Hong Kong Beauty & Wellness Tax — Expert Advisory

Prepaid treatment package revenue should be deferred and recognised as each treatment session is delivered. For example, if a client buys a 10-session laser package for HKD 10,000, each session represents HKD 1,000 of income. Recognising the full HKD 10,000 upfront creates a tax liability on services not yet rendered. The undelivered sessions at year-end should be held as deferred income in the balance sheet, not included in assessable profits.

Most professional beauty and aesthetic equipment qualifies as plant & machinery: laser machines (hair removal, skin rejuvenation), IPL devices, RF and ultrasound aesthetic equipment, LED light therapy panels, high-frequency facial machines, professional massage chairs, and steam cabinets. Medical-grade aesthetic devices (used in licensed medical beauty clinics) also qualify. Initial allowance of 60% applies in the year of purchase, with 10-30% annual allowance thereafter.

The employment status of beauty therapists depends on the actual working arrangement. Key factors: Does the salon control the hours, clients, and methods of the therapist? Is the therapist integrated into the business with a regular schedule? Does the therapist work exclusively for one salon? If yes to these — likely employee. If the therapist provides their own equipment, sets their own schedule, and works for multiple venues — likely contractor. Misclassification exposes salons to MPF contributions, salaries tax, and penalties.

Beauty product samples provided to clients or press for genuine marketing purposes are deductible marketing expenses. Keep records of the purpose and recipient. Samples that are given as incentives to purchase treatments or memberships are also deductible as they directly support revenue generation. However, products withdrawn for personal use by staff or owners are not deductible.

Annual membership fees for beauty clubs or wellness memberships should be recognised as income over the membership period, not all upfront when received. A 12-month membership fee received on 1 October should result in 3 months' income in the current tax year and 9 months deferred to the next. This matching principle ensures tax is paid only on income earned in the assessment year.