Hong Kong’s tax system is simple, low, and business-friendly. With a territorial approach, both individuals and corporations are only taxed on income sourced in Hong Kong. Corporate tax rates range from 8.25% to 16.5%, while personal income tax follows a progressive scale from 2% to 17%. There are no wealth, inheritance, or gift taxes, making it an attractive financial hub. Strong international agreements, including Double Tax Treaties (DTTs) and compliance with global transparency measures like CRS and FATCA, enhance its global standing.
Hong Kong’s Tax System overview
| Corporate Income Tax: | 8.25% or 16.5% |
| Personal Income Tax: | 2%-17%, progr. |
| Gift Tax: | None |
| Inheritance Tax: | None |
| Wealth Tax: | None |
Legal System
Hong Kong is a Special Administrative Region (SAR) of China. The legal system is based on English common law.
Currency and Exchange Controls
The currency is the Hong Kong Dollar (HKD). Hong Kong has no foreign exchange controls.
Corporate Income Tax
Hong Kong has a territorial system of taxation for corporations. Hong Kong corporations, or foreign corporations managed and controlled from Hong Kong, are subject to tax on income arising in or derived from (source) Hong Kong at a rate of 8.25% on the first HKD 2MM in profits, and 16.5% on profits above HKD 2MM.
Personal Income Tax
Hong Kong also has a territorial system of taxation for individuals. Residents are subject to tax on 3 types of income sourced in Hong Kong, Salaries Tax (employment, office, and pension), Profits Tax (business and trading profits), and Property Tax (rental income). Income is taxed at progressive rates from 2% to 17%. The standard rate is 15% tax without deduction of allowances. Individuals are not subject to tax on dividends, interest or capital gains.
Anti-Avoidance Rules
Hong Kong has General Anti-Avoidance Rules (GAARs), as well as Transfer Pricing rules that follow OECD guidelines, but has no Thin Capitalization rules or Controlled Foreign Corporation (CFC) rules.
Trusts
Hong Kong has a domestic trust law, which is based on English common law principles and the Trust Law (Amendment) Ordinance 2013. Hong Kong recognizes foreign trusts, and is party to the Hague Convention.
Double Tax Treaties (DTTs)
Hong Kong has DTTs with Austria, Belgium, Canada, China, France, Guernsey, Ireland, Italy, Japan, Jersey, Liechtenstein, Luxembourg, Macau, Malta, Netherlands, New Zealand, Portugal, Switzerland, UAE, and the UK.
OECD Multilateral Convention
Hong Kong is a signatory to the Multilateral Convention on Mutual Administrative Assistance in Tax Matters, which requires exchange of information “on request,” and authorizes spontaneous and automatic exchange.
Common Reporting Standard (CRS)
Hong Kong is a party to the Multilateral Competent Authority Agreement (MCAA), has implemented CRS for the automatic exchange of information, and has a number of activated exchange relationships.
FATCA
Hong Kong has a FATCA Model 2 IGA with the US for automatic information exchange.
