Mainland China’s Customs Duties: A Strategic Guide for Importers
📋 Key Facts at a Glance
- Hong Kong’s Tax Advantage: Hong Kong operates on a simple, low-rate, and territorial tax system. There is no capital gains tax, dividend withholding tax, or sales tax/VAT.
- Profits Tax Rates: Corporations pay 8.25% on the first HK$2 million of assessable profits and 16.5% on the remainder. Only one entity per connected group can claim the lower tier.
- Stamp Duty Update: As of 28 February 2024, all Special, Buyer’s, and New Residential Stamp Duties on property transactions have been abolished, simplifying the market.
- Global Minimum Tax: Hong Kong enacted the 15% Global Minimum Tax (Pillar Two) rules in June 2025, effective from 1 January 2025, affecting large multinational groups.
Imagine a business hub where profits are taxed at some of the world’s lowest rates, where dividends flow to shareholders tax-free, and where a straightforward territorial system provides clarity and certainty. This isn’t a theoretical haven; it’s the operational reality for companies in Hong Kong. While navigating complex customs regimes like Mainland China’s is a critical skill for importers, understanding Hong Kong’s own favourable and transparent tax landscape is the cornerstone of financial strategy for businesses based here. The real competitive edge lies in leveraging Hong Kong’s system to its full potential.
The Pillars of Hong Kong’s Business-Friendly Tax System
Hong Kong’s tax regime is built on principles of simplicity, low rates, and territoriality. Unlike many jurisdictions, it taxes only income sourced in Hong Kong. This means foreign-sourced income, including dividends, interest, and capital gains, is generally not subject to tax in Hong Kong, making it an ideal base for regional headquarters and investment holding.
Profits Tax: A Tiered and Territorial Approach
The cornerstone for businesses is Profits Tax. The two-tiered system, introduced to support SMEs and entrepreneurship, offers significant savings. For the 2024/25 tax year, incorporated companies pay 8.25% on the first HK$2 million of assessable profits and 16.5% on any amount above that. Unincorporated businesses (like sole proprietorships) benefit from rates of 7.5% and 15% on the same thresholds. It is crucial to note that this two-tier benefit can only be claimed by one entity within a group of connected corporations.
Stamp Duty: A Dramatically Simplified Landscape
In a major policy shift to revitalise the property market, the Hong Kong government abolished all demand-side cooling measures on 28 February 2024. This means the Special Stamp Duty (SSD), Buyer’s Stamp Duty (BSD), and New Residential Stamp Duty (NRSD) no longer apply. Property transactions are now subject only to the long-standing Ad Valorem Stamp Duty (AVD), with rates scaling from HK$100 on low-value properties up to 4.25% for high-value transactions.
| Property Consideration | Ad Valorem Stamp Duty Rate |
|---|---|
| Up to HK$3,000,000 | HK$100 |
| HK$3,000,001 – HK$4,500,000 | 1.5% |
| HK$4,500,001 – HK$6,000,000 | 2.25% |
| HK$6,000,001 – HK$20,000,000 | 3% to 3.75% |
| Above HK$21,739,120 | 4.25% |
Navigating Modern International Tax Rules
The Foreign-Sourced Income Exemption (FSIE) Regime
To comply with international tax standards, Hong Kong introduced the FSIE regime. Effective from January 2023 (and expanded in January 2024), it targets multinational entities receiving specified foreign-sourced passive income (like dividends, interest, and disposal gains) in Hong Kong. To claim tax exemption for such income, the recipient must meet an “economic substance” requirement in Hong Kong—essentially having an adequate level of staff, operating expenditure, and premises to carry out the relevant activities.
The Global Minimum Tax and Family Investment Vehicles
Hong Kong has formally joined the global effort to ensure large multinationals pay a minimum level of tax. The Global Minimum Tax (Pillar Two) was enacted in June 2025 and applies from 1 January 2025. It imposes a 15% minimum effective tax rate on multinational enterprise groups with consolidated global revenue of €750 million or more. Hong Kong’s rules include an Income Inclusion Rule (IIR) and a domestic Hong Kong Minimum Top-up Tax (HKMTT).
Conversely, to attract investment, Hong Kong offers a 0% tax rate for qualifying Family Investment Holding Vehicles (FIHVs). To benefit, the FIHV must have substantial activities in Hong Kong and assets under management of at least HK$240 million. This creates a powerful incentive for wealthy families to establish and manage their investment portfolios in Hong Kong.
Practical Compliance and Strategic Planning
Staying compliant in Hong Kong is straightforward but requires diligence. The tax year runs from 1 April to 31 March. Tax returns are typically issued in early May, with individual returns due about one month later. Businesses and individuals must keep records for at least 7 years. The Inland Revenue Department can raise back assessments for up to 6 years (or 10 years in cases of fraud or wilful tax evasion).
✅ Key Takeaways
- Leverage Low, Simple Rates: Actively structure to benefit from Hong Kong’s two-tiered Profits Tax and remember that offshore income is generally not taxable.
- Property Market is Simplified: With the abolition of SSD, BSD, and NRSD, property transactions are now governed only by the Ad Valorem Stamp Duty scale.
- Substance is Key for International Income: To benefit from exemptions on foreign-sourced passive income under the FSIE regime, ensure your Hong Kong entity has real economic substance.
- Plan for Global Rules: Large multinational groups must prepare for the 15% Global Minimum Tax, while family offices can explore the 0% FIHV regime.
- Maintain Impeccable Records: Keep all financial records for at least 7 years to support your tax positions and facilitate any potential audit.
Hong Kong’s tax system remains a powerful tool for business competitiveness. Its clarity and favourable rates provide a stable foundation for growth. However, as international tax standards evolve, proactive planning—ensuring substance, understanding new regimes like Pillar Two, and leveraging incentives like the FIHV—is what will separate the strategically savvy from the merely compliant. In the dynamic Asian market, a deep, actionable understanding of Hong Kong’s tax landscape is not just an administrative advantage; it’s a critical component of commercial success.
📚 Sources & References
This article has been fact-checked against official Hong Kong government sources:
- Inland Revenue Department (IRD) – Official tax authority
- GovHK – Hong Kong Government portal
- IRD Profits Tax Guide
- IRD Stamp Duty Guide
- IRD FSIE Regime Guide
- IRD FIHV Regime Guide
- Hong Kong Budget 2024-25
Last verified: December 2024 | For professional advice, consult a qualified tax practitioner.