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Low Taxes
Hong
Kong taxes are among the lowest in the world, and our tax regime is simple and
predictable.
The Profits tax rate is the same for foreign and local companies - a low 16.5
percent (proposed starting from 2008-09). The actual tax bill is often even less after various deductions and
depreciation allowances.
There is no capital gains tax in Hong Kong, withholding tax on dividends and
interest or collection of social security benefits.
The salaries tax rate is at a maximum rate of 15 percent (proposed starting from
2008-09), imposed only on all
salary income of individuals derived in or from Hong Kong. The salaries tax is
demanded on a yearly basis and can be paid in two installments, usually between
December and March.
The property tax applies to owners of land or buildings situated in Hong Kong.
It is low by international standards: 16 percent (for 2004-5) of the rental
income from the land or buildings and an allowance of 20 percent is permitted
for repairs and maintenance.
There is no sales tax or VAT in Hong Kong. The limited tax base, combined with
exceptionally low tax rates, makes Hong Kong's tax incidence much lower than in
virtually all other developed economies.
Taxation
Hong Kong's simple and
low tax system is a great attraction to foreign investors. This low fiscal
burden for all, domestic or international players, corporates and individuals
alike makes Hong Kong attractive.
In fact low tax is the most cited reason for regional offices to set up in
Hong Kong! This tax regime makes Hong Kong one of the lowest tax environments
among developed economies.
Hong Kong operates a territorial basis of taxation under which taxes are only
imposed on profits or income with a Hong Kong source. Foreign-sourced income
is not taxable even if remitted to Hong Kong.
The Inland Revenue Department is responsible for tax matters in Hong Kong.
Hong Kong has a different tax regime and is treated as completely separate to
the Mainland of China. Hong Kong does not remit any tax to the Mainland of
China.
Hong Kong's fiscal year runs from 1 April to 31 March.
The principal direct taxes are profits tax on business profits, salaries tax
on salaries and property tax on income from property.
Hong Kong does not have any capital gains tax, withholding tax in dividends
and interest, inheritance tax, value added tax and collection of social
security contributions. Few items attract duty.
The following are broad insights into Hong Kong's main direct taxes:
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