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Tax system in Hong Kong

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Hong Kong has one of the most favourable tax systems in the world.

There are several reasons for that and one of them is that the maximum individual income tax rate is quite low.

For income tax or Net Chargeable Income, i.e. assessable income after deductions and allowances, it is charged at progressive rates. See below for a typical list of the rates from the 2007/2008 tax year. The amount of Hong Kong tax charged, however will not exceed the amount charged by applying the standard rate to the net total income. If you can negotiate in your contract, your apartment rent can be used to offset some of your salaries tax, providing the lease is in your name.

Here is a list of the progressive rates for the 2007/2008 tax year:

Net chargeable income (HK$) Rate Taxe (HK$)
For the first 35000 2% 700
For tde next 35000 7% 2450
Total 1 70000 3150
On tde next 35000 12% 4200
Total 2 105000 7350
Remainder 17%

Individuals income earned in Hong Kong via employment or from services rendered for visits longer than 60 days for a given tax year is subject to salaries tax. This applies for non-resident in Hong Kong as well. There might be an exemption if the employee (not including a director) renders all services outside Hong Kong or if the visits to Hong Kong do not exceed 60 days in a given year.

When coming to Hong Kong to work, you must also consider the Hong Kong tax rules of the country the expatriate comes from. Indeed, you may see if the expatriate is still considered a tax resident of the home country but is the expatriate still required to file tax returns on worldwide income? You may also consider if the social security contributions cease in the home country or is there a voluntary contribution you can do to keep it running. If you rent your property back in your home country, are you going to pay taxes for that too or is there some kind of exemption?

All to say that you must consider carefully what you are doing for the taxes in order to pay the right amount and more to the point in order to avoid double-taxation for the same thing.

By OCDE standards, Hong Kong has extremely low tax rates and there are several usual taxes that are completely non-existent in Hong Kong like capital gains taxes, withholding taxes, sales taxes, VAT or annual net worth taxes. This is why it was and still is a paradise in terms of taxes.

Update 8/04/2010


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