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Tax in Hong-Kong: Myths and truths

Contributed by hongkongtaxfree.com
07 December, 2016

Planning to relocate to Hong Kong? You need to get everything right about taxation. Hong Kong is among the best places to work as an expatriate or run a business. Many are the times that myths have been peddled about the taxation system in Hong Kong. Well, do not take them because this post demystifies myths from facts for expats in Hong Kong.

Seven Myths and Truths about taxes for expats in Hong Kong

  1. Expats in Hong Kong pay taxes on income from both local and home country: Myth

    This is a myth. Expats in Hong Kong are only required to pay taxes on revenue that they earn in Hong Kong. If you have other sources of revenue such as properties that generate income back in your home country, it is not subject to taxation.

  2. The tax rates in Hong Kong are even on all revenues: Myth

    This is false because Hong Kong taxes people depending on the level of income. The tax is relatively smaller for people with lower salaries and higher for those earning more. However, even for those earning higher amounts, the tax does not go beyond 17%.

  3. Hong Kong system ensures that expats do not suffer double taxation: Fact.

    For many years this has been the focus Hong Kong puts a lot of emphasis on. To attract investors and more expats, Hong Kong Administration only taxes the revenue that is generated in Hong Kong and not outside. Recently, Hong Kong has entered into an agreement with various countries to ensure that they do not suffer double taxation. With such agreements, expats do not pay taxes back at home for revenue that has already been taxed in Hong Kong.

  4. You are required to pay taxes on income generated from property in Hong Kong: Fact

    In addition to salaries tax, Hong Kong requires expats who own property in Hong Kong and make income from it to pay appropriate taxes to the Inland Revenue Department (IRD). It is important to check with the IRD on the tax requirements on property tax.

  5. Hong Kong taxes interests and dividends: Myth

    To encourage more investors to invest in Hong Kong and promote business growth interest and dividends are not taxed. Besides, capital gains are also not taxed. Whether you want to use the dividends for personal reasons, put interest back into the business, or send it back home, it will not be taxed.

  6. If you are self-employed, Hong Kong does not charge you any fee. Myth

    Hong Kong considers self-employment as a type of buying and selling. Therefore, the income accrued is taxable. You should check with IRD to see the different tax requirements based on the amount of profits that you make.

  7. You should get clearance from IRD when the time for departure from Hong Kong finally comes: Truth.

    The Hong Kong IRD requires that you notify it several months before your expat mission and stay in Hong Kong is over. This is important so that it can check whether there is any tax obligation that you should clear before leaving.


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