All You Need to Know About the Hong Kong Tax System

Hong Kong Taxation

There are several reasons for investors coming to Hong Kong for establishing their operations and one of the determinants is Hong Kong’s tax regime – well-known for its attractive corporate and personal tax rates, non-taxable capital gains, one-tier tax system and extensive double tax treaties.

The Hong Kong tax system is territorial in nature, with a tax levied on income arising in or derived from Hong Kong. Hong Kong imposes three direct taxes, namely Profits Tax, Salaries Tax and Property Tax.

If you have any questions, please do not hesitate to contact us for assistance. 

Profits Tax in Hong Kong

  • Hong Kong follows a territorial basis of taxation. In other words, Hong Kong taxes only business profits, employment income and property rental income arising in or derived from Hong Kong. Whether profits or income arise in or are derived from Hong Kong depends on the nature of the profits or income and of the transactions which give rise to such profits or income.
  • Hong Kong follows a single-tier corporate tax system, where tax paid by a company on its profits is not imputed to the shareholders (i.e. dividends are tax-free).
  • There is no capital gains tax in Hong Kong. Capital loss and expenses are correspondingly not allowed as deductions.
  • There is no VAT or GST imposed in Hong Kong.
  • Hong Kong has concluded more than 30 bilateral comprehensive tax treaties to help Hong Kong companies minimize their tax burden.
  • There is no withholding tax on dividend distributions and interest payments from a Hong Kong entity.Only specific types of payments are subject to withholding tax in Hong Kong such as royalties and fees paid to non-resident entertainers or sportsmen for their performances in Hong Kong.
  • Royalty payments made to a non-resident for the use of, or the right to use, intellectual property in Hong Kong, or where the royalty payments are deductible for the payer, are deemed to be taxable in Hong Kong.
  • The amount deemed taxable is 30% of the gross amount of the royalties paid, resulting in an effective of 4.95% (4.5% for a non-corporate person).
    If a royalty is paid to an affiliated non-resident and the intellectual property was owned by a person carrying on business in Hong Kong, 100% of the royalty is deemed to be taxable, resulting in an effective rate of 16.5% (15% for a non-corporate person).
  • The payer of royalties to a non-resident is required to withhold the appropriate tax.

Profits Tax Rates

Income Tax rate
Tax rate on corporate assessable profits 16.5% (note)
Tax rate on assessable profits of unincorporated business 15% (note)
Tax rate on capital gains 0%
Tax rate on dividend distribution to shareholders 0%
Tax rate on non-Hong Kong sourced income 0%

From the year of assessment 2018/19, the profits tax rate for the first HK$2 million of assessable profits will be lowered to 8.25% (half of the current profits tax rate) for corporations and 7.5% (half of the standard rate) for unincorporated businesses (mostly partnerships and sole proprietorships). This tax rate concession is restricted to only one enterprise nominated among connected entities (i.e. has control over the other party or under common control of the same party).

Filing Profits Tax Return

Generally, a newly incorporated company will receive its first profits tax return around 18 months after the date of incorporation and the filing deadline is 3 months from the date of issue of the first profits tax return.

The filing deadline for Profits Tax Return is as follows.

Accounting year ended Filing deadline
Between 1 April to 30 November (“N Code”) 2 May of the following year
Between 1 December to 31 December (“D Code”) 15 August of the following year
Between 1 January to 31 March (“M Code”) 15 November of the same year

The documents to be submitted are as follow:

  • Tax computation and supporting schedules
  • Audited financial statements
  • Profits Tax Return

Please refer to Profits Tax Return – Corporations and Notes and Instructions – Form BIR51A for more details.

Salaries Tax in Hong Kong

Salaries tax is charged on all income arising in or derived from Hong Kong from any office or employment or pension.

Employees who have their work base during the year outside Hong Kong and who do not spend more than 60 days physically in Hong Kong will be exempt from Hong Kong salaries tax.

Salaries Tax Rates

Year of assessment 2018/19 onwards
(i) Standard tax rate 15%
(ii) Progressive tax rate Tax rate HK$
First HK$50,000 2% 1,000
Next HK$50,000 6% 3,000
Next HK$50,000 10% 5,000
Next HK$50,000 14% 7,000
Cumulative on first HK$200,000 16,000
Balance 17%

Please refer to Allowances, Deductions and Tax Rate Table for more details.

Filing Salaries Tax Return

  • The tax year is from 1 April to 31 March of the following year.
  • The salaries tax return is normally issued on the first working day of May each year and the filing deadline is 1 month from the date of issue of the salaries tax return.

Please refer to Guide to Tax Return – Individuals for more details.


Hong Kong Corporate Tax and Personal Tax

Hong Kong corporate tax rate differs depending on which category the corporation belongs to. Corporations can opt for a single-tier taxation system or a double-tier profits tax system. The double-tier system is broadly arranged in the following brackets:

  • For corporations with taxable profit under HK$2 million: 8.25%
  • For corporations with taxable profit over HK$2 million: 16.5%
  • For unincorporated taxable profit under HK$2 million: 7.5%
  • For unincorporated taxable profit over HK$2 million: 15%

For the single-tier tax system, corporations pay 16.5%, while unincorporated businesses pay 15%. The income and profits specified by the taxation system are solely based in Hong Kong. As mentioned previously, there is currently no tax on capital gains, shareholder dividends, and the income derived from international sources. The two-tier tax system is optimal if you’re functioning as a small or medium-sized enterprise.

Personal tax or income tax in Hong Kong is again charged on income based on activities based solely in Hong Kong. It begins at 2%, and the highest tax for an individual is 17% or 15% of income (whichever is lower). Individuals can also opt for a standard rate of 15% if they don’t want to be charged based on their income. The following are the tax slabs for different incomes:

  • Net Chargeable Income from 0 to HK$50,000: 2%
  • Net Chargeable Income from HK$50,001 to HK$100,000: 6%
  • Net Chargeable Income from HK$100,001 to HK$150,000: 10%
  • Net Chargeable Income from HK$150,001 to HK$200,000: 14%
  • Net Chargeable Income above HK$200,001: 17%

Because only the income earned from Hong Kong is taxed, individuals can significantly lower their tax burden when they pay their taxes based on self-assessment.

Self-assessment calculates tax based on progressive rates from the individual’s total income. Total income incorporates salaries, allowances, bonuses, commissions, convertible benefits, education benefits, pensions, back pay, share options, among others. Compared to many Western countries, the income tax burden is significantly low in Hong Kong.


What You Should Know About Tax Payment

When it comes to paying taxes in Hong Kong, it can be done through various methods. Electronic tax payment is available in Hong Kong and is a convenient option that can be done within a few minutes. Taxes can also be paid electronically through a phone (requires a PPS account) or through the ATM. Taxes can also be paid overseas, regardless of whether you have a bank account in Hong Kong.


What Should You Be Conducting Annual Auditing in Hong Kong?

An assessment year begins on April 1st and finishes on March 31st of the following year. Businesses will receive corporate profits tax returns on the first working day in April. When the company gets the profits tax returns, they will have to file for taxes accordingly.

Consider hiring a book-keeping service in Hong Kong to make this process more efficient for you. An expert service will ensure that your taxes are filed on time and that no mistakes are made when it comes to paying what you owe. Since corporations have to file a complete set of returns, a book-keeping service can help you keep track of finances throughout the year, making filing taxes easier.

Hong Kong is the ideal destination for entrepreneurs, businesses, and individuals seeking tax relief. It spares them from double taxation and has low rates for many taxation categories. Individuals can also reduce their tax burden when opting for self-assessment, which makes Hong Kong the ideal place to live in.

FAQs for Taxation Services in Hong Kong


In all cases if you cannot lodge a tax return by the due date or the extended due date, an estimated assessment will be issued and you may be required to pay more tax. You may also be subject to penalty proceedings which include payment of penalty, or even prosecuted.

According to the Inland Revenue Ordinance section 51(1), mere failure to file a return in time is an offense within s80(2) (penalty: HK$10,000 plus three times the tax undercharged or which would have been undercharged) or s82A (three times the tax undercharges or which would have been undercharged). The penalty can therefore be very severe.


If you wish to dispute the assessment, you must lodge a notice of objection in writing stating precisely the grounds of objection within one month after the issue date of the notice of assessment.

If the incorrectness is due to errors or omissions in the return already submitted, and you wish to amend the information in the tax return, you have to write to the Assessor.

If error or omission in the tax return previously submitted and the tax is excessively charged, you should lodge a written application for revision of assessment within 6 years after the end of the relevant year of assessment or within 6 months after the date on which the relevant notice of assessment was served, whichever is the later. State details of the error or omission and submit sufficient evidence to substantiate the claim.

Take notice that the application for revision of assessment is not an alternate way to extend the time limit for lodging objections against a notice of assessment. If the time limit for lodging an objection (i.e. within one month after the issue date of the notice of assessment) is missed, state the reasons preventing from lodging an objection within the specified time.

If the claim is accepted, a revised notice of assessment will be issued and the relevant tax will be refunded (if the tax has been paid) or discharged (if the tax has not yet been paid).


If you are not a citizen in Hong Kong and are working there on a visa permit or otherwise, you may wonder if any other taxes are applicable for you. The income tax for visa permit holder is applicable even if you are a freelancer. Foreigners and visa permit holders have to pay the same salary taxes as residents of the region. However, similar to other taxes, you will only be taxed for the income earned within Hong Kong.

Foreigners who have earned income in Hong Kong but stay for less than 60 days are exempt from the salaries tax. There are no unemployment taxes in Hong Kong for residents and foreigners.


Taxpayers and corporations have to file necessary taxes with the Inland Revenue Department of Hong Kong. Individual tax returns can be expected by May 1st. Once the individuals have received tax returns, they have to be submitted one month from the issue date.

Even for individuals who have no income to report, the declaration of zero income must be made on the tax form. For businesses owned by a sole individual, returns have to be filed within three months from the issue date.

There are numerous tax incentives available in Hong Kong for both individuals and corporations. If you are looking at various deductions and concessions that you can avail of, it is worthwhile to employ an accounting service in Hong Kong who can do it for you. Expert accounting services will know the various deductions that businesses can avail of and save considerable time and effort on your part. They will also help you avoid potential penalties and charges that can come from filing taxes incorrectly.

Do you need more information?

You may refer to these Hong Kong business expansion guides to find out more:

Hong Kong Company Incorporation

Are you planning to register or incorporate a company in Hong Kong?

Learn More

Hong Kong Company Secretary Services

You need a company secretary if you are thinking to starting a company in Hong Kong.

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Hong Kong Taxation System

Hong Kong tax regime is well known for its attractive corporate and personal tax rates.

Learn More