Hong Kong
1. Basis of taxation
Income is taxed on territorial basis. Three kinds of income are taxed under the Hong Kong Inland Revenue Ordinance:
Profit arising in or derived from trade, profession or business carried on in Hong Kong (subject to Profits Tax).
Income from any office or employment (subject to Salaries Tax).
Rental income in respect of land and buildings situated in Hong Kong (subject to Property Tax).
A tax year (“year of assessment”) starts from 1 April to 31 March of the following year. The 2011 Tax Card covers the period from 1 April 2011 to 31 March 2012.
For profits tax purposes, a company computes assessable profits on the basis of the accounting year that ends in a year of assessment.
2. Corporate Tax
Corporation: 16.5%
Unincorporated business: 15%
3. Withholding Tax
No true withholding tax in Hong Kong. Inland Revenue Department could raise assessment on a non-resident, or in the name of his agent in Hong Kong, in respect of profit from business undertaken through the Hong Kong agent.
For the following types of income, if chargeable to profits tax:
Payments for use in Hong Kong of any cinematographic or television film or tape, sound recording, or advertising material connected with a film, tape or recordings;
Royalties or payments for use of, or right to use, intellectual property (i) in Hong Kong or (ii) outside Hong Kong if those payments are deductible for profits tax purpose;
Payments in respect of appearances or performance in Hong Kong by entertainers or sportsmen;
assessment is raised upon in Hong Kong who has paid or credited the sum to the non-resident. A payer in Hong Kong retains out of his payments sufficient amounts to pay the tax. The effective tax rate for type (a) and (b) incomes above is 16.5%, if the non-resident is an associate of the Hong Kong taxpayer and the property had been wholly or partly owned by a person carrying on business in Hong Kong. In any other case, the effective tax rate is 4.95%.
4. Salaries Tax
Salaries Tax is calculated either (i) at standard rate of 15% on net assessable income, or (ii) at progressive rates on net chargeable income (i.e. after deduction of personal allowances).
Marginal net chargeable income |
HK$ |
Tax rate (from 2011/12) |
First |
40,000 |
2% |
Next |
40,000 |
7% |
Next |
40,000 |
12% |
Remaining Balance |
|
17% |
5. Goods and Services Tax
Hong Kong does not have Goods and Services Tax.
6. Estate Duty
Abolished with effect from 11 February 2006.
7. Stamp duty
(1) For the purchases or sale of Hong Kong stock
0.2% on the consideration or the value of stock.
(2) For issue of bearer documents 3% of the value of the bearer instrument at the time of issue.
(3) For conveyances on sale, agreements for sale or transfers of immovable property
Amount or value of consideration (HK$) |
Duty payable (HK$) |
$1 - $2,000,000 |
$100 |
$2,000,001 - $2,351,760 |
$100 + 10% of excess over $2,000,000 |
$2,351,761 - $3,000,000 |
1.5% |
$3,000,001 - $3,290,320 |
$45,000 + 10% of excess over $3,000,000 |
$3,290,321 - $4,000,000 |
2.25% |
$4,000,001 - $4,428,570 |
$90,000 + 10% of excess over $4,000,000 |
$4,428,571 - $6,000,000 |
3% |
$6,000,001 - $6,720,000 |
$180,000 + 10% of excess over $6,000,000 |
$6,720,001 - $20,000,000 |
3.75% |
$20,000,000 - $21,739,120 |
$750,000 + 10% of excess over $20,000,000 |
over $21,739,120 |
4.25% |
(4) Special Stamp Duty (SSD)
Where an individual or a company (whether incorporated or not) purchases a residential property on or after 20 November 2010 and resells it within 24 months will be subject to SSD at the following rate:
Period of holding |
Applicable rate on stated consideration or market value of the residential property |
< 6 months |
15% |
Between 6 to 12 months |
10% |
Between 12 to 24 months |
5% |
8. Property tax
Tax at 15% on net assessable value of land and buildings situated in Hong Kong. Net assessable value represents the amount of consideration (can be in the form of money or money’s worth) payable to the owner for the right of use of the property less certain deductions (such as government rates).
9. Tax Return filing deadlines
Tax Return - Type |
Tax/taxpayer concerned |
Bulk
issue date |
Filing
due date |
|
Profits Tax Return (Form BIR 51) |
Profits Tax of corporations |
1 April |
30 April |
(1) |
Profits Tax Return (Form BIR 52) |
Profits Tax of persons other than corporations (including partnership) |
1 April |
30 April |
(1) |
Tax Return – Individuals (Form BIR 60) |
Profits tax of sole proprietorship, salaries tax and property tax of individual |
1 May |
31 May |
(2) |
Property Tax Return (Form BIR 57) |
Property Tax of Individual Joint Owners or Corporate Owner |
1 April |
30 April |
|
(1) Taxpayers with tax representatives – filing date extended to 15 August (for accounting year end between 1 December to 31 December) or 15 November (for accounting year end between 1 January to 31 March)
(2) Taxpayers with tax representatives – filing date extended to 30 June (not involving sole proprietorship business) and 30 September (involving sole proprietorship business)
10. Double Tax Agreements
Hong Kong has entered into Double Tax Agreements (“DTA”) with 12 countries, which in general have no effect on taxability of dividend, interest and royalty income of non-resident in Hong Kong.
(a) Dividend
DTA has no effect on dividend income of non-resident as dividend income is not subject to tax in Hong Kong.
(b) Interest
Provided that the interest income of non-resident is not derived from business carried on in Hong Kong, it is not subject to Hong Kong tax.
(c) Royalties
Please refer to Section 3 above.
Note:
Hong Kong has entered into DTA with Austria, Belgium, Brunei, Hungary, Ireland, Japan, Liechtenstein, Luxembourg, Mainland China, Thailand, United Kingdom and Vietnam. Hong Kong has signed DTA with Czech, France, Indonesia, Kuwait, Netherlands, New Zealand, Portugal, Spain and Switzerland. The effective date of these DTAs is still pending.
11. Exchange of Information
In 2010, Hong Kong introduced certain legislative amendments to allow the Inland Revenue Department to obtain information necessary for the purpose of exchange of tax information with a jurisdiction that has signed a DTA with Hong Kong with a provision that requires disclosure of such tax information, even though the information may not be required by Hong Kong for its own domestic tax purposes.
Inland Revenue (Disclosure of Information) Rules (“Rules”), which became effective on 12 March 2010, set out domestic safeguards to protect taxpayers’ rights in exchange of tax information.
The Rules provide a system whereby the subject person will be notified of the disclosure request and given the rights to review the information to be exchanged and request for amendments to be made to any part of the information.
The Rules also set out the particulars that the requesting government must provide in a disclosure request with an aim to avoid “fishing expeditions”.
Updated: Aug 2011
This publication has been prepared for the purpose of quick information dissemination to our counterparts in other Countries. Its contents should not be used as a basis for advice or formulating decisions under any circumstances.
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