Everything You Need to Know About Hong Kong’s Salaries Tax Features
Hong Kong Salaries Tax is a key element of the city’s taxation system and a significant source of government revenue. It applies to income earned from employment, offices, and pensions within Hong Kong.
For many individuals, especially expatriates and new residents, understanding how salary tax works can seem complex at first. This guide breaks down the essentials of Hong Kong’s Salaries Tax, explaining who is liable to pay it, how it’s calculated, and the process for filing your tax return, helping you stay compliant with confidence.
Overview of Hong Kong’s Tax System
Hong Kong is globally recognised for its simple, low-tax regime, which attracts businesses and individuals alike. The system is straightforward and follows the territorial principle of taxation, meaning only income arising in or derived from Hong Kong is taxable, regardless of a person’s residency.
Key Features of the Tax System
- Territorial Basis: Only income earned in Hong Kong is subject to tax.
- Separate Taxes: There is no unified “income tax.” Instead, Hong Kong imposes different taxes depending on the source of income — Profits Tax, Salaries Tax, and Property Tax.
- Low Tax Rates: Tax rates are among the lowest globally, enhancing Hong Kong’s appeal as an international business hub.
Main Types of Taxes
- Profits Tax:
Businesses pay Profits Tax on assessable profits. A two-tier system applies: a lower rate on the first HKD 2 million of profits and a higher rate thereafter.
- Salaries Tax:
Applied progressively to income from employment, offices, and pensions. Individuals are taxed at a rate of 2% to 17% on net chargeable income, or at 15% at the standard rate, whichever results in a lower liability.
- Property Tax:
Levied on property owners based on the net assessable value of the property.
A defining feature of Hong Kong’s tax regime is its territorial principle, which exempts income derived outside Hong Kong from local taxation, a significant advantage for globally operating individuals and companies.
What Is Salaries Tax?
Salaries Tax is the tax levied on income earned from employment, offices, and pensions in Hong Kong. It ensures that individuals who contribute economically to the territory make a fair contribution to public revenue.
Income Subject to Salaries Tax
- Regular Salary and Wages: Basic pay and recurring compensation.
- Bonuses and Commissions: Performance-based payments from employment.
- Director’s Fees: Income earned for serving as a company director in Hong Kong.
- Other Employment Income: Includes leave pay, allowances, severance pay, and benefits in lieu of salary, depending on circumstances.
Income Exempt from Salaries Tax
- Severance Payments for Past Service: Exempt when meeting IRD-specified criteria.
- Foreign-Source Income: Income from employment performed entirely outside Hong Kong is not taxable.
- Certain Employee Benefits: Employer-provided benefits, such as medical insurance or subsidised meals, may qualify for an exemption.
- Retirement Contributions: Employer and employee contributions to recognised retirement schemes or MPF are tax-deductible.
For accurate assessment, always consult the Inland Revenue Department (IRD) or a licensed tax advisor to clarify exemptions, deductions, and compliance requirements.
How is Hong Kong’s salary tax different from other countries?
Hong Kong’s salary tax brackets are 2%, 6%, 10%, 14%, and 17%. Progressive tax rates are applied to an individual’s net chargeable income. It could follow the five tax brackets, or be charged a standard rate of 15% on an individual’s net income, or whichever is lower. Net income is the income that is left after deductions.
Other key features of Hong Kong’s salary tax include:
- No capital gains tax (income related to bonds, real estate or stocks in Hong Kong)
- No dividend tax
- There is no inheritance tax
- Individuals in Hong Kong are only taxed on income earned in Hong Kong.
- The tax assessment year in Hong Kong runs from 1 April to 31 March of the following year.
Individuals in Hong Kong can minimise their tax burden by opting for personal assessment. Under this assessment, taxes are calculated at progressive rates based on aggregated income from all sources.
Definition of Earned Income in Hong Kong
Hong Kong’s salaries tax applies to all employment income earned in Hong Kong. If you work for a Hong Kong company, it means your employment originates in Hong Kong. Therefore, your income is considered chargeable to Hong Kong salaries tax.
It is possible to claim either a full or partial tax exemption or tax relief on your Hong Kong salaries tax if you fall under the following conditions:
- If all your services have been rendered outside Hong Kong for the year of assessment (unless you are a crew member of a ship, aircraft or civil servant).
- The income from services rendered within Hong Kong during your visits does not exceed 60 days in a year.
- If another territory has already taxed part of your income during the year of assessment (eligible for partial tax exemption on your Hong Kong salaries tax). Evidence must be provided for this one.
If you are assigned to work in Hong Kong by an overseas company, you will only be assessed on the income attributed to the services which you render in Hong Kong.
How Personal Income Tax Rates in Hong Kong Work
The progressive tax rates on which an individual’s net income will be charged are based on the following structure:
- Income of HKD 0 – 50,000 = 2%
- HKD 50,001 – 100,000 = 6%
- HKD 100,001 to 150,000 = 10%
- HKD 150,001 to 200,000 = 14%
- Above HKD 200,000 = 17%
Hong Kong also applies a standard rate on net income (after allowances) for certain high earners.
As of 2025, the standard rate is 15% on the first HKD 5 million and 16% on the remaining balance
Total income in Hong Kong comprises of the following:
- Salaries (wages and director’s fees)
- Commissions
- Bonuses
- Leave pay
- End-of-contract gratuities
- Allowances
- Perquisites
- Fringe benefits (cash allowances, education benefits, convertible benefits, holiday benefits, etc.)
- Termination of payment
- Pensions
- Back pay
- Gratuities
- Deferred pay
- Stock awards (from holding an office or employment)
- Share options (from holding an office or employment)
- Retirement benefits (benefits accrued from mandatory provident fund schemes, or from recognised occupational retirement schemes)
- The rental value of the residence provided by the employer
- Any tips received from your employer or any other persons
Non-assessable Income in Hong Kong
- Minimum severance payments and long service payments, which are payable under the Employment Ordinance, are not deemed assessable income. If the amount exceeds the employee’s entitlement under the Employment Ordinance, it will be considered assessable salaries tax.
Allowable Deductions in Hong Kong
- Any charitable donations approved are subject to a 35% tax on assessable income.
- Expenses incurred for self-education are subject to a maximum limit of HKD100,000.
- Expenses during qualified employment (client entertainment, selected business travel expenses, subscriptions to selected professional societies).
- Interest from home loans (subject to certain qualifying conditions and a maximum HKD100,000 limit).
- Expenses related to elderly residential care, subject to a maximum HKD100,000 limit.
- Any contributions made to the Mandatory Provident Fund Scheme or Recognised Occupational Retirement Scheme are subject to a maximum HKD18,000 limit.
- Depreciation and capital allowance for plant and machinery which may have been used to generate assessable income in Hong Kong.
Personal Allowances in Hong Kong
- Allowance for a married person(s)
- Basic allowance
- Child allowance
- Dependent sibling allowance
- Dependent parent allowance or dependent grandparent allowance
- Single parent allowance
- Disable dependent allowance
Taxable Benefits in Hong Kong
Most of the profits and gains, including non-cash benefits that you acquire from your employment in Hong Kong, are taxable. Examples of these benefits include:
- Meal allowances
- Housing and accommodation allowance
- Share options
- Holiday allowances
- Company cars
- Educational benefits for your children
Note that some of the non-cash benefits from your employer are taxed using different tax formulas.
How to File Your Personal Tax Returns in Hong Kong?
Hong Kong’s year of assessment is from 1 April to 31 March of the following year. Moreover, the Inland Revenue Department (IRD) oversees the tax system in Hong Kong. The IRD will issue individual tax returns by 1 May. You must submit all tax returns to the IRD within one month of the date of issue.
If you do not have an income to report, you must still fill out your income tax form. You must then declare zero income on said form. Meanwhile, married couples in Hong Kong can opt for a joint assessment if the single evaluation based on their combined income results in a lower tax liability.
Sole proprietors in Hong Kong must file their tax returns within 3 months from the date of issue. You can file tax returns either online or by mail. Once you have successfully filed your taxes, you will receive a “Notice of Assessment” or tax bill from the IRD.
The amount of tax that you will be liable to pay for that year of assessment will be indicated on your tax bill. However, if you disagree with the amount, you must inform IRD within 30 days of the date your tax bill is issued. You must then declare the reasons for your disagreement.