is a flat 7.5% with some exceptions. A special stamp duty (SSD) of 10% to 20% applies if residential property is sold within 24 months, and a 7.5% buyer's stamp duty applies to residential property purchases by non-Hong Kong SAR permanent residents, including limited companies. Effective from 28 February 2024, the rate of the Buyer’s Stamp Duty and of the Special stamp duty are reduced to 0%.

Property tax in Hong Kong SAR is levied annually on the owner of any land or buildings (excluding government and consular properties) at a standard rate of 15% on the net assessable value of the property. The net assessable value is calculated as the consideration payable to the owner for the right to use the property, minus any rates paid by the owner and a 20% notional allowance. Corporate rental income from Hong Kong properties is subject to profits tax. A corporation subject to profits tax can request an exemption from property tax for the property. If no exemption is sought, the property tax paid can be offset against the profits tax payable by the corporation.
The government also levies indirect taxes as privately owned land in Hong Kong is normally held by way of a government lease: the rate is generally 3% of the rateable value of the property.

Under the Mandatory Provident Fund scheme, employers are required to make a mandatory contribution for their employees that is equal to 5% of their monthly income (the relevant minimum and maximum income levels are HKD 7,100 and HKD 30,000, respectively).

The Plastic Shopping Bag (PSB) charging scheme mandates that all plastic bags (excluding those used for food hygiene purposes) provided for retail sales, including flat-top bags, incur charges, with retailers required to levy at least HKD 1 per bag, retaining the proceeds. Additionally, effective from 1 August 2024, the Hong Kong SAR government will enforce Municipal Solid Waste (MSW) charging, aligning with the 'polluter-pays' principle, wherein waste disposal across all sectors will be subject to charges based on quantity.

Other Domestic Resources

Inland Revenue Department of Hong Kong

Tax Rate

Allowable Deductions and Tax Credits

Business expenses, self-education expenses, home loan interest, mandatory provident fund (MPF) contributions and elderly residential care expenses are some examples of deductible items. Most of the deductions are capped at a specified limit. Separate personal allowances are provided depending on the individual's social situation. Elderly residential care expenses paid to a residential care home in respect of a parent or grandparent of a taxpayer or spouse are deductible up to a maximum of HKD 100,000. A deduction is allowed for self-education expenses paid for employment-related courses (capped at HKD 100,000/year). For the same year, contributions to a recognised occupational retirement scheme or an MPF scheme are deductible up to a maximum of HKD 18,000. Home loan interest paid can be deducted by a person if the property is owned by that person and is occupied by that person as their place of residence during the year of assessment, capped at HKD 100,000 per year for 20 years of assessment. Charitable donations made in cash to approved charitable institutions are allowable if the aggregated amount for a year of assessment is at least HKD 100, limited to 35% of the assessable income after allowable deductions of the year of assessment.

Several personal allowances are also available, including a basic allowance of HKD 132,000, an allowance of HKD 264,000 for married couples, HKD 260,000 for the first year of each child, plus HKD 130,000 for every following year, etc. For further information, consult the dedicated page on the website of the Hong Kong government, as well as the IRD website.

Special Expatriate Tax Regime

There is no special expatriate tax regime in Hong Kong. The source of income from an office is determined by the location at which the company paying the fees is centrally managed and controlled.
An individual who visits Hong Kong for no more than 60 days in a tax year (from 1 April to 31 March of the following year) is not liable to taxation on employment income.