Hong Kong has a simple taxation system. In addition, low tax rate, generous tax allowances, no capital gain tax, no VAT, no sales tax, no withholding tax on dividend and interest make Hong Kong one of the most attractive tax regimes in the region.
Hong Kong adopts the territoriality basis of taxation, whereby only income or profit sourced in Hong Kong is subject to tax and that derived from a source outside Hong Kong by a local resident is in most cases not taxed in Hong Kong.
The principal direct taxes of Hong Kong are profits tax, salaries tax and property tax. Profit tax is charged from profits from a trade or business, salaries tax is charged from income from an office, an employment or a pension, and property tax is charged from income from real estate.
The Inland Revenue Department (IRD) is responsible for taxation matters in Hong Kong. IRD makes tax assessment based on income or profit accrued in the tax year or year of assessment which runs from 1 April of a year to 31 March of the following year.
Double Taxation Agreements and Arrangement
Double taxation arises when two or more tax jurisdictions overlap, such that the same item of income or profit is subject to tax in each. Most jurisdictions make provisions for double taxation arrangement to eliminate the double taxation of income. As of 24 February 2021, comprehensive double tax agreements were signed between Hong Kong and the following jurisdictions:
- Brunei Darussalam
- Czech Republic
- Macao SAR
- Mainland of China
- New Zealand
- Saudi Arabia
- South Africa
- United Arab Emirates (UAE)
- United Kingdom
Tax Information Exchange Agreement
Tax Information Exchange Agreements (TIEAs) are an important tool in Hong Kong’s efforts to combat tax evasion. The agreements is providing for the effective exchange of information between Hong Kong and its TIEA partners and enhancing Hong Kong’s ability to administer and enforce its domestic tax laws. As of 31 March 2019, comprehensive tax information exchange agreements were signed between Hong Kong and the following jurisdictions:
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