• Hong Kong Tax System

  • TAX RESIDENCY

    Tax Residency

    A company is considered to be tax resident in Hong Kong if it is registered in Hong Kong or its management and control is exercised in Hong Kong.

    Taxable Basis

    Hong Kong tax resident companies are taxed on a territorial basis, which means that they are taxed only on income generated or accrued from Hong Kong. Foreign income is not taxed in Hong Kong.

    Hong Kong non-tax resident companies are taxed on income generated or accrued from Hong Kong.

  • TAX ADMIN

    Taxable Period

    The taxable period for a company in Hong Kong is from 01/04 to 31/03 of the following year. This means that for a company, the basis period for a tax computation is the accounting year ended in the tax year.

    Tax Returns

    Every company needs to submit an annual tax return. Tax returns are usually issued on 1 April each year and need to be submitted within 1 month.

    The financial statements of the company also need to be submitted together with the tax return.

    Group tax returns are not allowed in Hong Kong.

    Tax Assessments

    The Commissioner has up to 6 months to issue a tax assessment.

  • CORPORATION TAX

    Corporation Tax

    Corporation tax is levied on taxable income at the rate of 16.5%.

  • DIVIDENDS

    Dividends from Foreign Investments

    Dividend income from foreign investments is not subject to tax in Hong Kong.

    Dividends from Local Investments

    Hong Kong adopts a one-tier taxation system, which means that all dividends are exempt in the shareholders' hands.

    Withholding Tax on Dividends

    No withholding tax is imposed on dividend paid by companies resident in Hong Kong either to local or foreign recipients.

  • INTEREST

    Interest Income

    Interest income is taxable under income tax. However, exemption is provided to interest income derived from deposits in financial institutions in Hong Kong.

    Interest Expense Deductibility

    Interest expense is tax deductible only if incurred wholly and exclusively for the generation of income. However, stringent and complicated rules exist which aim to guard against loan arrangements with the intention to avoid Hong Kong profit taxes.

    Withholding Tax on Interest

    There is no withholding tax on interest payments to local foreign recipients.

  • ROYALTIES

    Royalty Income

    Royalty income is taxable under income tax.

    Royalty Expense Deductibility

    Royalty expense is generally tax-deductible.

    Withholding Tax on Royalties

    Royalties paid or accrued to non-residents for the use of or the right to use in Hong Kong or outside Hong Kong a trademark, patent, design, copyright material, secret process, or other property of a similar nature, or for the use in Hong Kong of cinema or television tape or any sound recording are deemed to be taxable in Hong Kong (i.e. at 16.5%).

    If such royalties are paid to associated companies abroad then 100% of the royalties are deemed to be taxable in Hong Kong i.e. withholding tax of 16.5%. In all other cases, 30% of the royalties are deemed to be taxable in Hong Kong i.e. withholding tax of 4.95%.

  • TAX LOSSES

    Ordinary Tax Losses

    Ordinary tax losses can be carried forward indefinitely.

    Ordinary tax losses cannot be carried back.

    Group Relief

    Group relief is not available in Hong Kong.

  • CAPITAL GAINS

    Disposal of Shares by Foreign Shareholder

    The profit on disposal of a Hong Kong company by its foreign shareholder is exempt from corporation tax and capital gains tax in Hong Kong.

    However, stamp duty is payable on the market value or consideration of the shares of the company (refer to Stamp Duty section below).

    Capital Gains

    Capital gains are not subject to tax in Hong Kong.

    Capital Losses

    Capital losses are not treated as tax-deductible since capital gains are not taxable in Hong Kong.

  • PARTNERSHIPS

    Partnership Profits

    Partnerships are treated as transparent entities for tax purposes, which means that their profits are taxed directly in the hands of each partner.

  • BRANCHES

    Branch Profits

    A Branch is treated in the same manner as other types of companies in Hong Kong.

    There is no tax in Hong Kong on the remittance of the profit of a Hong Kong Branch to its foreign head office.

  • STAMP DUTY

    Stamp Duty

    Stamp duty is payable on transfers of Hong Kong stock and immovable property.

    The stamp duty on the transfer of stock/shares is 0.2% (payable equally by seller and buyer i.e. 0.1% each) on the market value or value of consideration.

    The stamp duty on the transfer of immovable property (payable equally by the seller and buyer) is as follows:

    Immovable property value or consideration value in HK$ Stamp Duty
    Less than HK$2,000,000 HK$100
    HK$2,000,000 - HK$2,351,760 HK$100 + 10% of excess over HK$2,000,000
    HK$2,351,760 - HK$3,000,000 1.5%
    HK$3,000,000 - HK$3,290,320 HK$45,000 + 10% of excess over HK$3,000,000
    HK$3,290,320 - HK$4,000,000 2.25%
    HK$4,000,000 - HK$4,428,570 HK$90,000 + 10% of excess over HK$4,000,000
    HK$4,428,570 - HK$6,000,000 3%
    HK$6,000,000 - HK$6,720,000 HK$180,000 + 10% of excess over HK$6,000,000
    HK$6,720,000 - HK$20,000,000 3.75%
    HK$20,000,000 - HK$21,739,120 HK$750,000 + 10% of excess over HK$20,000,000
    Over HK$21,379,120 4.25%
  • CAPITAL DUTY

    Capital Duty

    There is no capital duty in Hong Kong.

  • VAT

    Hong Kong does not levy VAT.