Hong Kong has a simple taxation system. The low tax rate, generous tax allowances, and lack of capital gain tax, VAT, sales tax, and the withholding of tax on dividend and interest, make Hong Kong one of the most attractive tax regimes in the region.
Hong Kong adopts the territoriality basis of taxation, whereby only income or profit sourced in Hong Kong is subject to tax. When income earned by a local resident is from a source outside Hong Kong, it is in most cases not taxable in Hong Kong.
The principal direct taxes of Hong Kong are profits tax, salaries tax, and property tax. Profits tax is charged from profits of a trade or business. Salaries tax is charged from income earned from an office, employment, or a pension. Thirdly, property tax is charged from income earned through real estate.
The Inland Revenue Department (IRD) is responsible for taxation matters in Hong Kong. It performs a tax assessment based on income or profit accrued in the year of taxation or assessment, which is from April 1st to March 31st of the following year.
Double Taxation Agreements and Arrangement
Double taxation arises when two or more tax jurisdictions overlap, such that the same item of income or profit is subject to tax in each. Most jurisdictions make provisions in such cases to eliminate the double taxation of income. As of 3 March 2024, comprehensive double tax agreements were signed between Hong Kong and the following jurisdictions:
- Austria
- Bahrain
- Bangladesh
- Belarus
- Belgium
- Brunei Darussalam
- Cambodia
- Canada
- Croatia
- Czech Republic
- Estonia
- Finland
- France
- Georgia
- Guernsey
- Hungary
- India
- Indonesia
- Ireland
- Italy
- Japan
- Jersey
- Korea
- Kuwait
- Latvia
- Liechtenstein
- Luxembourg
- Macao SAR
- Mainland of China
- Malaysia
- Malta
- Mauritius
- Mexico
- Netherlands
- New Zealand
- Pakistan
- Portugal
- Qatar
- Romania
- Russia
- Saudi Arabia
- Serbia
- South Africa
- Spain
- Switzerland
- Thailand
- United Arab Emirates (UAE)
- United Kingdom
- Vietnam
Tax Information Exchange Agreement
Tax Information Exchange Agreements (TIEAs) are an important tool in Hong Kong’s efforts to combat tax evasion. The agreements provide for the effective exchange of information between Hong Kong and its TIEA partners, as well as enhance Hong Kong’s ability to administer and enforce its domestic tax laws. As of 3 March 2024, comprehensive tax information exchange agreements were signed between Hong Kong and the following jurisdictions:
- Denmark
- Faroes
- Greenland
- Iceland
- Norway
- Sweden
- USA
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