๐ Key Information
- Profits Tax Rate: 8.25% on the first HKD 2 million, 16.5% thereafter
- Salaries Tax: Progressive rates 2%โ17%, standard rate 15%
- Property Tax: 15%
- Stock Stamp Duty: 0.1% per party (effective from November 17, 2023)
Overview of Hong Kong's Tax System
Hong Kong is renowned as one of the most business-friendly tax jurisdictions in the world. With its simple tax system, low tax rates, and territorial source principle of taxation, many international corporations choose Hong Kong as their base of operations.
Major Types of Taxes
1. Profits Tax
This tax is levied on corporations and unincorporated businesses carrying on a trade, profession, or business in Hong Kong. The tax rates for the 2024/25 year of assessment are as follows:
- Corporations: 8.25% on the first HKD 2 million, and 16.5% on the portion exceeding HKD 2 million
- Unincorporated Businesses: 7.5% on the first HKD 2 million, and 15% on the portion exceeding HKD 2 million
Importantly, Hong Kong adopts the territorial source principle of taxation, meaning that profits derived outside of Hong Kong are generally not subject to tax.
2. Salaries Tax
This tax is imposed on individuals employed in Hong Kong or individuals deriving income from Hong Kong sources.
| Net Chargeable Income (HKD) | Tax Rate |
|---|---|
| First 50,000 | 2% |
| Next 50,000 | 6% |
| Next 50,000 | 10% |
| Next 50,000 | 14% |
| Over 200,000 | 17% |
The amount of tax payable is capped at the standard rate of 15% if the progressive rate calculation results in a higher amount.
3. Property Tax
Property tax is levied at a rate of 15% on rental income derived from real estate situated in Hong Kong.
4. Stamp Duty
This tax is levied on real estate transactions and stock transfers. Effective February 28, 2024, the Buyer's Stamp Duty (BSD) and Special Stamp Duty (SSD) have been abolished.
Important Changes for 2025
โ Key Points
- Global Minimum Tax: Starting January 1, 2025, a minimum tax rate of 15% applies to large multinational enterprises
- Expansion of the FSIE Regime: The Foreign Source Income Exemption regime also applies to asset disposal gains
- Record Keeping: 7-year retention requirement
- Retrospective Assessment Period: Usually 6 years, 10 years in cases of fraud
Impact on Japanese Companies
Hong Kong is highly attractive to Japanese companies as a hub for expanding into the Asia-Pacific region. The main advantages are as follows:
- A Double Taxation Agreement has been concluded between Japan and Hong Kong
- Simple and predictable tax system
- No foreign exchange controls
- No tax on dividends or capital gains
Summary
Hong Kong's tax system provides a highly attractive environment for international business due to its simplicity and low tax rates. Particularly for Japanese companies, it serves as an essential hub acting as a gateway to Asian markets and enabling the establishment of efficient tax structures.
Last updated: December 2024
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