What are the tax consequences of arriving in Hong Kong and becoming tax resident?

Hong Kong applies a territorial basis of assessment that is determined by the source of income rather than residence status.
The terms “permanent resident” and “temporary resident” have no general application other than for individuals to elect for a personal assessment, claim certain allowances and to avoid double taxation.

Salaries tax is applicable to any individuals that derive income from Hong Kong from employment, a position of office or pension.

Profits tax is paid on income derived by persons carrying on a trade, business or profession in Hong Kong.

Property tax is payable on income from immovable property located in Hong Kong.

There is no capital gains tax or valued added tax in Hong Kong.

What is the minimum time I can remain in Hong Kong without being tax resident?

As Hong Kong applies tax on a territorial basis where assessment is determined by the source of income, the residence status does not have an impact on an assessment.

A “permanent resident” is a person who ordinarily resides in Hong Kong
A “temporary resident” is a person who stays in Hong Kong for a total of 180 days during a year of assessment and in the year of assessment immediately before or after this year of assessment, this person stays in Hong Kong for not less than 300 days.

Does Hong Kong tax its residents on a world wide or territorial basis?

Hong Kong applies tax on a territorial basis.

Is foreign income taxable in Hong Kong e.g. foreign rental income, foreign interest income and foreign dividend income?

Individuals and companies are generally not subject to tax on foreign income even if it is remitted into Hong Kong except in the case of companies where the income is deemed to have a Hong Kong source. Foreign capital gains are also not taxable in Hong Kong.

Does Hong Kong tax on a remittance basis?

Hong Kong does not tax on a remittance basis.

Does Hong Kong have a sales tax or VAT tax on purchases?

Hong Kong does not have a sales tax or a value added tax.

Does Hong Kong have a capital gains tax that taxes me when I sell foreign assets?

Foreign assets are not subject to capital gains tax in Hong Kong.

Does Hong Kong have an estate tax or death tax?

Estate duty (inheritance tax) was abolished from Hong Kong on 11 February 2006. A deceased estate is not subject to estate duty if the death occurred on or after 11 February 2006.

What is the top tax rate in Hong Kong?

The top tax rate in Hong Kong for salaries tax is 17%.

Does the tax rate vary for different types of income and if so what are the rates?

The tax rate in Hong Kong varies for different types of income. Profits tax is levied on companies at 16.5%. Property tax is levied at a standard rate of 15%.

What are the common tax deductions available in Hong Kong?

Expenses generally are deductible if they are exclusively, necessarily and wholly incurred in the production of assessable income.Some common personal tax deductions available in Hong Kong are:

  • Donations
  • Self-education expenses
  • Home loan interest
  • Elderly residential care expenses paid in respect of a parent or grandparent; and
  • Mandatory contributions to Mandatory Provident Fund (MPF) schemes

In terms of the production of business profits, deductions are generally allowed for outgoings and expenses to the extent that they relate to the production of chargeable income.
Some common deductible business expenditure include:

  • Interest on funds borrowed
  • Rental of buildings or lands
  • Repairs
  • Bad debts; and
  • Employer’s mandatory contributions to MPF schemes

Does Hong Kong require joint tax returns to be filed for me and my spouse or are separate tax returns required?

Married couples are generally assessed to tax individually unless they choose to be assessed jointly.

If I have a foreign company or foreign trust before I arrived in Hong Kong is the income of that company or trust taxable?

Income generated by a foreign company or trust is only taxable in Hong Kong if the income has a Hong Kong source.

Do children under 18 pay a higher rate of tax on certain types of income?

No, children under 18 do not pay a higher rate of tax on certain types of income.

Is there a gift tax in Hong Kong?

There is no gift tax in Hong Kong.

What are the personal tax exemptions in Hong Kong e.g. a gift from an overseas relative or a foreign insurance payout?

Only income that is sourced in Hong Kong is taxable. Gifts and foreign insurance payouts are not taxable in Hong Kong.

If I receive shares as part of my salary is this taxed in Hong Kong?

Salaries tax is required to be paid in relation to benefits associated with stock-based awards arising from your employment. Where you are granted a right to acquire shares within a period of time in the future (i.e. stock options), you will be assessed on the notional gain when you exercise, assign or release that option.

Any gains or losses as a result of the subsequent sale of these shares are usually non-taxable/non-deductible.

Dividend income generated as a result of these shares is also non-taxable.

When I leave the country is a 'termination payment' taxed by Hong Kong before I leave?

Due to the territorial basis of assessment, an individual will continue to have tax obligations in Hong Kong so long as they continue to receive Hong Kong sourced income, i.e. income arising after departure from Hong Kong, which is in respect to services rendered in Hong Kong prior to departure.

What are other tax consequences of leaving the country?

Other tax consequences of leaving Hong Kong are that any Hong Kong sourced; rental income or business income will continue to be taxable in Hong Kong.

Are there any tax consequences of me transferring money from Hong Kong to my say home country?

There are no tax consequences of repatriating after tax dollars back to your home country.