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KPMG is a global network of professional firms providing Audit, Tax and Advisory services. All income tax information is based on the Inland Revenue Ordinance and is summarized by KPMG, the Hong Kong member firm of KPMG International. There is no general income tax in Hong Kong. For income to be subject to tax, it must fall within one of the specific heads of taxation. Notification is not required where a taxpayer has already been issued an Individual Tax Return for the relevant year of assessment.

On the basis of this estimate, the Inland Revenue Department may assess the employee to provisional salaries tax. In addition, each employee is required generally in May each year to complete an individual tax return covering the same period. Tax payments are generally made in January and April; the balance of the final tax for the preceding year of assessment and 75 percent of the provisional tax for the current year of assessment are paid in January, with the remaining 25 percent of the provisional tax being paid shortly after the end of the year of assessment, in April.

What are the current income tax rates for residents and non-residents in Hong Kong? For the purposes of taxation, how is an individual defined as a resident of Hong Kong?

Taxation in Hong Kong is territorial. Hong Kong salaries tax is charged in respect of income arising in or derived from Hong Kong from any office or employment of profit and any pension. In respect of an employment, to determine the extent of salaries tax payable, it is first necessary to determine whether the income is derived from a Hong Kong-located employment or a non-Hong Kong-located employment.

If an employment is located in Hong Kong, it will be regarded as being a Hong Kong-located employment and all income from the employment will fall within the scope of salaries tax. If an employment is located outside Hong Kong, it will be regarded as being a non-Hong Kong-located employment and the liability to salaries tax will be limited to tax on income from services rendered in Hong Kong plus the attributable leave.

There are a number of exemptions from salaries tax available to employees. If all services with respect to the employment are rendered outside Hong Kong, regardless of the status of the employment see earlier , the income will be exempt from tax. In addition if duties are rendered in Hong Kong during visits of 60 days or less in a fiscal year, no liability will arise.

The Inland Revenue Department will not recognize as visits periods spent in Hong Kong where the individual is based in or has a place of residence in Hong Kong regardless of the actual number of days spent in Hong Kong. A further exemption is available to eliminate double taxation of income. This exemption excludes income derived from services rendered in a territory outside Hong Kong where the income for the services rendered is subject to a tax of a similar nature as salaries tax in that territory and that tax has actually been paid.

Is there a de minimus number of days rule when it comes to residency start and end date? See comments earlier in respect of the basis of taxation. Taxation is territorial and liability to tax is not determined by the assignment start date.

The notification should be submitted at least one month before the expected cessation date. The employer of an employee who is about to leave Hong Kong, for a period exceeding one month, must notify the Inland Revenue Department of the expected date of departure no later than one month before the expected departure date. Taxation is territorial and liability to tax is not determined by the assignment start date or end date.

Do the immigration authorities in Hong Kong provide information to the local taxation authorities regarding when a person enters or leaves Hong Kong?

In cases of non-payment of tax, after completing certain procedures, the taxation authorities can request that an individual is prevented from leaving Hong Kong by the immigration authorities.

Will an assignee have a filing requirement in the host country after they leave the country and repatriate?

If the assignee has income that is subject to salaries tax, they may have a filing requirement in Hong Kong after they leave Hong Kong. Do the taxation authorities in Hong Kong adopt the economic employer approach to interpreting Article 15 of the OECD treaty? If no, are the taxation authorities in Hong Kong considering the adoption of this interpretation of economic employer in the future?

Hong Kong has only recently expanded the number of Comprehensive Taxation Agreements and the economic employer approach has not been extensively tested in practice. To date, no guidance has been provided by the taxation authorities in Hong Kong on the economic employer approach and it is unclear whether the taxation authorities in Hong Kong will adopt this approach.

Are there a de minimus number of days before the local taxation authorities will apply the economic employer approach? If yes, what is the de minimus number of days? Income from any office or employment is defined as including any wages, salary, leave pay, fee, commission, bonus, gratuity, perquisite, or allowance, whether derived from the employer or others. Where an employee occupies rent-free or subsidized accommodation at the expense of the employer, the taxable benefit is the rental value of the residence.

Where some rent is paid by the employee, the taxable benefit is the excess of rental value over the rent paid. A housing allowance, which may be disbursed at the discretion of the employee, is taxable in full as income although rental reimbursement arrangements can be structured tax effectively.

Are there any areas of income that are exempt from taxation in Hong Kong?

If so, please provide a general definition of these areas. There are no exemptions for specific types of income.

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However, due to the limited application of the benefit-in-kind provisions, it is possible to provide many benefits to employees tax-free.

If the employment is regarded as being a Hong Kong-located employment, the employee will be liable to salaries tax on all remuneration subject to the exemptions noted earlier , even if some of the services are rendered outside Hong Kong.

Relief is available to mitigate the potential impact of double taxation.

Generally, investment income and capital gains are not subject to tax in Hong Kong. However, income from property land and buildings located in Hong Kong is subject to property tax. Any gain realized by the exercise, assignment or release of right to acquire shares or stock in a corporation obtained by a person as the holder of an office or employment of that or any other corporation is subject to salaries tax. To determine the extent of the liability to tax, the location of the employment and the characteristic of the award are considered.

Foreign exchange gains and losses will only be subject to tax if they are regarded as the Hong Kong profits from a trade, profession or business undertaken in Hong Kong. Are there additional capital gains tax CGT issues in Hong Kong? If so, please discuss?

A deduction may be claimed by the employee for expenses that have been incurred wholly, exclusively and necessarily in the production of assessable income.

In practice, an expenditure claim for salaries tax purposes rarely is successful because of the need to establish that the expenditure was incurred wholly, exclusively and necessarily for the employment. A depreciation allowance may be claimed in respect of plant and machinery, the use of which is essential to the production of assessable income.

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The allowances are available in full whether the employee is in Hong Kong for part or all of a year of assessment. However, these allowances are only available if the employee is subject to tax at the progressive rates of salaries tax rather than the standard 15 percent rate. Donations to approved charitable organizations may be deducted for tax purposes. Home mortgage interest payments are deductible against income subject to salaries tax.

Owner-occupiers may claim a deduction for mortgage interest payments up to a maximum of HKD, per year for one property. The deduction can be claimed for 15 years The Financial Secretary proposed in his Budget Speech on 22 February that the period to claim the deduction be extended to 20 years. What are the tax reimbursement methods generally used by employers in Hong Kong? For example, pay-as-you-earn PAYE , pay-as-you-go PAYG , and so on.

Provisional tax is payable in two installments, one of 75 percent in the last quarter of the year of assessment and the remaining 25 percent shortly after the end of the year of assessment. The provisional tax payable is typically estimated based on the income for the previous year of assessment.

The final tax for the previous year of assessment is payable at the same time as the first installment of provisional tax. Is there any Relief for Foreign Taxes in Hong Kong?

For example, a foreign tax credit FTC system, double taxation treaties, and so on? Unilateral relief, by way of an exemption of the income from salaries tax, is available under domestic legislation to employees if they are subject to tax of a similar nature to salaries tax in another jurisdiction in respect of services rendered in that jurisdiction.

Relief including foreign tax credit relief is also available under the relevant double taxation agreements with partner jurisdictions. What are the general tax credits that may be claimed in Hong Kong? Tax credit relief can only be claimed if there is a double taxation agreement in place. This calculation assumes a married taxpayer resident in Hong Kong with two children whose three-year assignment begins 1 April and ends 31 March KPMG International has created a state of the art digital platform that enhances your experience, optimized to discover new and related content.

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Hong Kong - Income Tax Hong Kong - Income Tax Taxation of international executives. Salaries tax — on income from an office, employment and any pension.

Profits tax — on income from a trade, profession or business. Property tax — on income from land and buildings located in Hong Kong. When are tax returns due? That is, what is the tax return due date? Generally within one month of the date of issue by the Inland Revenue Department. What is the tax year-end? What are the compliance requirements for tax returns in Hong Kong? Residents and non-residents See comments above.

Tax rates What are the current income tax rates for residents and non-residents in Hong Kong? Residents and non-residents Salaries tax is charged at the lower of: Residence rules For the purposes of taxation, how is an individual defined as a resident of Hong Kong?

See comments above in respect of the basis of taxation. What if the assignee enters the country before their assignment begins? Termination of residence Are there any tax compliance requirements when leaving Hong Kong?

What if the assignee comes back for a trip after residency has terminated? Communication between immigration and taxation authorities Do the immigration authorities in Hong Kong provide information to the local taxation authorities regarding when a person enters or leaves Hong Kong? Information can be requested from the immigration authorities by the taxation authorities. Filing requirements Will an assignee have a filing requirement in the host country after they leave the country and repatriate?

Economic employer approach Do the taxation authorities in Hong Kong adopt the economic employer approach to interpreting Article 15 of the OECD treaty? De minimus number of days Are there a de minimus number of days before the local taxation authorities will apply the economic employer approach?

See comments above in respect of economic employer approach. Types of taxable compensation What categories are subject to income tax in general situations? The following are specifically included as taxable income: Tax-exempt income Are there any areas of income that are exempt from taxation in Hong Kong? Expatriate concessions Are there any concessions made for expatriates in Hong Kong?

There are no special expatriate concessions. Salary earned from working abroad Is salary earned from working abroad taxed in Hong Kong? Taxation of investment income and capital gains Are investment income and capital gains taxed in Hong Kong? Dividends, interest, and rental income Generally, investment income and capital gains are not subject to tax in Hong Kong.

Gains from stock option exercises Any gain realized by the exercise, assignment or release of right to acquire shares or stock in a corporation obtained by a person as the holder of an office or employment of that or any other corporation is subject to salaries tax. Foreign exchange gains and losses In general, foreign exchange gains and losses are not subject to taxation. Principal residence gains and losses There is no capital gains tax in Hong Kong. Capital losses No relief.

Personal use items There is no capital gains tax in Hong Kong. Gifts There is no capital gains tax or gift taxes in Hong Kong. Additional capital gains tax CGT issues and exceptions Are there additional capital gains tax CGT issues in Hong Kong? Are there capital gains tax exceptions in Hong Kong? General deductions from income What are the general deductions from income allowed in Hong Kong? Home loan interest Home mortgage interest payments are deductible against income subject to salaries tax.

Tax reimbursement methods What are the tax reimbursement methods generally used by employers in Hong Kong? The following are the normal methods of recognizing tax reimbursements paid by the employer: Pay-as-you-go PAYG withholding There is no tax withholding in Hong Kong. PAYG installments There is no PAYG in Hong Kong. See comments earlier regarding tax payments. Relief for foreign taxes Is there any Relief for Foreign Taxes in Hong Kong? General tax credits What are the general tax credits that may be claimed in Hong Kong?

Sample tax calculation This calculation assumes a married taxpayer resident in Hong Kong with two children whose three-year assignment begins 1 April and ends 31 March Other assumptions The spouse does not derive income chargeable to salaries tax during the period from 1 April to 31 March All earned income is attributable to local sources.

Bonuses are paid at the end of each year of assessment, and accrue evenly throughout the year. Interest income is not remitted to Hong Kong. The company car originally cost USD50, The ownership of the company car is not transferred to the employee and it is used for business and private purposes.

The employee is deemed resident throughout the assignment. Tax treaties and totalization agreements are ignored for the purpose of this calculation.

The one-off tax reductions available have been ignored. Contributions to a mandatory provident fund or recognized retirement scheme have been ignored. The housing allowance is a cash allowance and does not qualify for the favourable treatment for accommodation provided by the employer.

Domestic tax rebates dependent spouse rebate 0 0 0 Foreign tax credits 0 0 0 Total Hong Kong tax 18, 14, 16, Connect with us Find office locations kpmg.

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By using this website, you agree to the use of cookies as outlined in KPMG's online privacy statement. Child allowance - 1st to 9th child each Year of birth Other years. Dependent parent allowance aged 60 or above aged between 55 and Dependent grandparent allowance aged 60 or above aged between 55 and Additional dependent parent and grandparent allowance aged 60 or above aged between 55 and