Hong Kong Tax Laws and Tax System 2012, Individual Income Tax, Hong Kong Business Deductions,Hong Kong Deduction of Tax at Source

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Hong Kong Income Taxes

Last partial update, January 2012.

Individual Income Tax: Hong Kong's individual income tax rates for 2012 are progressive, from 2% to 17%.

Personal annual tax rates 2012 (HKD)

Income (HKD, HONG KONG DOLLAR)	%
1-40,000	2
40,001-80,000	7
8O,001-120,000	12
over 120,000	17

Note: The maximum tax is subject to the 15% standard rate for income without personal deductions and credits.

Corporate Tax: Hong Kong corporate tax rate for 2012 is 16.5%. Unincorporated businesses pay a lower corporate tax rate of 15%.

Capital Gains: There is no capital gain tax for both companies and individuals.
Dividend income and interest income derived from deposits are tax exempt too.

Hong Kong Residence

A company is resident if incorporated in Hong Kong or has its actual management in Hong Kong.
The Hong Kong income tax is imposed on a territorial basis. Hong Kong companies and individuals pay income tax only on HK source income. Income derived outside of Hong Kong is tax exempt.
Individuals pay salary income tax when the employment services are rendered in Hong Kong.

Hong Kong Business Deductions

Losses are carried forward indefinitely. There is no carry back of losses.
Depreciation is deducted according to the type of the fixed asset.The depreciation rate for industrial buildings is 20%, 4% for commercial buildings and 60% for plant and machinery. .
There is no company consolidation for tax purpose.
Thin capitalisation rules are not in effect in Hong Kong.
Bad debts are tax deductible.

Hong Kong Tax Credits and Deductions

For Hong Kong residents there is a basic deduction of HKD 108,000 per year. The sum is increased for people aged 60 or more with additional deduction for other dependent family members and disabled people. Home loan interest of the main residence is tax deductible for 10 years, up to a limit of HKD 100,000 per year.
35% of donations are deductible, subject to a ceiling.
Payments to mandatory retirement and provident funds of up to HKD 12,000 per year are tax deductible.
Self education expenses up to HKD 60,000 per year are deductible.

Hong Kong Deduction of Tax at Source

In Hong Kong tax is deducted at source from the following payments to non residents:
Dividend- 0%.
Interest- 0%.
Royalties- 4.5% payments to individuals. 4.95% payments to companies.
Branch remittance to head office- 0%.

Hong Kong Social Security

The contributions by the employer and the employee to provident funds are subject to to ceiling defined by law.

Employer: 5% of the gross salary.
Employee: 5% of the gross salary.
The above mentioned rates relate to monthly salary of HKD 5,000 or more.
Self employed pay 5% social security too.

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