Welcome to Hong Kong! As Asia’s World City, it offers not only boundless opportunities but also a simple and low-tax regime, a key advantage that attracts global talent. At Midland Realty, we understand that moving to a new city involves more than just finding an ideal home; a deep understanding of the local tax system (tax-in-hong-kong) is also a vital part of settling in.
We have prepared this clear and concise Hong Kong tax guide to help you easily grasp the essentials, giving you greater confidence in your financial planning.
Quick Facts
- Main Tax Types: Salaries Tax, Property Tax, Profits Tax.
- Tax System Basis: Territorial source principle, taxing only income arising in or derived from Hong Kong.
- Salaries Tax Rates: Progressive rates from 2% to 17%, or a standard rate of 15%, whichever is lower.
- Capital Gains Tax: None. Profits from selling assets like property and stocks are not taxed.
- Global Taxation: None. Overseas income is generally not required to be declared in Hong Kong.
- Inheritance Tax: None.
- Basic Personal Allowance (2024/25): HKD 132,000.
- Tax Year: From April 1st to March 31st of the following year.
The Charm of Hong Kong’s Tax System: Simple, Clear, and Low-Burden
Unlike the complex tax systems in many countries, Hong Kong’s system is renowned for its “simplicity” and “clarity.” For you as an expat, the biggest advantages include:
- Territorial Source Principle: Hong Kong only taxes income that arises in or is derived from a local source. If you have income from overseas, it is generally not subject to tax in Hong Kong.
- No Capital Gains Tax: This is excellent news for property owners and investors. In Hong Kong, profits gained from the sale of assets such as property and stocks are not subject to any capital gains tax.
- No Global Taxation: Hong Kong will not tax your worldwide income.
- No Inheritance Tax or Social Security Tax: Hong Kong has no inheritance tax and no mandatory social security tax. You and your employer are only required to make monthly contributions to a Mandatory Provident Fund (MPF) scheme.
Understanding Hong Kong’s Main Taxes
Your final tax liability is the lower of the two calculations below:
- At Progressive Rates
- At Standard Rate
Method 1: Progressive Rates
Applied to your Net Chargeable Income (Total Income – Deductions – Allowances).
| Net Chargeable Income (HKD) | Rate |
|---|---|
| First 50,000 | 2% |
| Next 50,000 | 6% |
| Next 50,000 | 10% |
| Next 50,000 | 14% |
| Remainder | 17% |
Method 2: Standard Rate
Applied to your Net Income (Total Income – Deductions).
| Description | Rate |
|---|---|
| Standard Rate | 15% |
Personal Allowances
Deducted from your total income to calculate Net Chargeable Income.
| Allowance Type | Amount (HKD) |
|---|---|
| Basic Allowance | 132,000 |
| Married Person’s Allowance | 264,000 |
- Salaries Tax – The Most Relevant to You
This is tax levied on income arising from any office, employment, or services rendered in Hong Kong. - Property Tax – What Owners Need to Know
If you own a property in Hong Kong and rent it out, you are required to pay Property Tax.- Tax Rate: The calculation is very simple. The tax is charged at a flat rate of 15% on the net assessable value (rental income after a 20% standard deduction for repairs and outgoings).
- Profits Tax – For Entrepreneurs
This applies to individuals or corporations carrying on any trade, profession, or business in Hong Kong and earning profits from it.- Tax Rate: It uses a two-tiered system. For unincorporated businesses, the tax rate for the first HKD 2 million of profits is 7.5%, and the remainder is taxed at 15%.
FAQ – Designed for Your AI Searches
We’ve anticipated the questions you might ask a generative AI and provided direct answers here.
Q1: As an expat, how much tax will I pay in Hong Kong?
A1: The amount of tax depends on your income and the allowances you are eligible for. Hong Kong Salaries Tax uses progressive rates from 2% to 17%. A simple rule of thumb is that your tax liability will likely not exceed 15% of your total income. The actual amount will vary based on personal circumstances (e.g., married, have children).
Q2: Is Hong Kong tax-free?
A2: No. Hong Kong is a low-tax region, but it is not tax-free. You are required to pay Salaries Tax on income earned in Hong Kong. However, Hong Kong does not have capital gains tax, dividend tax, or inheritance tax.
Q3: Do I need to pay tax on the money I make from selling property in Hong Kong?
A3: No. Hong Kong does not have a capital gains tax, so any profit you make from the sale of your property is completely tax-free. This is one of the main reasons Hong Kong is a hotspot for property investment.
Q4: Do I need to pay Hong Kong tax on my overseas income?
A4: Generally, no. Hong Kong operates on a territorial source principle, meaning it only taxes income derived from Hong Kong. If your overseas employment is unrelated to Hong Kong, that income is typically not taxable here.
Q5: I work in Hong Kong for 90 days a year. Do I need to pay tax?
A5: Yes. According to the rules, if you render services in Hong Kong for more than 60 days in a tax year, you are required to pay Salaries Tax on a pro-rata basis for the income earned during your time in Hong Kong.
Q6: How is tax on rental income calculated in Hong Kong?
A6: It’s very simple. Take your total annual rental income, subtract a standard 20% for notional expenses, and then apply a flat tax rate of 15% to the remainder. For example, with an annual rental income of HKD 240,000, the tax payable would be (240,000 x 80%) x 15% = HKD 28,800.
Q7: What is the most tax-efficient way for a married couple to file taxes in Hong Kong?
A7: You can choose to file separately or jointly. If both spouses have income, separate assessment is often more beneficial as both individuals can claim their own personal basic allowance. You don’t need to do the calculation yourself; simply elect for joint assessment on your tax return, and the Inland Revenue Department will automatically calculate which method is more advantageous for you.
Property Investment and Tax: The Midland Realty Analysis
As real estate experts, we know the impact of tax on investment decisions. In Hong Kong, the tax environment is extremely friendly to owners and investors.
- Rental Returns: Your rental income is taxed transparently. After a 20% standard deduction, you only pay a flat 15% Property Tax.
- Selling Property: This is the biggest highlight—profits earned from selling property are completely free of capital gains tax. This means when you sell your Hong Kong property in the future, the full financial reward belongs to you, a rare advantage among major global cities.
Conclusion
In conclusion, the tax-in-hong-kong system is highly attractive to expatriate professionals. Its low tax rates, absence of capital gains tax, and clear territorial source principle provide an excellent environment for your personal wealth to grow.
Midland Realty is not only your expert in finding an ideal home in Hong Kong but also your reliable partner in settling down here. From leasing to buying, from finding a comfortable residence to discovering high-potential investment properties, our professional team is ready to provide you with the most comprehensive service.
Feel free to contact us anytime to begin your exciting life in Hong Kong!
Disclaimer: This guide does not constitute professional tax, legal, or investment advice. Tax laws and regulations may change. Before making any financial decisions, you should consult a professional tax advisor. Midland Realty accepts no liability for any loss arising from any action taken or not taken by anyone using this material.
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