For a foreign executive considering a move to Asia, the choice between Mainland China and Hong Kong is more than a lifestyle decision—it’s a fundamental financial calculation. While China’s 2019 tax reforms reshaped the cost of expatriate life, Hong Kong’s stable, low-tax regime presents a compelling and often overlooked alternative. Understanding the stark contrast between these two systems is crucial for any professional or business planning their future in the region.

The Hong Kong Alternative: A Stable, Low-Tax Harbour

Unlike Mainland China’s progressive reforms, Hong Kong’s tax framework is defined by its simplicity, predictability, and low rates. For expatriates and businesses, this translates into clear financial planning and significant take-home pay retention. The system is built on a territorial basis, meaning only income arising in or derived from Hong Kong is subject to tax.

Salaries Tax: Capped Rates and Generous Reliefs

Hong Kong’s salaries tax offers two calculation methods, with taxpayers liable to pay the lower amount. The progressive rates start at 2% and top out at 17%. Alternatively, income is taxed at the standard rate, which is 15% on the first HK$5 million of net income and 16% on any amount above that for the 2024/25 year. Crucially, this standard rate acts as a cap, ensuring tax liability never spirals unexpectedly.

Substantial personal allowances further reduce the tax burden. For the 2024/25 year, these include a basic allowance of HK$132,000, a married person’s allowance of HK$264,000, and a child allowance of HK$130,000 per child. Additional deductions are available for Mandatory Provident Fund (MPF) contributions (max HK$18,000), approved charitable donations (up to 35% of income), and domestic rent (max HK$100,000).

Profits Tax: A Business-Friendly Two-Tier System

For corporations and unincorporated businesses, Hong Kong’s profits tax is highly competitive. The two-tiered system taxes the first HK$2 million of assessable profits at a reduced rate, with the remainder taxed at the standard rate.

Navigating Hong Kong’s Modern Compliance Landscape

While Hong Kong’s core tax rates remain attractive, the jurisdiction has implemented significant reforms to align with global standards. Understanding these is non-negotiable for international businesses and high-net-worth individuals.

1. The Foreign-Sourced Income Exemption (FSIE) Regime

Effective from January 2023 (expanded in January 2024), the FSIE regime targets multinational enterprises. It subjects four types of foreign-sourced income received in Hong Kong by multinational entities to profits tax: dividends, interest, disposal gains, and intellectual property income. Exemption is available if the taxpayer meets specific economic substance requirements in Hong Kong for the relevant activities.

2. The Global Minimum Tax (Pillar Two)

Hong Kong has formally enacted the OECD’s Global Minimum Tax rules. As of 6 June 2025, with effect from 1 January 2025, large multinational enterprise (MNE) groups with consolidated global revenue of EUR 750 million or more will be subject to a 15% minimum effective tax rate in Hong Kong. The rules include an Income Inclusion Rule (IIR) and a domestic Hong Kong Minimum Top-up Tax (HKMTT).

3. Family Investment Holding Vehicle (FIHV) Regime

For ultra-high-net-worth families, Hong Kong offers the FIHV regime. Qualifying family-owned investment holding vehicles can enjoy a 0% tax rate on profits from qualifying transactions. To qualify, the vehicle must have assets under management of at least HK$240 million and maintain substantial activities in Hong Kong, providing a tax-efficient wealth management hub.

Property & Stamp Duty: A Simplified Market

A major differentiator for Hong Kong is its treatment of property. Property tax is levied at 15% on the net assessable value (annual rent minus rates, with a 20% statutory allowance for repairs). More significantly, the government abolished all market-cooling stamp duties on 28 February 2024.

For stock transfers, the stamp duty remains at 0.1% payable by both the buyer and the seller, resulting in a total duty of 0.2% on the transaction value, plus a HK$5 fixed duty per instrument.

Hong Kong’s tax system continues to offer a compelling proposition of low rates and simplicity, but it is no longer a “set and forget” jurisdiction. The introduction of global anti-avoidance standards means strategic planning is essential. For expatriates and businesses comparing locations in Asia, Hong Kong’s combination of fiscal efficiency, modern compliance framework, and recent property market liberalisation presents a robust and attractive long-term base.