Hong Kong tax guide for foreigners and expats

Expats living in or moving to Hong Kong need to understand both the local and international tax rules, including double taxation treaties and specific regulations applicable to expats.

We have created this guide to provide an overview of tax obligations for foreign nationals living in Hong Kong and Hong Kong nationals living abroad. It also provides the opportunity to be introduced to a trusted Hong Kong tax specialist from our network who will be able to assist with your tax matters.

Please be aware that this article is for informational purposes only and should not be used to make decisions. Always seek professional advice regarding your tax and financial matters.

Hong Kong Tax Rates and Allowances (2024/25)

Hong Kong imposes salaries tax on income arising in or derived from Hong Kong from an office, employment or any pension. In general, Hong Kong salaries tax is calculated at progressive rates on the taxpayer’s net chargeable income or at standard rate on the taxpayer’s net income, whichever is lower.

Salaries Tax for the Year of Assessment 2024/25

Progressive Tax Rates

Generally, Hong Kong salaries tax applies progressive rates to a person's employment income after deducting allowable deductions and personal allowances.

Standard Tax Rates

Allowances for the Year of Assessment 2024/25

• Hong Kong offers various allowances to reduce taxpayer’s tax burden. Key allowances include:

Note 1:

Granted to a married person whose spouse has no assessable income in Hong Kong or if joint assessment is elected.

Note 2:

To qualify the dependent parent or grandparent allowance, the dependent parent/grandparent must at any time during the year be:

1. ordinarily resident in Hong Kong;
2. aged 55 or more, or eligible to claim an allowance under the Government's Disability Allowance Scheme; and
3. resided with the taxpayer or his/her spouse, without paying full cost, for a continuous period of not less than 6 months or have received from the taxpayer or his/her spouse not less than $12,000 in money towards his/her maintenance.

Note 3:

Taxpayer is entitled to additional dependent parent and dependent grandparent allowance if the dependent parent/grandparent resided with the taxpayer continuously throughout the whole year without paying full cost.

Types of Taxes in Hong Kong

Hong Kong levies three separate income instead of a unified income tax system:

Profits Tax

• Two-tiered tax rates.
• Corporations: 25% on assessable profits up to HK$2,000,000; and 16.5% on any part of assessable profits over HK$2,000,000.
• Unincorporated Businesses: 5% on assessable profits up to HK$2,000,000; and 15% on any part of assessable profits over HK$2,000,000.
• Losses can be carried forward indefinitely to offset future assessable profits.

Property Tax

• Non-corporate landowners or building owners are subject to a 15% property tax on the net assessable value, which is determined by deducting irrecoverable rent, rates paid by the owner, and a 20% notional allowance from the rent receivable.
• Corporate lessors of real properties are subject to profits tax.

Salaries Tax

• Levied on net chargeable income (assessable income less deductions and allowances) at progressive rates (2% to 17%), or a two-tiered standard rate (15% on the first HK$5 million of net income and 16% on the remainder) on the net income, whichever is lower.
• Profits tax, salaries tax and property tax are assessed separately. If beneficial, a permanent or temporary Hong Kong resident individual may elect to be assessed under personal assessment on the aggregate of his or her income or losses from all sources.

Key Tax Exemptions and Deductions for Individual Taxpayers

• Capital Gains: Not taxable
• Dividends: Not taxable
• Withholding Tax: None on dividends or interest paid to non-residents
• VAT/Sales Tax: None in Hong Kong
• Approved Charitable Donations: Tax deductible up to 35% of assessable profits

Who Pays Tax in Hong Kong?

Residents and Non-Residents:

Both are subject to salaries tax on income* arising in or derived from a Hong Kong office or Hong Kong employment, or from services rendered in Hong Kong during visits of more than 60 days in any tax year.

Expat Tax Residency:

• Hong Kong follows a territorial basis of taxation, meaning only income sourced in Hong Kong is taxable. Income earned outside Hong Kong is not subject to tax, regardless of residency status.

* Income includes all income, perquisites and fringe benefits from the employer or others.

How is Income Taxed in Hong Kong (For Individuals)?

Employment Income:

• Taxable income consists of all cash emoluments, including bonuses and gratuities.
• Benefits in kind are largely non-taxable, unless they are convertible into cash or specifically related to holiday travel or education of a child.
• Taxpayer can reduce taxable income under the rental reimbursement scheme (i.e., employer reimburses the rent paid by an employee on his/her place of residence).

60-Day Rule:

• For both Hong Kong and non-Hong Kong employment: An Individual working in Hong Kong for 60 days or less in a tax year is generally exempt from Hong Kong salaries tax.
• For non-Hong Kong employment: if an Individual rendered services in Hong Kong for more than 60 days during a year of assessment, he/she will be taxed on a pro-rata basis.

Self-Employment and Business Income:

• Subject to profits tax on income arising in or derived from Hong Kong.
• Business losses can be carried forward indefinitely but cannot be carried back.

Rental Income:

• Individual landowners or building owners are subject to a 15% property tax on the net assessable value, which is determined by deducting irrecoverable rent, rates paid by the owner, and a 20% notional allowance from the rent receivable.

Investment Income:

• Interest income (not from business funds) and all dividend income are tax-exempt.
• No withholding taxes on dividends or interest paid to non-residents.

Royalties:

• Royalties paid to non-residents for intellectual property used in Hong Kong are subject to 4.95% withholding tax.
• The withholding tax rate is increased to 15% if the recipient is a related party to the payer and the intellectual property was previously owned by a Hong Kong business.

Directors' Fees:

• Director’s fees are generally subject to Hong Kong salaries tax if the company has its central management and control in Hong Kong.

Share Options:

• Gains from share options are taxable under Hong Kong salaries tax. There are various types of share option schemes. In general, the assessable gain from share options is the difference between the price paid and the market price at the time of exercise. Given the potential complexities related to the timing and taxation of share option gains, we provide professional advice and support on related issues.

Mandatory Provident Fund and Social Security

Mandatory Provident Fund

• Employers must enrol employees aged 18-65 normally residing and working in Hong Kong to join a mandatory provident fund (MPF) scheme.
• Expats on employment visas for 13 months or less or members of an overseas retirement scheme are exempt.

Social Security

• No social security/social insurance taxes in Hong Kong.

Inheritance and Estate Tax

• No inheritance or estate tax in Hong Kong.
• However, expats may still be liable to inheritance tax (IHT) in their home country or other jurisdictions where they hold assets.

Double Tax Relief and Tax Treaties

• Hong Kong has double tax agreements (DTAs) with over 51 countries, including the UK, China and Singapore.
• Expats may claim relief for foreign taxes paid on income subject to double taxation under these treaties.

Speak to a Hong Kong Tax Specialist

Tax rates and rules can change, so it’s essential to consult a professional for the latest advice. Therefore, please do not rely exclusively on the information to determine your liability for tax.

If you need further assistance with any aspect of Hong Kong tax, we can connect you with a trusted Hong Kong tax specialist from our network.