Hong Kong: Working and Living
Taxation of Individuals
In Hong Kong personal income tax is known as salaries tax. Individuals are only assessed on annual employment income. Non-employment source income such as share dividends and capital gains realized on the sale of shares are not taxable in the territory. Salaries tax is governed by the provisions of the Inland Revenue Ordinance. Income received by an employee is subject to salaries tax whilst income received by a self employed person is subject to profits tax. Salary tax rates are among the lowest in the world and remain one of the major attractions of locating to the territory.
The territorial principle governs salaries tax with the consequence that salaries tax is only levied on income "arising in or derived from a Hong Kong employment". The definition of income includes wages, salaries, bonuses, commissions, payments by the employer into a pension fund for the employee and gratuities. It does not include either a pension from a source outside Hong Kong or compensation for loss of employment.
The assessment to salaries tax is provisional and is based on the previous year's income with a tax credit being given in the subsequent year in the event of the assessment exceeding the actual income. 75% of the provisional assessment is payable in the 3rd quarter with the final 25% being payable in the final quarter.
The salaries tax rate is the lower of either:
- 15% of "assessable income" after the deduction of allowances; or
- A progressive rate levied on "assessable income" after the deduction of allowances. For the 2009/10 tax year onwards, these progressive rates are:
- Nil to HKD40,000 - 2%
- HKD40,000 to HKD80,000 – 7%
- HKD80,000 to HKD120,000 – 12%
- HKD120,000 upwards – 17%
For more information about personal taxation in Hong Kong, see here.