HK Taxation & Exemption

INTERSHORES I Features, Pros and Cons of HK Tax System

Hong Kong's tax system is reputable for its simplicity, transparency, and low cost, coupled with the free flow of funds and legitimate legal system etc. Hong Kong  attracts many foreigners to do business in Hong Kong. This article briefly describes the features, advantages and problems of Hong Kong's tax system. 


Introduction of Hong Kong Tax System

Hong Kong's tax system is divided into direct tax and indirect tax. Direct taxes are levied directly on taxpayers, while indirect taxes are levied on services or goods.


There are three direct taxes in Hong Kong: profits tax, salaries tax and stamp duty. Indirect taxes include stamp duty, gambling tax, rates, business registration fees, and automobile first registration tax.


In terms of taxation, profits tax is the largest source of revenue for the Hong Kong government, accounting for approximately 23% of the overall revenue, followed by stamp duty (13%) and salaries tax (10.5%). 


Advantages of Hong Kong Tax System

Companies and individuals enjoy a simple, transparent and low tax regime in Hong Kong. The profits tax rate for the first 2 million Hong Kong dollars (US$255,000) is only 8.25%, and subsequent profits are taxed at the standard of 16.5%. The following taxes are all exempt in Hong Kong:


  • Sales tax / consumption tax / value-added tax
  • Withholding tax
  • Capital gains tax
  • Dividend tax
  • Inheritance tax


Hong Kong taxation issues

If you rely too much on one single income, the company's finances are prone to crisis when that business income is unstable.  There is a saying that the tax system in Hong Kong is too narrow on tax base.  According to past data, the tax revenue is very unstable.   Voices to reform  tax system to broaden  income base are regularly heard. 


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Whilst reasonable care has been taken in provision of information above, it does not constitute legal or other professional advice. INTERSHORES does not accept any responsibility, legal or otherwise, for any error omission and accepts no responsibility for any financial or other loss or damage that may result from its use.  In particular, readers are advised to take appropriate professional advice before committing themselves to any involvement in jurisdictions, vehicles or practice.










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