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Taxation Service

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  • Taxation Service

Taxation Service

Hong Kong has a simple and low tax rate system and attract many foreign investors. There are 3 main types of taxes in Hong Kong:

Salaries tax – 15%

Profit tax – For the first HK$2million of Assessable profits, 8.25%; over HK$2 million, 16.5%

Property Tax – 15%

Hong Kong adopts a territorial source principle of taxation, which means that only profits sourced in Hong Kong are taxable in Hong Kong. Profits Tax is only charged on profits arise in or are derived from Hong Kong, which means that a person who carries on a business in Hong Kong but derives profits from another place is not required to pay tax in Hong Kong on those profits.

Our professional service

We are especially adept at assisting clients in the planning of their tax affairs and to structure tax efficient deals. We understand the business and economic environment and combine this with specialist tax knowledge. We help you navigate complexity to achieve business objectives by reducing tax risks and meeting your compliance obligations.

We can provide specific services such as:

Act as tax representative

Filing of corporate tax returns, Employers’ and Employees’ return

Apply extension for tax return filing

Assist in handling IRD enquires, tax field audit or tax investigation

Provide tax planning and consultation

Profit Tax

Persons who are carrying on any trade, profession or business in Hong Kong are chargeable to tax on all profits arising in or derived from Hong Kong.

Corporations are charged to profits tax and provisional tax at the rate of 16.5% set out in Sch. 8 of the Inland Revenue Ordinance (Cap112) while individuals and unincorporated business (sole proprietorships or partnerships) are charged at the standard tax rate of 15% set out in Sch. 1 of the Inland Revenues Ordinance (Cap 112).

Since 2018/19, profits tax calculated under the Two-Tiered Profits Tax Rates Regime to reduce the profits tax burden of taxpayers in Hong Kong. For the first HK$2,000,000 of assessable profits, the tax rate will be reduced to by one-half, i.e. 8.25% for corporations while by 7.5% for sole proprietorships or partnerships.

Generally, tax reduction is allowed for outgoings and expenses arising from carrying on of a business such as rental fee, employees’ salaries, the contribution of mandatory provident fund scheme (only eligible for unincorporated businesses), and interests on borrowings.

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Salaries tax

Any income derived by an individual from employment, offices and pension in Hong Kong is taxable. If you received an Individual Tax Return (BIR60), you must declare to IRD for income declaration even if there is without chargeable income.

Taxpayers may claim allowances and tax reduction. A common allowance included approved charitable donations, contributions to MPF scheme or recognized occupational retirement scheme, outgoings and expenses that are wholly, exclusively and necessarily incurred in the production of the assessable income.

Salaries tax can be calculated at the standard rate and progressive rates.

The standard rate is calculated at 15% of net income.

Progressive rate, also known as marginal tax rate, are payable at different tax bands and are detailed in the chart below,

Tax rate of the assessment year 2021/22:

Tax Bands

Net chargeable income (HKD) Rate
On the First 50,000
 2%
On the Next 50,000
 6%
On the Next 50,000
 10%
On the Next 50,000
 14%
Remainder
 17%
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Property tax

Rents received from sole-owned rental properties of landlord(s) in Hong Kong are chargeable.

Currently, Property Tax is calculated on the net assessable value (i.e. net rental income) for the year of assessment at the standard rate of 15%.

Net rental income is defined as rental income less irrecoverable rent, rates paid by owner and repairs.

However, in order to simplify the administration of tax assessment, the IRD will automatically deduct 20% of the net rental income as the statutory allowance for repairs and outgoings.

The 20% statutory allowance includes expenses incurred in renting out the property, such as government rent, building renovation fees, rent-collection fees, building management fees, insurance and mortgage interest, etc. Landlords are not required to provide the IRD with any evidence of the actual expenses incurred.

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