Hong Kong

Low Tax Rate

In the IMB World Competitiveness Yearbook 2011 published by University of Lausanne Swiss, 59 countries were rated globally in their performances in 4 key factors, which consist of 331 rating criteria. The 4 key factors are economic performance, government efficiency, business efficiency and infrastructure. Hong Kong was rated #2 in 2010 and in 2011, Hong Kong has surpassed Singapore, and received the #1 ranking together with the USA.

With advancements in international investment, public finance, business legislation, law, finance and information technology, Hong Kong has scored a perfect score of 100 points this year. Being an East meets West city, Hong Kong has the best of both worlds, possessing both excellent business environment and abundant working opportunities. Moreover, up to date, the holder of Hong Kong SAR passport can enjoy the privilege of visa-free access to 143 countries in the world which facilities business and leisure travelling for all individuals.

The population policy of Hong Kong is lenient and has no birth restriction. Immigrating to Hong Kong not only means a better social status, but you and your family can leverage on the firmly built competitive advantages for a well-protected living and stability.

Information source as of May 2011: The Immigration Department of the Hong Kong SAR Government and the Global Urban Competitiveness Project website

The relatively low tax rate in Hong Kong is a key reason attracting overseas investors.

The taxation system in Hong Kong has two major characteristics: low tax rate, and simple tax structure. There is no location duty, estate duty, interest tax and investment duty. Comparing to other neighboring countries and cities, Hong Kong residents enjoy the lowest tax rate. According to the Forbes Tax Misery Index 2009, Hong Kong was ranked the third lowest “misery score” city in the world.

The Inland Revenue Ordinance provides for the levying of direct tax mainly under three distinct and separate heads, namely Salaries Tax, Profits Tax and Property Tax. The tax burden of Hong Kong residents is in fact very low since there are no sales tax, withholding tax and capital gains tax, while dividend income and individual heritage are also exempted from taxation.

With regard to individual salary and personal income tax rate, here is a brief introduction to its computation method. The taxable income is the total annual salary income minus all tax allowances a taxpayer can enjoy. This net taxable income will then be chargeable at a progressive rate. In this regard, tax rate will go up with your earning. However, in Hong Kong, the tax payable is capped at the standard rate. The standard tax rate for the year of 2010/2011, for example, is 15%. Therefore, it means if one’s taxable income finalized at the progressive rate is higher than that calculated at the standard rate, a taxpayer is only required to pay the lesser amount. Tax planning is a complicated procedure and especially if it’s across multiple jurisdictions. The applicant should seek professional tax advice.

Whether you are doing business or developing your professional career here, you can easily leverage on all these competitive advantages of Hong Kong.

Information source on the Hong Kong tax system as of March 2011: The Inland Revenue Department of the Hong Kong SAR Government and Forbes website

Please consult the Inland Revenue Department of the Hong Kong SAR Government on detailed information of the tax system.