The Hong Kong tax system is one of the most straightforward and attractive anywhere. It is a territorial system that levies tax on income arising in or originating from Hong Kong, with a statutory rate set at 16.5 per cent for corporations and up to 17% for unincorporated business or individuals. Start-ups and smaller businesses benefit from a two-tier profits tax regime that taxes the first HK$2 million of assessable profits at 8.5% for corporations and 7.5% for unincorporated business.
There is no Hong Kong tax on dividend payments or capital gains. That applies also on dividends from foreign companies because they count as foreign-sourced income.
The tax year runs from 1st April to 31st March.
Pacific Jade’s highly-qualified expert Hong Kong tax team is happy to advise on the detail of the Hong Kong tax regime and to handle compliance work, covering issues ranging from arms-length transactions and country-by-country reporting, through to specialised sector incentives, salaries tax and statutory annual filings. We have deep experience managing the tax affairs for a range of local and international businesses, including publicly-listed companies, and can advise on individual tax matters.
The key elements of the Hong Kong tax regime for the 2022-23 tax year, announced in the February 2022 budget statement, are immediately below. Updates are shown in our blog pages.
Wednesday 23rd February 2022: New personal and corporate tax incentives are among the measures announced in the Annual Budget issued by Financial Secretary Paul Chan earlier today.
Both businesses and individuals will benefit from a proposed one-off tax rebate of 100% up to HK$10,000 for salaries tax, tax under personal assessment and profits tax. The rebates will be applied to tax levied for the current financial year, 2021/22. They will be deducted from the 2021/22 final tax assessment after 2021/22 Individual Income Tax Returns and Profits Tax Returns are filed.
Chan also proposed a tax deduction for domestic rental expenses starting from the year of assessment 2022/23 so as to ease the burden of renting a private property on taxpayers liable to salaries tax and tax under personal assessment who are not owners of domestic properties, subject to a deduction ceiling of HK$100,000 per year.
Chan proposed a waiver on Business Registration fees for 2022/23, benefitting 1.5 million Hong Kong-registered business currently facing an annual cost of HK$2,250. It means they will pay nothing in the 12 months starting this April.
Chan said the Budget placed substantial emphasis on fighting the COVID-19 pandemic by stepping up Anti-epidemic efforts, relieving individual hardship, supporting enterprises, creating jobs and issuing consumption vouchers for Hong Kong residents and new arrivals. Meanwhile, various measures were proposed for what Chan described as enhancing economic resilience, enriching industrial development, creating land, nurturing talent and building a liveable city.
With the outbreak of the fifth wave of the COVID-19 epidemic, businesses and individuals are facing considerable financial pressure. It is thus disappointing for local businesses that the Government did not propose further tax incentives such as allowing losses to be carried forward under the profits tax regime, permitting claims for leased plant and machineries used within Great Bay Area (“GBA”), or allowing enhanced R&D deductions for R&D activities carried out in GBA among other things.
A full list of the support measures that Chan did propose are listed in the highlights below.
Chan reiterated that the Government revenue is susceptible to changes in the economic environment due to a relatively narrow tax base, and reconfirmed this is neither the appropriate time to revise rates of profits tax and salaries tax. In the long run, he said, there will be further challenges in alleviating the pressure on public expenditure in the face of an ageing population. We expect that the Government will continue to explore different ways to broaden revenue sources, and will initiate in depth discussions to forge a consensus on how to sustain healthy public finances to meet the development needs of the local economy and society.
The highlights of the Budget are as follows:
A tax deduction for domestic rental expenses was proposed to ease the burden of renting a private property on taxpayers liable to salaries tax and tax under personal assessment who are not owners of domestic properties. However, no change to allowances was proposed.
A summary of the allowances and deductions for 2021/22 and 2022/23 is shown as below:
| Allowances | 2021/22 HK$ |
2021/22 HK$ |
| Basic Allowance | 132,000 | 132,000 |
| Married Person Allowance | 264,000 | 264,000 |
| Single Parent Allowance | 132,000 | 132,000 |
| Child Allowance | 120,000 | 120,000 |
| For each child born during the year | 120,000 | 120,000 |
| Dependent Brother or Dependent Sister Allowance | 37,500 | 37,500 |
Dependant Parent and Dependant Grandparent Allowance
|
50,000 25,000 |
50,000 25,000 |
Additional Dependant Parent and Dependant Grandparent Allowance
|
50,000 25,000 |
50,000 25,000 |
| Disabled Dependant Allowance | 75,000 | 75,000 |
| Personal disability allowance | 75,000 | 75,000 |
| Deductions | 2021/22 HK$ |
2022/23 HK$ |
| Expenses of self-education | 100,000 | 100,000 |
| MPF Contribution | 18,000 | 18,000 |
| Home Loan Interest | 100,000; 20 Years | 100,000; 20 Years |
| Elderly Residential Care | 100,000 | 100,000 |
| Approved Charitable Donations | 35% of income after deductions | 35% of income after deductions |
| Voluntary Health Insurance Scheme | 8,000 | 8,000 |
| Annuity Premiums and MPF Voluntary Contributions | 60,000 | 60,000 |
| Domestic rental expenses | Nil | 100,000 |
No change is proposed. Tax Bands for salaries tax from year of assessment 2022/23 onwards are as follows:
| TAXABLE Income HK$ |
Progressive tax rate | Progressive tax applicable to the band HK$ |
| 0-50,000 | 2% | 1,000 |
| 50,001-100,000 | 6% | 3,000 |
| 100,001-150,000 | 10% | 5,000 |
| 150,001-200,000 | 14% | 7,000 |
| 200,001 and over | 17% |
The Financial Secretary also noted the following:
We trust you will find the above useful information. Should you have any questions, please do not hesitate to contact us on (852) 3705 0095 or [email protected].