Income Tax in Hong Kong
Income tax in Hong Kong is commonly referred to as Salaries Tax and is levied on income that is earned in Hong Kong. This income is usually income that is derived from employment or pension. Salaries Tax is levied on Hong Kong citizens, permanent residents and foreigners who have lived and worked in Hong Kong for 180 days of the tax assessment year.
Individuals who are employed by a Hong Kong company have a tax liability on their entire income even if some of their duties are preformed away from Hong Kong. They can, however, can claim full or partial exemptions on this income whereas individuals who are employed in Hong Kong for a few years to work in a overseas company are liable for income earned only in Hong Kong.
Individuals in Hong Kong are taxed at progressive rates on their net chargeable income i.e. assessable income after deductions and allowances which starts at 2% and maxes out at 17%; or at the standard rate of 15% on net income (i.e. income after deductions), whichever is lower.
A married couple in Hong Kong usually receives separate tax bills but if the salary of one spouse is less than the allowances allowed, the couple can elect to be assessed jointly in order to reduce their tax burden.
Hong Kong resident individual taxpayers who own properties or have businesses in addition to employment income can potentially reduce their tax burden by electing for personal assessment. Under personal assessment, tax is calculated at progressive tax rates on the aggregate income derived from all sources.
Hong Kong has no Capital Gains, Dividend or Inheritance tax.
Net Chargeable Income = Total Income – Deductions – Allowances: Progressive Tax
Net Income = Total Income – Deductions: Standard Tax
Your net chargeable income, or assessable income after deductions and allowances, is charged at progressive rates. But if what you need to pay on the basis of your net chargeable income exceeds the tax charged at standard rate on your net total income, then you pay the lower amount of tax.
Progressive Tax Rates 2014/2015
|Net Chargeable Income ($)||Rate (%)||Tax ($)|
|On the First||40,000||2%||800|
|On the Next||40,000||7%||2,800|
|On the Next||40,000||12%||4,800|
Standard Tax Rates
The standard tax rate for the year 2014/15 is 15%. The annual income level at which tax payers will enter the Standard Rate Zone is as follows:
|Year of Assessment 2014/15 ($)|
|Married + 1 child||3,235,000|
|Married + 2 children||3,830,000|
|Married + 3 children||4,425,000|
There are further allowances with respect to support of aged parents, grandparents, disabled siblings and if you are a single parent. Details of which are available on the website of the Inland Revenue Department.
Completing Your Tax Return
The tax assessment year is from 1 April to 31 March, and at the end of each assessment year. You are responsible for filing your own tax return and paying your own tax. Employees need to file a tax return detailing their earnings. Your employer will prepare an income declaration statement, which you then use to file your taxes. Even if you do not have any income to report, you still need to file your return and declare zero income in your tax form. You can choose to file your returns electronically or by mail. Returns are typically mailed out by the department on May 1 and need to be filed within a month of their issue.
After you have filed your returns you will receive your ‘Notice of Assessment’, or tax bill, from the tax authorities. This tax bill will indicate the total amount of tax that you are liable to pay for the current assessment year. This amount typically also includes the provisional salaries tax payable for the next assessment year.
If you feel there is a discrepancy with your tax bill, you have to inform the tax department within 30 days from the date of your tax bill along with your reasons. Regardless of any objections raised by you, your tax must be paid on or before the due date specified in the notice of assessment.
Tax is payable in two installments: 75% in the final quarter of the fiscal year (January to March) and the remaining 25% just after the end of the year of assessment (April to June), and is paid directly by the taxpayer to the Inland Revenue Department. Note that a surcharge of 5% is automatically added to late payments. As an expat in Hong Kong it is quite likely that your company will supply you with the services of a recognized company to help you prepare your tax return.
Hong Kong signed agreements with a number of countries to avoid double taxation. A list of the countries can be found here: http://www.ird.gov.hk/eng/tax/dta_country.htm.
Further information in English about completing and returning tax forms can be found at the Inland Revenue Department’s website below.
For more information:
Inland Revenue Department
Hotline: 187 8088