Yes, Hong Kong does have income tax. However, Hong Kong’s income tax system is different from many other regions.
Hong Kong employs three distinct income tax systems instead of a unified one. The rates mentioned earlier apply to salaries tax for the period from April 1, 2020, to March 31, 2021.
- Profits tax is imposed at a flat rate of 15% on income from non-corporate professions, trades, or businesses. Alternatively, there is an option to choose the “two-tiered” profits tax rates regime, wherein the tax rate for the first HKD 2 million of profits is reduced to 7.5%, while the remaining profits are taxed at the standard rate of 15%. Within each group of “connected entities,” only one entity can elect the two-tiered tax regime for the assessment year.
- Property tax is calculated at a flat rate of 15% on rental income, after applying a standard deduction of 20%.
- Salaries tax is computed based on net chargeable income, which is assessable income minus personal deductions and allowances. It is subject to progressive rates ranging from 2% to 17%. Alternatively, a flat rate (maximum rate) of 15% is applied to assessable income minus personal deductions, using the calculation that results in the lower tax liability.
Profits tax, salaries tax, and property tax are assessed independently. In certain situations, permanent or temporary residents in Hong Kong can opt for personal assessment, combining income or losses from all sources.
A basic allowance of HKD 132,000 or a married person’s allowance of HKD 264,000 (if the spouse has no chargeable income or if joint assessment is chosen) is available.
For the 2019-20 tax year, a one-time tax rebate is offered, equal to 100% of the final tax payable for salaries tax and tax under personal assessment, capped at HKD 20,000 for each case.