Tax Facts
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 2023-24 tax year, announced in the February 2023 budget statement, are immediately below. Updates are shown in our blog pages.
Hong Kong 2023-24 Budget – Tax Rates and Highlights
- Commitment to propose early legislation encouraging Hong Kong corporate domicile
- No increases to attractive corporate or personal taxes despite financial headwinds
- Business Registration fees returned to HK$2,000 p.a.
- Support for telecoms, tourism IT, wealth management, and aircraft leasing
Wednesday 22nd February 2023: Constrained by unfavourable financial headwinds and able to offer only a limited package of personal and corporate tax incentives in his annual budget proposals today, Hong Kong Financial Secretary Paul Chan nonetheless committed the Government to new legislation aimed at attracting more overseas businesses to register in Hong Kong.
Although he remained short on detail, Chan said the key objective would be to entice companies “to redomicile in Hong Kong.
“We will conduct consultation and submit legislative proposals in 2023 24”, the Financial Secretary said. “We will introduce a mechanism to provide facilitation for companies domiciled overseas, particularly enterprises with a business focus in the Asia Pacific region, for re domiciliation to Hong Kong, so that these companies may utilise our favourable business environment and professional services.” See more
The highlights of the Budget are as follows:
I. Salaries Tax / Personal Assessment
-
From the year of assessment 2023/24, the basic child allowance and the additional child allowance for each child born during the year of assessment will be increased from HK$120,000 to HK$130,000.
A summary of the allowances and deductions for 2022/23 and 2023/24 is shown as below:
| Allowances |
2022/23
HK$ |
2023/24
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 |
130,000 |
| For each child born during the year |
120,000 |
130,000 |
| Dependent Brother or Dependent Sister Allowance |
37,500 |
37,500 |
Dependant Parent and Dependant Grandparent Allowance
- for aged 60 or above or eligible to claim allowance under the Disability Allowance Scheme
- for those aged 55 to 59
|
50,000
25,000 |
50,000
25,000 |
Additional Dependant Parent and Dependant Grandparent Allowance
- for aged 60 or above or eligible to claim allowance under the Disability Allowance Scheme
- for those aged 55 to 59
|
50,000
25,000 |
50,000
25,000 |
| Disabled Dependant Allowance |
75,000 |
75,000 |
| Personal disability allowance |
75,000 |
75,000 |
| Deductions |
2022/23
HK$ |
2023/24
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 |
100,000 |
100,000 |
II. Marginal bands for salaries tax
III. One-Off Tax Rebate
- A one-off 100% tax rebate or HK$6,000 (whichever is lower) on 2022/23 Salaries Tax, Personal Assessment and Profits Tax has been proposed. The rebate will be deducted from the 2022/23 final tax (i.e. after the 2023/23 Individual Income Tax Returns and Profits Tax Returns are filed).
IV. Other tax measures
The Financial Secretary also noted the following:
- The Government proposes deductions for the spectrum utilisation fees to be paid by future successful bidders for radio spectrum to encourage telecommunications network operators to invest more actively in infrastructure.
- For family office businesses, the Government introduced legislative amendments into LegCo last December to provide profits tax exemption for qualifying transactions of family owned investment holding vehicles managed by single family offices in Hong Kong. Upon LegCo's passage of the proposal, the tax concession arrangements will be applicable to any years of assessment on or after 1 April 2022.
- The Government will work with regulators to refine the regulatory measures and tax arrangements for the asset and wealth management sectors. Moreover, the Government will review the existing tax concession measures applicable to funds and carried interest.
- The aircraft leasing preferential tax regime will be enhanced to attract more aircraft leasing companies to establish presence in Hong Kong.
- A “patent box” tax incentive will be introduced to encourage the I&T sector to create more patented inventions in Hong Kong.
- The Government will adjust the value bands of the ad valorem stamp duty payable for the sale and purchase or transfer of residential and non-residential properties (Rates at Scale 2) to ease the burden on ordinary families of purchasing residential properties, particularly small and medium residential units.
- To encourage the employment of elderly employees, the Government proposes to increase the tax deduction allowable for Mandatory Provident Fund voluntary contributions made by employers for employees aged 65 or above - from 100% to 200%.
- A proposed increase to duty levied on cigarettes by 60% per stick with immediate effect.
- In spite of the relatively narrow tax base, the Government proposes that profits tax and salaries tax rates should remain unchanged to help Hong Kong maintain its established tax advantages.
- To increase government revenue in the short term, the Government proposes to impose an annual special football betting duty of HK$2.4 billion on the Hong Kong Jockey Club (HKJC) under the Betting Duty Ordinance for five years starting from 2023 24, while the current betting duty rates remain unchanged.
- In October 2021, the Organisation for Economic Co-operation and Development (OECD) announced the international tax reform proposals to address base erosion and profit shifting (abbreviated as BEPS 2.0). According to BEPS 2.0, a global minimum effective tax rate of 15% will be introduced on large multinational enterprise (MNE) groups with global turnover of at least 750 million euros. Hong Kong will implement the global minimum effective tax rate in accordance with international consensus so as to safeguard its taxing rights and maintain the competitiveness of its own tax regime. The Government has been closely liaising with the trade in this regard while closely monitoring the implementation plan of other jurisdictions. Hong Kong plans to apply the global minimum effective tax rate on these large MNE groups and implement the domestic minimum top-up tax starting from 2025 onwards.
- The Government will put forward an enhancement proposal in mid March to provide clearer guidelines on whether onshore gains on disposal of equity interests are subject to tax.
V. Property Owners
- Although there will be no new tax concessions on property tax, property owners will enjoy a waiver of rates for the first two quarters in 2023/24, subject to a ceiling of HK$1,000 per quarter.
VI. Miscellaneous measures for supporting enterprises
- The Government will extend the application period of all guarantee products under the SME Financing Guarantee Scheme (SFGS) from end June 2023 to end March 2024.
- Rates for non-domestic properties will be waived for the first two quarters of 2023/24, subject to a ceiling of HK$1,000 per quarter for each rateable non-domestic property.
- A 50% rental fee concession will be granted to eligible tenants of government premises and short-term tenancies with waivers for 6 months.
- Fully guaranteed loans will be offered for eligible passenger transport operators and licensed travel agents.
- The Travel Agents Incentive Scheme will be extended to June 2023.
- HK$30 million will be injected into the Information Technology Development Matching Fund Scheme for Travel Agents to encourage upgrades within the tourism sector.
- Chan said Hong Kong has enjoyed a competitive edge as a hub for multinational enterprises and as a headquarters economy. To further explore market opportunities, the Government will introduce a mechanism to provide facilitation for companies domiciled overseas, particularly enterprises with a business focus in the Asia Pacific region, for re domiciliation to Hong Kong, so that these companies may utilise the favourable business environment and professional services. He undertook to conduct consultation and submit legislative proposals in 2023 24.The Government will seek to implement the use of a common online mediation platform in the GBA.
VII. Miscellaneous relief measures
- A subsidy of HK$1,000 will be granted to each eligible residential electricity account.
- An extra half-month allowance of standard Comprehensive Social Security Assistance payments, Old Age Allowance, Old Age Living Allowance or Disability Allowance will be provided. Similar arrangements will apply to Working Family Allowance.
- The temporary special measures of the Public Transport Fare Subsidy Scheme will be extended for six months to October 2023.
- The examination fees will be waived for school candidates sitting for the 2024 Hong Kong Diploma of Secondary Education Examination.
- The current distribution of relief on electricity charges of HK$50 a month to each account will be extended to end 2025.
VIII. Others measures
- HK$5,000 consumption vouchers will be issued to each eligible Hong Kong permanent resident and new arrival aged 18 or above in two instalments.
- The Government will set aside HK$100 million to strengthen support for women’s development.
- The Government will allocate an additional annual recurrent expenditure of about HK$170 million to regularise Tier 1 Support Services Enhance support for pre-school children with special needs.
- Certain schemes will be regularised to support the elderly and carers, involving a recurrent expenditure of more than HK$1.3 billion.
- Incentives will be provided to encourage the provision of more quality private residential care homes for the elderly and persons with disabilities.
- Water fee deposits and charges for the installation of separate water meters in eligible subdivided units will be waived.
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].
