Hong Kong Tax Guide

Jul 21 2016

The taxation system in Hong Kong operates on a progressive rate structure, and the maximum rate extends only to 17% for the top bracket. The system is considered to be simple, transparent and straightforward when compared to other systems around the world. If you are an expat in Hong Kong, it is important to note that only what you earn in Hong Kong is subject to tax.

Our brief overview of taxes for expats in Hong Kong is by no means exhaustive nor meant to constitute legal advice, rather it aims to provide you with the basis for understanding personal taxation as an expat in Hong Kong. For more detailed information on tax related issues, the Hong Kong Inland Revenue Department (IRD) is the definitive source to look to.

Hong Kong Salaries Tax

Under the Inland Revenue Ordinance, all income which derives from Hong Kong is subject to tax. In the basic sense this applies to your salary earned through your employer in Hong Kong, yet also encompasses other forms of accrued income such as holiday journey benefits, share option gains, “rental value” of a place of residence provided by your employer as well as end-of-contract gratuities.

Based upon “the chargeable income of the year of assessment”, the IRD will nonetheless demand payment of Provisional Salaries Tax during your initial year of employment only to adjust any excess in payment upon the following year.

You are entitled to claim deductions and allowances. These include approved charitable donations, contributions to a mandatory provident fund (MPF), self-education expenses as well as allowances for married persons, single parents and dependents.

Income Tax Calculation

The net chargeable income (after discounting deductions and allowances), is charged at the following rates:

	Net Chargeable Income	Rate	Tax
	$		$
On the First	40,000	2%	800
On the Next	40,000	7%	2,800
	80,000		3,600
On the Next	40,000	12%	4,800
	120,000		8,400
Remainder	17%

Source: IRD

Calculated at either progressive rates on your net chargeable income or standard rates on your net income (precludes allowances), the IRD’s Hong Kong Salaries Tax Calculator will enable you to assess your liabilities in terms of income tax.

Generally speaking your employer is responsible for notifying the IRD of your employment and income but you may be held personally liable if you fail to file your tax return in time.

How to pay tax

Payment taxes can be carried out in person, by post or via e-channels.

Payment through electronic means presents the most convenient option. Whether by phone, bank ATM or the internet (“Pay e-cheque” portal), there are a number of key considerations you must keep in mind. Namely that the “Shroff Account Number for electronic payments” that is printed on your tax payment voucher must be referenced in the above payment methods. There are slight discrepancies in formatting that you can reference on the IRD’s site.

Payment by post requires that you mail a cheque made payable to “the Government of the HKSAR”, with reference numbers pertaining to the Shroff Account number on the back, to the IRD. Payment in person requires that you head over to the Gloucester Road Post office or present the tax payment voucher at a convenience store.

Other possible tax obligations in Hong Kong

Those who are self-employed are liable to tax as are property owners and landlords who receive rental income. For those who are self-employed you will also have existing obligations such as accounting standards under Hong Kong law.

You are exempt from paying capital gains tax unless your remuneration package includes share options. However as an expat you will have to pay particular attention as to whether you will still be considered liable for taxes in your home country.