| This information page has been prepared to provide an overview of the business environment, forms of business entities, finance, taxation, and audit and accounting practices in Hong Kong. It sets down a broad summary of the prominent features of the topics discussed. This information is general in nature and should not be used as a substitute for detailed advice. Persons conducting or planning to conduct business in Hong Kong are advised to obtain detailed information from experienced professionals.
• Business Environment • Business
Entities • Finance • Auditing
and Accounting • Taxation
GENERAL INFORMATION
Geography. Hong Kong is located on the southeast coast of China. It consists of 236 islands and islets and a portion of the Chinese mainland covering a total area of approximately 1,046 square kilometers. Hong Kong Island (75.6 square kilometers) constitutes the principal business and commercial center. The Kowloon Peninsula, an area of 10.6 square kilometers on the mainland, also contains important commercial, industrial and residential areas. The New Territories (958 square kilometers), which adjoin Kowloon and the mainland, contain the principal areas of agriculture, although they are gradually being eroded by the encroachment of industry and suburbs. A large number of the islands and islets are waterless and consequently uninhabited.
History. Hong Kong Island was formally ceded to the British in 1842. The Kowloon Peninsula was ceded in 1860, while the New Territories were made over to Britain subject to a 99-year lease by a treaty signed in Beijing in 1898. This lease expired on June 30, 1997. On July 1, 1997, the sovereignty of Hong Kong was handed over to China. Today, Hong Kong is formally known as "Hong Kong Special Administrative Region of the People's Republic of China" ("Hong Kong SAR").
Basic Law. To maintain Hong Kong's prosperity, China has adopted the formula "one country, two systems" and guaranteed Hong Kong an autonomous administration for a period of 50 years from 1997. This concept is enshrined in the Basic Law, the mini-constitution of Hong Kong. The fundamental precepts of the Basic Law are that:
Government. Hong Kong SAR is administered by the Hong Kong Government, headed by its Chief Executive. The Chief Executive presides over the two main policymaking bodies, the Executive Council and the Legislative Council.
The Executive Council is composed of three ex-officio members: the Financial Secretary, the Attorney General and the Chief Secretary. In addition, other persons are permitted to sit on the Council by appointment. The additional members would usually be (a) community representatives nominated by the Chief Executive because of their particular knowledge of Hong Kong and its people, or (b) heads of government departments. All have equal voting rights. The Executive Council meets weekly, and its purpose is to advise the Chief Executive on financial matters and policies covering a wide range of areas.
The Legislative Council comprises 60 members. The current Legislature was voted in by an election held in May 1998. Of the 60 members, one-third were elected through an 800-member electoral college, one-third through functional representation, and one third through direct polls.
Population. The present population is approximately 6.9 million, of which
42% are under 35. Approximately 95% of the population are Chinese.
Climate. Although Hong Kong is within the tropics, it experiences a variety of seasons. From December to April the weather is dry and cool, with February being the coldest month, when the temperature is approximately 10°C. From April to September the weather is wet, hot and humid, with temperatures rising to about 30°C and humidity often in excess of 80%. Typhoons occur from May to November, bringing heavy rains and gale-force winds. The most pleasant months are October and November, when it is dry, warm and sunny.
Language. English and Chinese are the official languages of Hong Kong, but English tends to be the language of commerce. However, Cantonese, a Chinese dialect and the mother tongue of the majority of the Hong Kong population, is the most widely spoken.
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BUSINESS ENVIRONMENT
Economy. Hong Kong has very
few natural resources and imports virtually all its raw
materials. It is, thus, extremely vulnerable to the external
influences of its trading partners. Nonetheless, Hong Kong
has achieved rapid economic growth.
Manufacturing, shipping, banking and tourism are the major
traditional foreign currency earners. Textiles, clothing,
toys, electronics and plastics employ a large percentage
of the work force and contribute significantly to the GDP,
accounting for some 70% of total domestic exports. With
cheap labor and land costs across the border in China, however,
the manufacturing base in Hong Kong has been eroding in
the last ten years. As a gateway to China, and with China
using Hong Kong as the window to the outside world, Hong
Kong is increasingly becoming a service-oriented financial
center, where its active banking sector and the stock market
provide the financial and administrative support for investment
ventures in China.
Hong Kong's economic recovery continues with solid and
broad based growth marked by sustained consumer demand,
rising investments and strong export performance. Real GDP expanded by
7.5% in 2005, 6.9% in 2006 and 5.6% year-on-year in the
first quarter of 2007.
The Closer Economic Partnership Arrangement (CEPA)
implemented in 2004 between Hong Kong and Mainland China has
strengthened co-operation between the two territories, along
with measures to enhance tourism from Mainland have all
been pivotal to the economic recovery and growth of Hong
Kong.
Foreign Investment. Government
policy encourages free enterprise and foreign investment.
No distinction is made between local and foreign investment,
and both are welcomed.
Although there are no incentives in the form of cash or
grants, the freedom from government intervention, a highly
productive labor force, excellent communications facilities,
the lack of exchange controls and low taxation attract industry
and commerce to Hong Kong.
Imports and Exports. Import
and export licensing formalities are kept to a minimum,
in line with Hong Kong's international obligations. The
most complex licensing formalities are those resulting from
Hong Kong's obligations to restrain certain exports of textile
products. There is a nominal charge for import and export
licenses.
Hong Kong's export of textiles to most countries is regulated
by restraint agreements negotiated under the Multi-Fibre
Arrangement.
Generalized preference schemes are operated by most developed
countries to promote the export of goods manufactured by
developing countries, and Hong Kong is included. The schemes
include provisions permitting low-tariff or duty-free entry
for products from certain developing countries.
With Hong Kong's dependence on the export of manufactured
goods – mostly from imported materials – and
on the substantial re-export trade, a certificate of origin
system to meet the requirements of overseas customs authorities
is important. The Trade Industry and Customs Department
issue certificates of origin and accepts responsibility
for safeguarding the integrity of the entire Hong Kong certification
system.
The Hong Kong Export Credit Insurance Corporation (ECIC)
is a government-owned organization established in 1966 to
facilitate Hong Kong's export trade by protecting exporters
against otherwise uninsurable losses. The ECIC covers all
forms of short term credits and payment methods up to a
maximum credit period of 180 days after delivery. It also
offers protection on medium to long term credit with payment
terms of five years or longer. The other functions of the
ECIC include checking the credit worthiness of overseas
buyers and review of international economic developments
for the benefit of the exporters of Hong Kong.
The Hong Kong Trade Facilitation Council has responsibility
for the simplification of trade documents and procedures.
The Council is partially subverted by the government and
composed of representatives of government, trade and industrial
organizations.
The Hong Kong Trade Development Council is a trade promotion
body organizing overseas business group visits and participation
in overseas trade fairs.
There are various Chambers of Commerce to promote and develop
trade and industry.
Labor Relations and Conditions.
Arguably Hong Kong's greatest asset is its resourceful and
energetic work force. Industrial disputes are rare. The
largest of the manufacturing work force is engaged in the
textile and clothing industries, with the electronics and
plastics industries being the next two largest employers.
The Employment Ordinance provides the framework for a comprehensive
code of employment into which major amendments have been
progressively incorporated. It governs the payment of wages,
the termination of employment contracts and the operation
of employment agencies.
An amendment was introduced in 1985 to the Employment Ordinance
to provide for long service payments at the rate of two
thirds of a month's wages for each year of service to employees
who have worked for a specified number of years with the
same employer. Eligibility for the payment is based on age
and the number of years of continuous service.
The law provides, among other benefits, statutory holidays
with pay, sick leave and seven days annual leave with pay
for most employees. All employees have statutory protection
against anti-union discrimination. The law also provides
for severance payment to workers made redundant.
There is no statutory minimum wage rate in Hong Kong. The
wage level prevailing is essentially the result of an interplay
of the economic forces of supply and demand.
Wage rates are usually calculated on a time basis such
as hourly, daily or monthly or on an incentive basis depending
on the volume of work performed. The pay period is normally
10 to 15 days for day-rate and piece-rate workers. Most
semiskilled and unskilled workers in the manufacturing industries
are paid on a piece-rate basis although daily rates of pay
are also common. Industrial workers in the skilled trades
or in technical and supervisory capacities are usually paid
monthly. Men and women receive the same rate for piece-work,
but women are generally paid less when working on a time-basis.
An annual bonus of between one and two months salary is
paid to all employees before the Chinese New Year. Optional
fringe benefits offered by local employers are good attendance
bonuses, free medical insurance, free or subsidized canteens,
free transportation to and from factories and paid leave.
If a public holiday falls on a Sunday, the following day
is usually substituted. Hong Kong standard time applies
the year round and is 8 hours ahead of Greenwich Mean Time
(GMT). Most offices are open from 9am to 5pm with a lunch
break of one hour. While it is still usual for offices to
open on Saturdays, a five-day government week has been
adopted on July 1, 2007.
Land and Buildings. All
land in Hong Kong is owned by the Government, which sells
or grants leasehold interest. Government policy is to optimize
the use of land, and most land available for commercial,
industrial or residential development in the urban areas
are sold by tender or public auction. Available land is
at a premium and has proved to be a major source of Government
revenue.
Because of the high cost of land and shortage of space,
rents for high quality office space are expensive. Factory
space is also expensive and is concentrated in the New Territories
where rental are relatively lower than those prevailing
in Hong Kong and urban Kowloon.
The terms of land leases after July 1, 1997 are as follow:
Position vis-à-vis China.
For the purpose of its foreign investment, taxation, and
custom laws, the mainland China treats Hong Kong investors
as foreigners or foreign enterprises, enjoying the full
privileges, benefits or restrictions conferred upon all
foreigners.
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BUSINESS
ENTITIES
Forms of Business Entities. The following are the principal
forms of business entities through which business is undertaken
in Hong Kong:
Company. Companies incorporated
in Hong Kong are governed by the Companies Ordinance. This
also regulates the activities of companies incorporated
outside Hong Kong but trading in the territory through a
branch.
Companies may be either limited or unlimited. The most
usual form of business entity is the limited liability company,
in which the shareholders' liability is limited to the amount
paid or unpaid, if any, on the shares held by them. Companies
limited by guarantee may also be formed under the Ordinance.
A limited liability company may be either a private or
a public company. A private company is one which:
A private company's main advantage compared with those
of a public company are:
Any company which is not a private company is a public
company.
Formation Procedures. Two
or more persons subscribe their names to the Memorandum
and Articles of Association of the proposed company.
An application is made to the Registrar of Companies enclosing
a copy of the Company's Memorandum and Articles of Association
together with a Statutory Declaration of Compliance with
the Companies Ordinance.
A Certificate of Incorporation is issued normally three
to four weeks after the clearance of the name and submission
of the required documents, and from the date of the issue
of company may commence business. There are additional procedures
in the formation of a public company including the filing
of a prospectus or a statement in lieu before business may
be commenced.
"Shelf companies" may be acquired immediately.
The registration fee payable on incorporation of a private
company is HK$1,720 plus at HK$1 per HK$1,000 or part thereof
of the authorized capital, up to a maximum of $30,000.
Legal costs of incorporation vary according to the complexity
of the company's organization and structure.
Statutory Requirements.
Each company is required to maintain a register address
in Hong Kong at which its name must be prominently displayed
and at which the statutory records, i.e., of members, register
of directors, register of mortgages, etc.; minute books
of meetings of directors and shareholders and the company's
seal may be kept. Every company must also keep a cash book,
a journal and a ledger of these shall be kept at the registered
office or such other place as the directors think fit.
Auditors must be appointed annually and Annual General
Meetings (AGMs) are required every calendar year and not
more than fifteen months after the previous meeting. There
is no requirement that such meetings are held in Hong Kong
though minutes of any such meeting must be kept at the registered
office or at such other place as the directors think fit.
An annual return must be filed with the Companies Registry
within 42 days after the anniversary of the date of incorporation.
The directors are required, within eighteen months of incorporation
and thereafter at least once on each calendar year to present
audited accounts drawn up to a date not more than nine months
previously or, in the case of a company having interests
abroad twelve months previously, before an AGM.
A report by the directors covering the profit or loss company,
the company's general financial position and its principal
activities is required to be attached to each balance sheet.
There is no residence requirement for directors of a Hong
Kong company and meetings may be held in any part of the
world. However, it is usually desirable that meetings be
held in Hong Kong for practical reasons.
Public companies may not have corporate directors nor can
a private company which is part of a group of companies
of which a listed company is also a member. The minimum
number of directors for both public and private companies
is two. Companies also must appoint a resident secretary
who may be a natural person or corporate body, to attend
to the statutory and administrative functions of the company.
Branch of Foreign Corporation.
A foreign corporation establishing a place of business in
Hong Kong is required within one month to file with the
Registrar of Companies a copy of its constitution, a list
of directors and names and addresses of persons authorized
to receive and accept notices served on the company. An
overseas public corporation is also required to file a copy
of its annual balance sheet, profit and loss account, group
accounts, directors' report and auditors' report. This requirement
also extends to overseas private companies where there are
statutory requirements to publish accounts in their country
of incorporation.
Partnership and Sole Proprietorships.
Ordinary partnerships may be formed whereby all the partners
are jointly liable without limited for the debts and obligations
of the partnership. Each partner is also personally liable
for all the debts of the partnership not satisfied by the
partnership assets.
Limited partnerships may also be formed. A limited partnership
may not consist of more than twenty persons, one or more
of whom must be nominated as a general partner whose liability
for the debts of the firm is unlimited. The liability of
a limited partner for the debts of the firm is limited to
the amount of his initial capital contribution. Limited
partners are not permitted to take part in the management
of the firm or to bind the firm in any way. Limited partnerships
must register as such with the Registrar of Companies in
accordance with the Limited Partnership Ordinance and non-compliance
with this requirement will result in the partnership being
deemed to be a general partnership with unlimited liability
on each and every partner. A formal partnership agreement
is not a statutory requirement in Hong Kong.
Trusts. Hong Kong is a common
law jurisdiction and the concept of trusts is recognized.
Fixed and discretionary trusts may be settled in Hong Kong.
Trusts are frequently used in international tax and estate
planning exercises to acquire beneficial ownership of an
underlying company.
There is no statutory requirement in Hong Kong for a trust
to make annual returns of any kind unless it is carrying
on a business in Hong Kong. There is also no need for audited
accounts to be prepared.
There is no tax, by withholding or otherwise, on distributions
from a Hong Kong trust, and resident or non resident beneficiaries
have no Hong Kong tax liability.
Business Registration. Every
person who carries on a business in Hong Kong is required
to register under the Business Registration Ordinance and
pay a fee of HK$2,600. All Hong Kong companies, whether
carrying on a business or not, are required to register.
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FINANCE
Financial Services. Hong
Kong's convenient location within the Asia Pacific region
and its well-developed communication facilities have contributed
to its development as an important center for offshore banking
and financial services. The widespread use of English as
the commercial language as well as Hong Kong's position
within the time zone have enabled it to establish a link
within 24-hour market place.
Currency. The units of currency
is the Hong Kong Dollar (HK$), divided into 100 cents. In
October 1983 the Government introduced measures to peg the
exchange rate so that it is maintained at a fixed rate of
US$1 to HK$7.8. There is no exchange control in Hong Kong.
Banking System. Hong Kong
has a well developed banking system. There is no central
bank in Hong Kong, although a Commissioner of Banking is
appointed under the Banking Ordinance and exercises general
supervision and control over banks. The Ordinance provides
that no institution may engage in banking without a license
and further provides that each bank must have a minimum
paid-up capital of HK$100 million and total paid-up capital
and reserve of at least HK$200 million. The Banking and
Deposit-taking Company Ordinance draw a distinction between
a licensed bank, a licensed deposit-taking company is one
which can take deposits of not less than HK$500,000 an of
any maturity. A registered deposit-taking company can take
deposits of not less than HK$100,000 and with an original
term of maturity of not less than 91 days. A licenses bank,
on the other hand, can engage in the full range of banking
services.
Stock Exchange. The Hong Kong
Exchanges and Clearing Ltd. (HKEx) is the stock exchange of Hong
Kong. The HKEx is the holding company for The Stock Exchange of Hong
Kong Ltd. (SEHK), Hong Kong Futures Exchange Limited (HKFE) and Hong
Kong Securities Clearing Company Limited.
Trading
on the Exchange is monitored by the Commissioner under the Securities
and Futures Ordinance. The Stock Exchange Compensation
Fund exists to compensate investors who suffer losses as
a result of defaults by stockbrokers.
Securities and Commodities Markets. The Chinese Gold and Silver Exchange Society operates a
gold bullion market. Gold traded by the Society is of 99%
fineness, measured in taels and quoted in HK dollars.
The "loco-London" gold market provides an alternative
forum for gold trading. Gold in principally traded in U.S.
dollars per troy of 99.95% fineness.
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AUDITING AND ACCOUNTING
Auditors. Every company
must appoint auditors to report to the members on the accounts
laid before the company at the AGM during their tenure in
office. With the exception of the company's initial auditors,
who may be appointed by the directors, auditors are appointed
at the AGM to serve until the next AGM. Unincorporated bodies
are not required to be audited.
Audit Requirements. Companies
are required to keep proper books of accounts which give
a true and fair view of the state of the company's affairs
and explain its transactions.
The auditors' report must state whether the accounts have
been properly prepared in accordance with the provisions
of the Ordinance and whether they give a true and fair view.
A private company may dispense with many of the statutory
disclosure requirements providing it complies with certain
conditions, namely that:
Accounting Profession.
The Hong Kong Institute of Certified Public Accountants is the official accounting
body in Hong Kong. Administered by a full time secretariat,
the Society is responsible for all matters concerning the
accounting profession including the establishment of guidelines
for professional procedures, practices, ethics, and administration
of the examination for accountants and the maintenance of
a register of qualified accountants.
The society issues statements of auditing and standards
describing principles to be applied to accounts to give
a true and fair view. The statements are, in the main, in
line with the comply with statements issued various international
accounting bodies.
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TAXATION
Introduction to the Tax System.
There are many advantages for companies operating in Hong
Kong. The principal advantage is that Hong Kong only taxes
income that derives from or arises in Hong Kong. Hong Kong
does not have a comprehensive system of taxation, instead
various classes of income are subject to tax under scheduler
headings. These are:
Foreign source income is not taxed even if remitted to
Hong Kong.
Whether or not profits arise in or derive from Hong Kong
is a question of fact. The test applied to determine the
location of a source of profits for Hong Kong tax purposes
is 'where do the operations take place, from which the profits
in substance exist?'
If income does not come under any one of the above categories
or does not arise in or derive from Hong Kong it does not
come within the scope of Hong Kong taxation.
Dividends are free from tax by withholding or otherwise.
There is no capital gains tax in Hong Kong.
Except in certain instances where a resident individual
may elect to aggregate his various sources of income, there
is no total income concept.
Except for an arrangement with the mainland, Hong Kong
has no double tax treaties. No unilateral relief is granted
in respect of any overseas tax suffered, with the exception
of a measure of relief which is provided where income has
been taxed in another Commonwealth country and that country
provides for similar relief in its own legislation.
The Inland Revenue Department issues tax returns, and assessments
are issued based on information filed. The assessment shows
the amount assessed, the tax payable, and the due date for
payment. There are not prescribed dates for payment of tax
beyond those notified to taxpayers in their own assessment.
The fiscal year end is 31 March but liability to profits
tax is calculated by reference to results of the accounting
period ending in that year of assessment rather than profits
arising during the fiscal year.
A provisional assessment to tax is issued based on the
profits of the preceding year. The amount so paid is applied
against the agreed final liability of the current year and
any excess is applied against provisional tax payable for
the succeeding year.
In the initial year of assessment a provisional assessment
is made based on the results of the first six months' trading
activity. This figure is used as a base figure pending finalization
of the financial accounts for the period, at which the suitable
adjustments are made to finalize the current year assessment.
Provisional assessments apply in the case of both Profits
Tax and Salaries Tax. In the case of Salaries Tax, the fiscal
year end is always adopted for tax purposes.
Profits Tax. Sole proprietorship,
partnerships and corporations carrying on a trade, profession
or business in Hong Kong are subject to Profits Tax on income
arising in or derived from Hong Kong.
Where a corporation derives both Hong Kong and non-Hong
Kong source income and has incurred expenses that cannot
be directly allocated to either the Hong Kong source, the
expenses will be apportioned in order to arrive at the figure
for Hong Kong income which is subject to tax.
In the case of commission it is necessary to look to the
place where the services are rendered. The Inland Revenue
could look to the place where any agreement was signed in
order to determine the location of a source income, in the
absence of the services rendered test. Special rules exist
for life and other insurance businesses, shipping (including
airlines), banks and financial institutions, and clubs/trade
associations.
Deductions. All expenses
wholly and exclusively incurred in the production of assessable
profits are allowed for Profits Tax purposes.
Expenses such as the following are allowable:
Certain items are non-deductible for tax purposes. These
include:
Depreciation. There are
three categories of capital expenditure for which there
are different rules for the computation of depreciation
allowances.
Industrial Building Allowance.
Where a qualifying trade, defined to include trade carried
on in mills, factories and similar premises, is carried
on, an allowance is given on the construction cost (excluding
land cost) of the industrial building. An initial allowance
of 20% is granted together with an annual allowance of 4%
for the construction cost. Provision is made for re-capture
of excess depreciation allowances or for granting a balancing
allowance in the year of assessment in which the industrial
building is disposed of.
Commercial Rebuilding Allowance.
A rebuilding allowance of 4% of capital expenditure (excluding
land cost) is granted on a building used for the purpose
of a trade other than a qualifying trade as defined in (a)
above.
Plant and Equipment. An
initial allowance of 60% of the capital expenditure is given
in the year of purchase and an annual allowance at rates
from 10% to 30% calculated on the reducing value is given
in subsequent years.
Losses. Unrelieved losses
may be carried forward and applied against future assessable
profits without time limit. Losses cannot be carried back.
There is no group relief. Where there is any change in the
share ownership of a company, there is anti-avoidance legislation
to prevent the carry forward of tax losses in certain circumstances.
Foreign Corporation. Foreign
corporations are taxed to the extent that they have Hong
Kong source profits from a trade or carried in Hong Kong.
Where a foreign corporation carries on business in Hong
Kong through a branch it is the company which is taxable
since a branch is not recognized as a separate legal entity.
The tax liability, if any, is therefore that of the corporation
as a whole and the governing factor is the extent to which
the corporation has profits arising in or derived from Hong
Kong. This liability will generally be determined by reference
to the profits as reflected on the local establishment's
financial accounts.
In the event that the assessor does not accept these as
reflecting the true profits of the establishment, he has
recourse to two alternative methods for determining the
profits.
(a) On Hong Kong Turnover X World profits as adjusted for
Hong Kong tax purposes
World Turnover
OR
(b) On a percentage of the Hong Kong turnover of the company.
If a foreign corporation forms a subsidiary selling on
its own account in Hong Kong, the subsidiary itself is taxable
on profits arising in Hong Kong. If the local subsidiary
conducts transactions with its parent, such transactions
would have to be commercially realistic since there are
provisions enabling the Inland Revenue Department to adjust
the profits where transactions are conducted between closely
connected companies.
Where a foreign corporation establishes a representative
office carrying out administrative or liaison functions
and his office limits its activities to these functions,
the foreign corporation is not taxable in Hong Kong on the
grounds that it is not possible to make a profit from oneself.
In the situation where a foreign corporation makes direct
sales to Hong Kong it is necessary to consider whether the
foreign corporation is trading with or trading in Hong Kong.
If the foreign corporation is trading in Hong Kong and has
a source of profits arising in Hong Kong, then it is liable
to Hong Kong taxation.
Salaries Tax. Income subject
to salaries tax includes basic salary, leave pay, fee commission,
bonus, gratuities, foreign service allowances, tax reimbursements,
child allowances, and housing allowance.
The rental value of a place of residence provided rent
free or partly free by the employer, or where an employer
reimburses all or part of the rent paid by the employee
is subject to tax on the notional value which is deemed
to be 10% of total income excluding the cost of housing.
The rental value may be abated by any rent paid by the employee
not reimbursed by the employer. This contracts with the
tax treatment of housing allowances which are taxable in
full, and generally represents a significant saving in tax
in view of the high level of residential rents.
All other benefits in kind apart from the gain on the exercise
of share options and education benefits are free of tax
to the extent that they cannot be converted into money's
worth.
The value of any holiday warrant or passage is specifically
exempted in so far as it is expended for travel.
Reimbursement of private expenditure is a taxable item.
Expenses wholly, exclusively and necessarily incurred the
production of income are allowable as a deduction from income
chargeable to Salaries Tax. Private expenditure is not allowable.
Salaries Tax is calculated on a sliding scale from 2% to
17% on net chargeable income after deduction on expenses
and personal allowances, subject however to the overriding
proviso that total tax cannot exceed 16% of assessable income
before deduction of allowances. At high levels of salary,
income is effectively taxed at the rate of 15% without any
allowance.
| The standard rates of
tax |
|
 |
|
| Standard: |
16% |
|
|
| Graduated: |
|
|
|
| First $35,000 |
2% |
|
|
| Next $35,000 |
7% |
|
|
Next $35,000
|
12% |
|
|
Balance
|
17% |
| |
|
|
|
| Personal allowances (HK$) |
|
|
|
| Single Person |
100,000 |
|
|
| Married Person-additional |
100,000 |
|
|
| Single Parent |
100,000 |
|
|
| 1st & 2nd Child |
50,000 |
| 3rd to 9th Child |
50,000 |
|
|
| Dependent Brother/Sister |
30,000 |
|
|
| Dependent Parent/Grandparent aged 60 or above |
30,000 |
| |
|
| Additional Dependent Parent/Grandparent aged 60 or
above |
30,000 |
|
|
| Dependent Parent/Grandparent aged 55 or above but
below 60 |
15,000 |
| |
|
| Additional Dependent Parent/Grandparent aged 55 or
above but below 60 |
15,000 |
|
|
| Dependent Parent/Grandparent in residential care Up
to |
60,000 |
|
|
| Disabled Dependent |
60,000 |
|
|
Where services are rendered in Hong Kong during visits
not exceeding a total of sixty days in a year of assessment
(ending 31 March), exemption from Salaries Tax applies to
income from that employment. Where more than sixty days
are spent in Hong Kong and the employment is with a Hong
Kong employer the total income is subject to tax. This sixty
day rule does not apply where the person is regarded as
residing in Hong Kong.
Where a person has a contract of employment entered into
outside Hong Kong with an overseas company which bears his
remuneration and the services performed under the contract
are performed outside Hong Kong; this salary will not be
subject to Hong Kong tax. Where, however, the person performs
some service under that contract in Hong Kong, he may be
assessed on the proportion of income attributed to services
rendered in Hong Kong usually calculated by reference to
the number of days spent in Hong Kong.
Directors' fees received from a company managed and controlled
in Hong Kong are subject to Hong Kong taxation notwithstanding
that the services may be rendered outside Hong Kong. Payment
for services - than those as director, i.e., for executive
services, are treated as income from employment as opposed
to income from an office of a director, and the sixty day
exemption could apply to income from that source.
Personal Assessment. An
individual temporarily or permanently resident in Hong Kong
may elect for personal assessment of total income. This
basis provides for all amounts taxable under the separate
scheduler headings of Profits Tax, Salaries Tax, and Property
Tax to be aggregated and personal allowances granted. The
balance is taxable at graduated rates which apply for Salaries
Tax purposes subject again to the proviso that maximum tax
charged cannot exceed 16% of income without allowances,
in practice, personal assessment is appropriate only to
individuals with low income from various sources or where
losses are available for offset against other income.
Property Tax. Property Tax
is payable by the owners of land or buildings situated in
Hong Kong at 16% of the actual rental income from such land
or buildings, less and allowance of 20% for repairs and
maintenance. Deduction is also permitted in respect of rates
paid by the owner. Where the rent is included in the owner's
business profits and subject to Profits Tax, the Property
Tax paid during any year of assessment represents tax paid
on account of the final Property Tax liability of the year.
Other Taxes
Estate Duty is no longer
chargeable in Hong Kong in respect of estates passing on
the death of an individual.
Stamp Duty is levied on
assignments of immovable property on a sliding scale
from HK$100 to 3.75%. Transfer of stock and shares are
levied 0.2%.
Excise Duty is levied on
certain categories of goods including alcoholic beverages,
tobacco, hydrocarbons and various types of industrial alcohol.
Motor Vehicle Registration Tax
is applied to the first registration of a motor vehicle
in Hong Kong which applies on a sliding scale up to a maximum
of 100% on private cars.
Entertainment Tax is imposed
at varying rates on the admission price to places of public
entertainment.
Hotel Accommodation Tax
is levied on proprietors of hotels at the rate of 3% of
the charge for accommodation.
Gambling Tax applies to
the proceeds from betting, which are subject to duty
charged at a scale determined from time to time by the
Legislative Council ranging from 25% to 75%.
Airport Tax requires
that each departing adult passenger at the Airport pay a
departure tax of HK$120.
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