What Are the Different Types of Taxes in Hong Kong

Hong Kong Tax System Explained: Types, Rates, and Exemptions for 2026

Hong Kong consistently ranks among the most competitive tax jurisdictions in the world. According to the Inland Revenue Department, the territory levies no capital gains tax, no VAT, no GST, and no withholding tax on dividends or interest paid to non-residents, a fiscal structure that has made it one of the most sought-after bases for regional and international operations across Asia.

This guide sets out the categories of income subject to tax in Hong Kong, the principal taxes levied under Hong Kong law, and the exemptions and deductions that legally reduce that liability.

Who Has to Pay Tax in Hong Kong?

Hong Kong’s tax system operates on a territorial basis, meaning liability is determined by where income is earned rather than where a taxpayer resides.

• Anyone receiving income from Hong Kong employment, a local office, or a pension is subject to salaries tax under the Inland Revenue Ordinance. 
• Non-residents are no exception, as those rendering services in Hong Kong for more than 60 days within a single tax year become liable for salaries tax on income attributable to that period. Tax is assessed either at progressive rates ranging from 2 percent to 17 percent on net chargeable income or at a standard rate of 15 percent, whichever produces the lower liability.
• Businesses operating in the territory face a separate and distinct obligation. Any company, whether incorporated in Hong Kong or registered abroad, along with sole proprietors and partnerships carrying on a trade or business in Hong Kong, owes profits tax on income arising from or derived within the territory.
• Property ownership carries its own tax consequences. Rental income generated from Hong Kong property is subject to a flat property tax rate of 15 percent, calculated after a standard allowable deduction of 20 percent.
• Certain categories of taxpayers are governed by additional provisions. Directors, non-resident entertainers, and professional sportsmen each fall under specific regulatory treatment prescribed by Hong Kong tax law.

Which Types of Income are Taxable in Hong Kong?

Hong Kong uses a schedular taxation system, which means that income derived in or arising from Hong Kong is taxable. Incomes that attract tax liability in Hong Kong are stated below. Each of these incomes carries a defined tax obligation under Hong Kong law.

• Employment Income

Salaries, wages, bonuses, gratuities, and commissions received from a Hong Kong employment are fully taxable. Housing allowances and holiday travel benefits provided by an employer are also brought within the charge to salaries tax.

• Director’s Fees

Fees paid to a director of a company whose central management and control is exercised in Hong Kong are subject to salaries tax, irrespective of where the director personally resides or performs their duties.

• Pension Income

Pensions derived from a Hong Kong office or employment fall within the scope of salaries tax and are assessed accordingly under the Inland Revenue Ordinance.

• Business and Trade Profits

Any profits arising from a trade, profession, or business carried on in Hong Kong are subject to profits tax. This applies equally to incorporated companies, sole proprietors, and partnerships operating within the territory.

• Rental Income

Income generated from the letting of property situated in Hong Kong is subject to property tax at a flat rate of 15 percent, applied after a standard deduction of 20 percent for repairs and outgoings.

• Royalties

Royalties paid to non-residents for the use of intellectual property rights in Hong Kong are deemed to arise from a Hong Kong business and are subject to an effective withholding tax, assessed under the profits tax framework.

• Stock Options and Share Awards

Gains realised from employer-provided stock options and share award schemes are treated as part of an employee’s assessable income and taxed accordingly at the point of exercise or vesting.

 

What are the Different Types of Taxes in Hong Kong?

The main direct taxes are stated below:

Salary Tax

Salary tax, as its name suggests is to be paid by those who work full-time in Singapore and is the same for foreigners as well as residents. The salary tax depends on the income and can vary between 2% to 17%, while 15% is taken as the standard (or average). The amounts for these Hong Kong employment taxes are in Hong Kong Dollars (HKD).

The salary income tax in Hong Kong for foreigners is the same as for the residents and anyone living for more than two months in the place is eligible to pay the tax.

This table here shows the salary taxes you need to pay in Hong Kong.

Salary Tax Table

Income	Taxes
First 50,000	2%
Next 50,000	6%
Next 50,000	10%
Next 50,000	14%
Remaining	17%

Hong Kong Corporate Tax

Hong Kong has a Single-Tier tax system, which means the Hong Kong Dividend tax rate is 0%. This means the corporates only have to pay taxes for the profit that was derived in Hong Kong. Other sales taxes in Hong Kong, Capital gains tax, Goods and Services Tax and Value Added Tax (VAT) have a 0% rate, i.e. they need not be paid.

Hong Kong tax regime effective from the Assessment Year 25-26:

• 8.25% on the first HKD 2 million of assessable profits

• 16.5% on profits exceeding HKD 2 million

 

Property Tax in Hong Kong

Hong Kong property tax depends on the value of the property. The property value is estimated, and the property owners pay taxes accordingly. The standard rate is 15% of the net accessible value of the property.

 

Stamp Duty

Another one among the most asked types of taxes in Hong Kong is the stamp duty. The stamp duties in Hong Kong are of two types, fixed duty and ad valorem duty. These duties might depend on the type of documents are you are transferring or processing, and the fixed duties are between HKD 3 to HKD 300 while ad valorem duty is between 0.1% to 4.25%.

 

Withholding Tax in Hong Kong

The withholding tax needs to be paid by non-resident companies or individuals, who generate profit in Hong Kong from entertainment or sports. For example, singers in concert or athletes. The withholding taxes are different for individuals and corporations.

For non-resident companies are tare associates to a Hong Kong company, the rate is 16.5% of the profit they generate in a project.

• The withholding tax for non-resident companies that aren’t associates with a Hong Kong company is 4.95%.
  
• The withholding tax rate for non-resident individuals is 15% and 4.5% for affiliates, and non-affiliates respectively.

 

Customs Excise Duties

Importing to Hong Kong doesn’t have any duties as long as the imports are not oils, liquor, or cigarettes. The Hong Kong import duty rates depend on the volume and the type of import. On the other hand, there are no export taxes in Hong Kong, which is, another reason for entrepreneurs to look into Hong Kong as a platform to build their global business.

 

What Tax Exemptions and Deductions are Available in Hong Kong?

The table below discusses the tax exemptions and deductions available in Hong Kong:

Category	Exemption/Deduction	Who it Applies to	Key Details	Benefits
Territorial Exemption	Offshore Profits Exemption	Corporations	Profits sourced outside Hong Kong are not taxable, subject to proper documentation and substance review.	Reduces the overall effective tax rate for international businesses.
Foreign-Sourced Income Exemption (FSIE)	Exemption for Foreign Dividends, Interest & Disposal Gains	Multinational Enterprise (MNE) entities	Foreign-sourced passive income may be exempt if economic substance, participation, or nexus requirements are met.	Enables tax-efficient global structuring.
Dividends	Dividend Income Exemption	Corporations & Individuals	Dividends received from Hong Kong companies are not taxed again. No withholding tax.	Eliminates double taxation on distributed profits.
Capital Gains	No Capital Gains Tax	Corporations & Individuals	Gains from the disposal of capital assets are not taxable (unless considered trading income).	Encourages investment and asset restructuring.
Depreciation Allowance	Initial & Annual Allowances on Plant & Machinery	Businesses	Initial allowance up to 60% plus annual allowance (10%–30%) depending on asset pool.	Accelerates tax deductions for capital investments.
Industrial & Commercial Buildings	Building Allowances	Property-owning businesses	Initial allowance 20%, annual allowance 4% on construction cost (industrial buildings).	Reduces long-term tax burden on property investments.
Research & Development (R&D)	Enhanced R&D Deduction	Corporations	300% deduction on the first HKD 2 million of qualifying R&D expenses; 200% thereafter.	Significant tax incentives for innovation-driven companies.
Charitable Donations	Approved Charitable Contributions	Corporations & Individuals	Donations to IRD-approved charities are deductible up to 35% of assessable profits/income.	Encourages CSR with tax efficiency.
Loss Relief	Carry Forward of Losses	Corporations	Business losses can be carried forward indefinitely to offset future profits.	Helps smooth the tax burden during growth cycles.
Interest Expense	Deduction for Borrowing Costs	Businesses	Interest on money borrowed for producing taxable profits is generally deductible.	Optimises financing structure.
Salaries Tax Allowances	Personal Allowances	Individuals	Basic allowance, married person allowance, child allowance, dependent parent allowance, etc.	Reduces personal tax liability legally.
Home Loan Interest	Deduction for Mortgage Interest	Individuals	Deductible up to the statutory ceiling per year for owner-occupied property.	Encourages property ownership.
MPF Contributions	Mandatory Provident Fund Deduction	Employers and Employees	Mandatory contributions are deductible up to the statutory limit.	Provides retirement planning benefits with tax relief.

Conclusion

Understanding where tax liability begins and ends is a matter of legal and financial consequence. The distinctions between salaries tax, profits tax, property tax, and stamp duty each carry their own compliance requirements, deadlines, and implications that demand precise and informed management. 

At 3E Accounting, we work with businesses, corporations, and individual professionals to comply with Hong Kong’s Inland Revenue obligations with accuracy and efficiency, from tax filing and structuring to exemption qualification and cross-border compliance

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