Ever wondered why some high earners in Hong Kong pay surprisingly low taxes while others with modest incomes face higher bills? The answer lies in Hong Kong’s unique dual-rate tax system that automatically calculates your liability two different ways and charges you the lower amount. Whether you’re a fresh graduate starting your career, a seasoned professional, or someone with multiple income streams, understanding how this system works can save you thousands of dollars each year. Let’s demystify Hong Kong’s tax brackets and reveal exactly how much you’ll really pay.

Hong Kong’s Unique Dual-Rate Tax System

Hong Kong’s Salaries Tax system stands out globally with its clever “pay the lower amount” approach. Unlike most countries that force you into a single tax bracket, Hong Kong automatically calculates your tax two different ways and charges you whichever is lower. This creates a built-in safety net that prevents excessive taxation while maintaining fairness across income levels.

The Progressive Rate System

The progressive system applies increasing rates to different portions of your net chargeable income (your income after deductions and allowances). For the 2024-25 tax year, the progressive rates work as follows:

The Standard Rate System

Starting from the 2024-25 tax year, Hong Kong introduced a two-tiered standard rate system:

Maximizing Your Tax Savings: Allowances and Deductions

Your tax liability isn’t just about your salary—it’s about what’s left after applying various allowances and deductions. Hong Kong offers generous provisions that can significantly reduce your taxable income. Here’s what you need to know for the 2024-25 tax year:

Personal Allowances (2024-25)

Key Deductions You Should Know

• MPF Contributions: Maximum HK$18,000 per year (deductible from assessable income)
• Charitable Donations: Up to 35% of your assessable income (must be to approved charities)
• Self-Education Expenses: Maximum HK$100,000 per year for approved courses
• Home Loan Interest: Maximum HK$100,000 per year (up to 20 years total)
• Domestic Rent: Maximum HK$100,000 per year (for non-homeowners)
• Qualifying Annuity/Voluntary MPF: Maximum HK$60,000 per year

Real-World Tax Calculation: See Exactly How It Works

Let’s walk through a practical example to see Hong Kong’s dual-rate system in action. Consider a single individual earning HK$800,000 annually in the 2024-25 tax year:

1. Step 1: Calculate Net Assessable Income
   Salary: HK$800,000
   Minus MPF contributions: HK$18,000
   Net Assessable Income: HK$782,000
2. Step 2: Calculate Net Chargeable Income
   Net Assessable Income: HK$782,000
   Minus Basic Allowance: HK$132,000
   Net Chargeable Income: HK$650,000
3. Step 3: Progressive Rate Calculation
   First HK$50,000 at 2%: HK$1,000
   Next HK$50,000 at 6%: HK$3,000
   Next HK$50,000 at 10%: HK$5,000
   Next HK$50,000 at 14%: HK$7,000
   Remaining HK$450,000 at 17%: HK$76,500
   Total Progressive Tax: HK$92,500
4. Step 4: Standard Rate Calculation
   Net Assessable Income: HK$782,000
   Standard Rate (15% on first HK$5M): 15%
   Standard Rate Tax: HK$117,300
5. Step 5: Pay the Lower Amount
   Progressive Tax: HK$92,500
   Standard Rate Tax: HK$117,300
   Tax Payable: HK$92,500 (the lower amount)