in Hong Kong
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Outsource tax compliance in hong kong
Navigating taxes in Hong Kong can be intimidating. Our team of experts is here to help you through. Our deep understanding of the local tax regulatory landscape, will help you benefit from Hong Kong’s business-friendly taxation policies. Normally, the Hong Kong Inland Revenue Department (IRD) will issue tax returns to companies and individuals in Hong Kong for each year of assessment, and these must fill out the returns and submit them to the IRD within one month from the dates the returns are issued.
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Tax System in Hong Kong
an attractive relocation destination
Hong Kong tax regime and regulations are surely one of the main reasons that pushes investors to start a company in Hong Kong, making it an attractive relocation destination. The city is in fact well-known for its attractive corporate and personal tax rates, non-taxable capital gains, one-tier tax system and extensive double tax treaties. The Hong Kong tax system is territorial in nature, with a tax levied on income arising in or derived from Hong Kong. Within the territory there are three main direct taxes that are imposed, namely Profits Tax, Salaries Tax and Property Tax.
Profits Tax in Hong Kong (Corporate Income Tax)
Hong Kong is one of the world’s most tax-friendly jurisdictions for businesses, with a territorial basis and single-tier corporate tax system. This means that companies are only taxed on their business profits arising from or derived directly within Hong Kong, and the tax paid by a company on its profits is not imputed to the shareholders (i.e. dividends are tax-free).
In addition, Hong Kong has some of the most competitive business tax rates in Asia. The city’s absence of capital gains taxes and expenses is compensated by not paying any VAT or GST on products sold, which makes it an ideal place for international entrepreneurs looking to set up shop without having their prices skyrocket due local market pressures. Only specific types of payments are subject to withholding tax in Hong Kong such as royalties.
And lastly, Hong Kong has a number of agreements with other countries that allow companies in the Special Administrative Region to operate without being subject to heavy taxation. This is thanks largely due its extensive network for signing comprehensive tax treaties, which currently stands at 30 separate pacts – more than any other country or territory worldwide.
Hong Kong’s tax system is Hong Kong-residents based. Personal Income Tax, known in Hong Kong as Salaries Tax, is charged on income arising in or derived from Hong Kong from an employment, an office or a pension. Therefore, Hong Kong follows a territorial principle of taxation. Individuals are taxed only on income that has been “earned in Hong Kong”. Hong Kong-sourced income of non- Hong Kong residents (including Mainland Chinese citizens) from an employment is not subject to salaries tax unless it is attributable to a permanent establishment which the non- Hong Kong resident employer has in Hong Kong.
However, individuals can claim full or partial exemption of income or tax relief, under certain circumstances i.e. part of the income has already been taxed in another territory during the year of assessment.
Hong Kong Salaries Tax follow a progressive tax rate on the net chargeable income (i.e. assessable income after deductions and allowances) starting at 2% and ending at 17%; or at a standard rate of 15%.
Property Tax in Hong Kong
In Hong Kong, property tax is levied on all properties, including residential and commercial buildings. Property tax is charged on the owners who have derived rental income and is computed at the standard rate on the net assessable value of the property. If the chargeable income generated from property is included in the taxpayer’s profits or if the property owned by the taxpayer is occupied by him/her for business purposes, the amount of Property Tax may be deducted from the amount of Profits Tax assessed.
Property tax is a major source of revenue for the government of Hong Kong, and has been used to finance a variety of public projects including education, transportation, and healthcare.
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