Hong Kong: Guide to Income Tax for Foreigners (2024)

10 minute read

An income tax return is a form filed with a taxing authority that reports income, expenses, and other pertinent tax information. Tax returns allow taxpayers to calculate their tax liability, schedule tax payments, or request refunds for the overpayment of taxes.

Most tax authorities in the world require taxpayers to file tax returns annually.

But, how does this work in Hong Kong?Seeing that the tax system in Hong Kong is different from the one in Mainland China, business owners should be familiar with it if they have any kind of business in Hong Kong. On top of that, Hong Kong is a heaven for foreigners when it comes to taxes.

Overview:

  • Is There An Income Tax in Hong Kong?
  • What is Provisional Tax in Hong Kong?
  • Is Bank Interest Taxable in Hong Kong?
  • Do I Need to Pay Tax in Hong Kong?
  • Expats
  • Freelancer / Self- Employed
  • Taxes For Unemployed Individuals
  • Bonus Tips For Foreign Companies

Sorry to burst your bubble, but the answer is yes. There is income tax for every individual in Hong Kong. Even foreigners have to pay taxes.

There are also differences between profits tax, income tax and property tax, with different requirements for each. However, Hong Kong indeed has one of the most attractive income tax rates of any of the first-world economies. Since Hong Kong really is a tax haven, the region’s income tax rates for foreigners, along with its corporate tax rates, help create an exceptional business environment.

Expatriate professionals and business owners can rest assured that their income tax burdens will be considerably lower in Hong Kong compared to most other countries in Europe and Asia. Royalties and/or fees paid to non-resident/overseas entertainers or sportsmen for their performances in Hong Kong are subjected to withholding tax on their assessable profits. There are no withholding taxes levied on dividends and interest.

Under the Comprehensive Arrangement, a Hong Kong resident working in the Mainland may be exempted from taxation in the Mainland on the basis that all 3 of the following conditions:

  • Resident is present in the Mainland for a period or periods not exceeding in the aggregate 183 days in any 12-month period commencing or ending in the taxable year concerned
  • The remuneration is paid by/on behalf of an employer who is not a Mainland resident
  • The remuneration is not borne by a permanent establishment which the employer has in the Mainland

On top of that, there are no capital gains taxes and the region’s tax laws also offer various deductions and allowances. Also, they completely exempt income earned outside the region.

This is why foreigners find it attractive to start a business in Hong Kong!

What Is Provisional Tax In Hong Kong?

The provisional tax is charged by referring to the amount of a taxpayer’s net chargeable income for the preceding year of assessment. However, Hong Kong provisional salaries tax is not a prepayment. This is a rather common misconception, since many people believe that a taxpayer pays this tax on future employment income.

Provisional tax is payable in two instalments:

  • 75% applies in the last quarter of the year of assessment
  • the remaining 25% shortly after the end of the year of assessment.

Is Bank Interest Taxable In Hong Kong?

Interest income sourced in Hong Kong which is received by a corporation that carries on a trade or business in the region is subject to profits tax.

An exemption pertains to interest income derived from any deposit placed in Hong Kong with a financial institution unless the deposit secures a borrowing where the interest expense is deductible.

However, this exemption does not apply to interest accruing to a financial institution.

Interest accruing to a bank or financial institution is deemed to be sourced and taxable in Hong Kong if the interest arises through or from the business conduct in Hong Kong by the bank or financial institution.

Interest income arising through or from the carrying on of an intra-group financing business in Hong Kong by a corporation will be deemed to be sourced and taxable in Hong Kong.

Do I Need To Pay Tax In Hong Kong?

Apart from the residents in Hong Kong, you are subjected to salary tax. This includes individuals that are earning income that arises in or is derived from a Hong Kong office or Hong Kong employment, or from services rendered in Hong Kong during visits of more than 60 days in any tax year. Hong Kong practices a territorial taxation rule – the concept of tax residency has no significance in determining tax liability (except in limited circumstances).

Tax rates imposed on individuals are progressive based on their net chargeable income (i.e. assessable income after deductions and allowances) which starts at 2% and is capped at 17%; or 15% of net income (i.e. income after deductions only).

Net Chargeable Income (in HKD currency) Tax rate
1 – 50,000 HKD 2%
50,001 – 100,000 HKD 6%
100,001 – 150,000 HKD 10%
150,001 – 200,000 HKD 14%
Above 200,000 HKD 17%

Employers & Employees

Employers are not required to withhold tax for its employees, regardless of whether the employees are residents in Hong Kong. Unless it is a case of termination and/or employee wishes to leave Hong Kong within 1 month of ceasing employment, the employer will then have to send a form to the Inland Revenue Department (IRD) of the departure and must temporarily withhold ALL payment (including salary) due to the employee till the “Letter Of Release” is issued.

Find out more about departure from employment in Hong Kong here.

Expats

Hong Kong laws function under a territorial principle. This means that only income earned in Hong Kong is taxable in Hong Kong. But, income that has been taxed elsewhere could be exempt from the salary tax in Hong Kong, while income earned for work done outside of Hong Kong can also be considered outside the jurisdiction.

Income earned locally by visitors staying for fewer than 60 days is also exempt from Hong Kong salaries tax.

A general rule of thumb is that there is no separate ‘Hong Kong expatriate tax’ and tax rates, so calculation methods remain the same for everyone. Most expatriates employed in Hong Kong will pay salaries tax in Hong Kong.

Freelancer/Self-Employed

If your income is derived from buying and selling of goods, or from providing professional or personal services, you are considered to be a self-employed entity conducting business.

A self-employed person may be either a sole proprietor or a partner of a partnership business. However, you need to register with the Inland Revenue Department (IRD) if you are an unincorporated company.

Every self-employed person is subject to profits tax on the assessable profits of your sole proprietorship or partnership business.

All self-employed individuals have the following responsibilities:

  • Keep sufficient business records for at least 7 years.
  • Prepare accounts based on your accounting records.
  • Complete and submit a tax return for reporting business profits or losses.
  • Notify the Inland Revenue Department in writing about your liability to tax unless you have already received the tax return from the Department.
  • In addition, you need to notify the Inland Revenue Department about the potential cessation of your business and change of address.
  • And, pay tax.

Taxes For Unemployed Individuals

Luckily and expectedly, there are no unemployment taxes in Hong Kong. Therefore, if you are not currently employed, there is no need to worry about paying taxes.

Bonus Tips For Foreign Companies

The Hong Kong authorities have expanded the scope of deductions and allowances in recent times. As a result, there are many incentives provided to continue driving investments.

Hong Kong’s tax system is still one of the most competitive and beneficial systems both for locals and expatriates. Even foreign companies can seek financial help from different chambers of commerce, ask for international grants, and so on.

Bear in mind that assessable profits of a corporation are taxed at the corporate tax rate of 16.5%. Various tax incentives exist for special business operations such as tax exemption for profits derived by offshore funds and profits derived from operating ships in Hong Kong.

Profits rendered from the business of reinsurance of offshore risks as a professional reinsurer and profits of a qualifying Corporate Treasury Centre are taxed at half of the corporate tax rate.

Wrap Up

Even though you need to pay income tax in Hong Kong, this is still is one of the most attractive places for entrepreneurs due to its great taxation system.

If you have more questions regarding foreigners income tax Hong Kong, feel free to contact Sleek!

Hong Kong: Guide to Income Tax for Foreigners (2024)

FAQs

Do foreigners have to pay income tax? ›

A nonresident alien (for tax purposes) must pay taxes on any income earned in the U.S. to the Internal Revenue Service, unless the person can claim a tax treaty benefit. This applies to students as well.

Do I need to pay income tax in Hong Kong? ›

Hong Kong SAR does not impose income tax based on an individual's total income. Instead, the three main types of income derived by individuals are taxed under different income taxes.

Do foreigners pay higher taxes? ›

Filing Requirements for Nonresident Aliens

It is taxed for a nonresident at the same graduated rates as for a U.S. person.

Which country is tax free for foreigners? ›

Bahamas doesn't charge any income tax to its residents. Endowed with breathtaking beaches and a fast grwoing economy, Bahamas is one of the most livable nations in the world.

How can I avoid foreign income tax? ›

Foreign Earned Income Exclusion

Expats who pass the Bona Fide Residence Test or Physical Presence Test can use the Foreign Earned Income Exclusion (FEIE) to exclude up to roughly $100,000 of foreign earned income from their US tax obligations—regardless of what country they live in.

How do you pay taxes if you are not a citizen? ›

Nonresident aliens who are required to file an income tax return must use Form 1040-NR, U.S. Nonresident Alien Income Tax Return.

How can foreign income avoid double taxation? ›

Filing Taxes with the IRS While Living in Another Country

United States citizens who work in other countries do not get double taxed if they qualify for the Foreign-Earned Income Exemption. Expats should note that United States taxes are based on citizenship, not the physical location of the taxpayer.

How much tax will I pay if my salary is 30000? ›

If you make KSh 30,000 a year living in Kenya, you will be taxed KSh 4,401. That means that your net pay will be KSh 25,599 per year, or KSh 2,133 per month. Your average tax rate is 14.7% and your marginal tax rate is 1.7%. This marginal tax rate means that your immediate additional income will be taxed at this rate.

How can I save tax in Hong Kong? ›

Deductions
  1. Qualifying Premiums Paid under the Voluntary Health Insurance Scheme (VHIS) Policy. ...
  2. Tax Deductions for Qualifying Annuity Premiums and Tax Deductible MPF Voluntary Contributions. ...
  3. Tax Deduction for Domestic Rents. ...
  4. Approved Charitable Donations. ...
  5. Expenses of Self-education.

What salary is eligible for income tax? ›

According to the Income Tax Act, it is mandatory to file income tax returns if: If your gross total income is over ₹ 2,50,000 in a financial year. This limit exceeds to ₹ 3,00,000 for senior citizens and ₹ 5,00,000 for citizens who are above 80 years.

Is Hong Kong a tax haven? ›

One of the most popular tax havens in the world is Hong Kong. It doesn't tax corporate profits made outside the territory. The local government encouraged foreign investment. And the companies that choose to do business in Hong Kong will find a generous 0% VAT on goods and services sold.

Is Hong Kong a high tax country? ›

Hong Kong is considered a leading tax haven due to its laws that limit taxation on the island's wealthy foreign residents and corporations.

Can you avoid paying income tax? ›

Tax evasion, where you deliberately fail to pay a portion or all of your taxes, is illegal. File your annual tax returns even if you can't afford it or don't think you owe taxes, to avoid trouble. Tax evasion can result in fines and expensive interest on the amount you owe.

Who has the fairest tax system in the world? ›

Tax Competitiveness Index 2022: Estonia has the world's best tax system
  • It has no corporate income tax on reinvested and retained profits (and a 14-20 per cent corporate income tax rate on distributed profits). ...
  • It has a flat 20 per cent tax on individual income.

What country pays the highest tax in the world? ›

As the old adage goes, only two things in life are certain: death and taxes.
...
Top 10 Countries with the Highest Personal Income Tax Rates - Trading Economics 2021:
  • Japan - 55.97%
  • Denmark - 55.90%
  • Austria - 55.00%
  • Sweden - 52.90%
  • Aruba - 52.00%
  • Belgium - 50.00% (tie)
  • Israel - 50.00% (tie)
  • Slovenia - 50.00% (tie)

Which is the highest tax paying country? ›

Sweden has a developed post-industrial society with an advanced welfare state and the highest income tax rate in the world, with as much as 52.9% deducted from annual income.

Which country has lowest income tax? ›

Bermuda, Monaco, the Bahamas, and the United Arab Emirates (UAE) are four countries that do not have personal income taxes. If you renounce your U.S. citizenship, you may end up paying a tax penalty called an expatriation tax.

Is Dubai income tax free? ›

Absence of taxation

There is currently no personal income tax in the United Arab Emirates. As such, there are no individual tax registration or reporting obligations.

Why Dubai is tax free? ›

Due to the absence of income tax in Dubai and the emirate's many economic free zones which offer business incentives such as exemption from corporation tax, zero customs duties and full repatriation of capital and profits, people incorrectly assume that Dubai is completely tax free.

Can you be taxed in 2 countries? ›

If you are resident in two countries at the same time or are resident in a country that taxes your worldwide income, and you have income and gains from another (and that country taxes that income on the basis that it is sourced in that country) you may be liable to tax on the same income in both countries.

What happens if you dont report foreign income? ›

The failure to report may results in penalties as high as 50% maximum value of the foreign account. The penalties can occur over several years. Still, the IRS voluntary disclosure program, streamlined programs, and other amnesty options can serve to minimize or avoid these penalties.

How much do expats pay in taxes? ›

US social security taxes consist of 6.2% for employees plus 2.9% Medicare Tax, or a total of 15.3% of income for self-employed expats (12.4% social security tax and 2.9% Medicare Tax. Expats may also have to pay social security taxes in the country where they live though.

Does immigration check your taxes? ›

The U.S. Immigration and Citizenship Services (USCIS) is not responsible for making sure you pay your taxes. However, many U.S. federal government agencies share information about people.

How long can you stay in a country without paying taxes? ›

Understanding the 183-Day Rule

Generally, this means that if you spent 183 days or more in the country during a given year, you are considered a tax resident for that year. Each nation subject to the 183-day rule has its own criteria for considering someone a tax resident.

Do you pay taxes if you have a work visa? ›

Wages paid to resident aliens employed within the United States by an American or foreign employer are subject to Social Security/Medicare taxes under the same rules that apply to U.S. citizens.

What qualifies as foreign income? ›

Foreign earned income is income you receive for performing personal services in a foreign country. Where or how you are paid has no effect on the source of the income.

How much tax will I pay if my salary is 50000? ›

If you make ₹ 50,000 a year living in India, you will be taxed ₹ 6,000. That means that your net pay will be ₹ 44,000 per year, or ₹ 3,667 per month. Your average tax rate is 12.0% and your marginal tax rate is 12.0%. This marginal tax rate means that your immediate additional income will be taxed at this rate.

How much tax is deducted from 50k salary? ›

If you make $50,000 a year living in the region of California, USA, you will be taxed $7,917. Your average tax rate is 8.59% and your marginal tax rate is 12%.

How much tax will I pay if my salary is 35000 per month? ›

If you make ₹ 35,000 a year living in India, you will be taxed ₹ 4,200. That means that your net pay will be ₹ 30,800 per year, or ₹ 2,567 per month.

What are 3 ways of reducing the taxes you pay? ›

7 Best Tips to Lower Your Tax Bill from TurboTax Tax Experts
  • Take advantage of tax credits.
  • Save for retirement.
  • Contribute to your HSA.
  • Setup a college savings fund for your kids.
  • Make charitable contributions.
  • Harvest investment losses.
  • Maximize your business expenses.
1 Dec 2022

What are three main ways to reduce taxable income? ›

How to Lower Taxable Income
  • Contribute significant amounts to retirement savings plans.
  • Participate in employer sponsored savings accounts for child care and healthcare.
  • Pay attention to tax credits like the child tax credit and the retirement savings contributions credit.
  • Tax-loss harvest investments.
6 Sept 2022

What is the highest tax rate in Hong Kong? ›

Tax Rates for Individuals
Net Chargeable Income (in HKD currency)Tax rate
100,001 – 150,000 HKD10%
150,001 – 200,000 HKD14%
Above 200,000 HKD17%
Tax rate on capital gains0%
4 more rows

Which income is fully exempt from tax? ›

Exempt income comes in many forms such as the interest received through agricultural means, interest received through PPF, long term capital gains earned through shares and stocks, and much more.

How do I know if I am eligible for income tax? ›

Step 1- Go to the 'Income Tax Eligibility Checker' page and click on 'Check Your Eligibility for ITR'. Step 2- A page titled 'Income Details' requesting your date of birth and annual income appears. Enter the details correctly and click on 'Next. Step 3- A page titled 'Other Details' appears.

How much salary is free from income tax? ›

If your income is below ₹2.5 lakh, you do not have to file Income Tax Returns (ITR).

What are the disadvantages of living in Hong Kong? ›

High Pollution Levels

Unfortunately, the atmosphere in Hong Kong ranks among the most polluted in Southeast Asia. The city is often shrouded in fog, making it difficult to breathe easily or see clearly. The major sources of pollution are emissions from industrial plants, marine traffic and vehicles.

Can foreigner open bank account in Hong Kong? ›

Hong Kong offers a wide selection of local and international banks. You should not have problems opening a bank account here whether you are a resident or not.

What is Hong Kong main source of income? ›

Hong Kong raises revenues from the sale and taxation of land and through attracting international businesses to provide capital for its public finance, due to its low tax policy.

Is Hong Kong salary high? ›

Statistics and Trends Around Average Salary in Hong Kong. An employee working in Hong Kong receives an average monthly salary of 36,000 HKD (around USD 4,684). On digging deeper, you'll see that the employee salary in the region ranges from 9,260 HKD (lowest average) to 163,000 HKD (highest average).

Why cost of living is high in Hong Kong? ›

For a number of years, Hong Kong has topped Mercer's Cost of Living Survey and remains the most expensive city for expats in the world in 2022. In part, this is thanks to the region's extremely overinflated property market, which makes finding accommodation an expensive endeavour.

Does Hong Kong tax overseas income? ›

Foreign income

Foreign-sourced income, whether or not remitted to Hong Kong SAR, is not taxed. As such, there is no specific tax provision dealing with deferral or non-remittance of foreign earnings. Nor does Hong Kong SAR have any controlled foreign company (CFC) legislation.

What is the minimum income to file taxes in 2022? ›

Minimum income to file taxes

$12,550 if under age 65. $14,250 if age 65 or older.

How do I pay zero taxes 2022? ›

You may qualify for the 0% long-term capital gains rate for 2022 with taxable income of $41,675 or less for single filers and $83,350 or under for married couples filing jointly. You may be in the 0% tax bracket, even with six figures of joint income with a spouse, depending on taxable income.

Is Hong Kong a tax free country? ›

There is no general income tax in Hong Kong (SAR). For income to be subject to tax, it must fall within one of the specific heads of taxation. Salaries tax – on income from an office, employment and any pension. Profits tax – on income from a trade, profession or business.

Does Hong Kong give citizenship to foreigners? ›

Hong Kong does not have its own citizenship, but does have its own travel document (passport). Only citizens of the People's Republic of China (PRC) who are permanent residents of Hong Kong with a permanent ID card, can apply for a Hong Kong passport.

How can I avoid tax in Hong Kong? ›

9 Ways to Reduce Your Personal Tax in Hong Kong
  1. Home Loan Interest Allowance. ...
  2. Deduction for Housing. ...
  3. You Can Choose Your Tax Rate. ...
  4. Get Deductions for Your Donations to Charitable Organisations. ...
  5. Deduct Your Mandatory Provident Fund (MPF) From Your Income. ...
  6. Have a Family. ...
  7. IRD Can Hold Over Your Provisional Tax.
24 Jul 2020

Why is Hong Kong a tax haven? ›

One of the most popular tax havens in the world is Hong Kong. It doesn't tax corporate profits made outside the territory. The local government encouraged foreign investment. And the companies that choose to do business in Hong Kong will find a generous 0% VAT on goods and services sold.

How does Hong Kong tax work? ›

Hong Kong has a simple tax regime. Income/profits are only taxed if sourced from Hong Kong. Individuals are subject to salaries tax on any income arising in or derived from a business, employment or pension in Hong Kong. Salaries tax is levied at progressive rates on the net chargeable income and is capped at 17%.

Is Hong Kong still tax haven? ›

Taxation of Offshore Companies

What makes Hong Kong a tax haven is that there is a 0% tax rate on all foreign-sourced income. Meaning if you own a company that is incorporated Kong Kong and are a non-resident and all the income is derived from outside the country, then you have no tax obligations.

Which country has the fairest tax system? ›

Tax Competitiveness Index 2022: Estonia has the world's best tax system
  • It has no corporate income tax on reinvested and retained profits (and a 14-20 per cent corporate income tax rate on distributed profits). ...
  • It has a flat 20 per cent tax on individual income.

Is Hong Kong good for foreigners? ›

Hong Kong is a fantastic destination for expats and their families, with wonderful food, a vibrant culture and so much opportunity. Just make sure you are well prepared, with a job offer secured, international health insurance prepared and an apartment ready to help you settle in quickly.

How long do you have to live in Hong Kong to get citizenship? ›

The continuous period of 7 years in which you have ordinarily resided in Hong Kong must be immediately before the date that you apply to the Director of Immigration for the status of a permanent resident of the HKSAR.

Can I live in Hong Kong without Chinese? ›

You Shouldn't Have a Language Problem

The most common form of Chinese spoken is of course Cantonese, but there are other variations of the language used by minority groups in the city. As English is a co-official language of Hong Kong, expats with no knowledge of Chinese should be able to get along fine in the city.

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