Are taxes in Hong Kong high?

  • strict warning: Non-static method view::load() should not be called statically in /nfs/c03/h01/mnt/51424/domains/batgung.com/html/drupaldir/sites/all/modules/views/views.module on line 879.
  • strict warning: Declaration of content_handler_field::options() should be compatible with views_object::options() in /nfs/c03/h01/mnt/51424/domains/batgung.com/html/drupaldir/sites/all/modules/cck/includes/views/handlers/content_handler_field.inc on line 208.
  • strict warning: Declaration of date_handler_field_multiple::pre_render() should be compatible with content_handler_field_multiple::pre_render($values) in /nfs/c03/h01/mnt/51424/domains/batgung.com/html/drupaldir/sites/all/modules/date/date/date_handler_field_multiple.inc on line 185.
  • strict warning: Declaration of views_handler_argument::init() should be compatible with views_handler::init(&$view, $options) in /nfs/c03/h01/mnt/51424/domains/batgung.com/html/drupaldir/sites/all/modules/views/handlers/views_handler_argument.inc on line 745.
  • strict warning: Declaration of views_handler_filter::options_validate() should be compatible with views_handler::options_validate($form, &$form_state) in /nfs/c03/h01/mnt/51424/domains/batgung.com/html/drupaldir/sites/all/modules/views/handlers/views_handler_filter.inc on line 589.
  • strict warning: Declaration of views_handler_filter::options_submit() should be compatible with views_handler::options_submit($form, &$form_state) in /nfs/c03/h01/mnt/51424/domains/batgung.com/html/drupaldir/sites/all/modules/views/handlers/views_handler_filter.inc on line 589.
  • strict warning: Declaration of views_plugin_row::options_validate() should be compatible with views_plugin::options_validate(&$form, &$form_state) in /nfs/c03/h01/mnt/51424/domains/batgung.com/html/drupaldir/sites/all/modules/views/plugins/views_plugin_row.inc on line 135.
  • strict warning: Declaration of views_plugin_row::options_submit() should be compatible with views_plugin::options_submit(&$form, &$form_state) in /nfs/c03/h01/mnt/51424/domains/batgung.com/html/drupaldir/sites/all/modules/views/plugins/views_plugin_row.inc on line 135.

Question: What about taxes? Will my income be severely affected by this in Hong Kong?

Mr Tall replies: No. Hong Kong's tax system can be summarized in one phrase: 16% flat salaries tax. Okay, I'll explain that just a bit -- Hong Kong's income/salaries tax system (the two terms are synonymous) is one of the world's simplest. No one is subject to more than a total rate of 16% tax on his income. There are personal exemptions (currently HKD100,000) and exemptions for children, other dependent relatives you're caring for, etc. The majority of people in Hong Kong pay no income tax at all. That said, many (perhaps most) expats here receive salaries that do incur much or all of the 16% top rate.

And there's more good news. There's no tax on capital gains, e.g. sales of stocks/bonds/property (although there is a tax called the 'stamp duty' imposed on property sales).

All in all, the tax burden here is low, and preparing tax returns takes most Hong Kong people literally just a few minutes.


I am thinking of moving to Hong Kong and am currently reviewing my salary package. Are 'housing allowances' subject to income tax?

Mr Tall replies: My understanding (from my own situation; consult a tax expert if you want something definitive!) is that allowances that are earmarked by your employer for 'housing', AND that are spent on RENT, are tax-exempt, within certain limits per year (which I don't know). If you buy a flat and have a mortgage, and therefore don't pay rent, any such allowance is taxable as straight-up cash income.

Odaiwai adds: Mr Tall is right -- if your employer refunds your actual rent then you won't pay tax, but if they pay you even a few cents more, then (in theory at least) you will be liable to tax. Your employer must keep records, and you will need to provide the rental receipts.

Mortgage interest is deductible, but only the first HK$100k per annum, and this is supposed to be a short-term concession (I think it was originally limited to 7 years but it was extended in the last budget).


How do property taxes work in Hong Kong? Who exactly pays the property taxes when I buy or rent a flat or other home?

Mr T replies: Property taxes here are known as 'Government Rates'. They are irritatingly expensive, but not extortionate. According to the Inland Revenue webpage, you pay 16% a year of your property's 'net assessable value'. How this is calculated is a bit obscure; I'll over-simplify it and say that you pay about 16% of the amount you could get in rent for your property in a year. Just keep in mind that you're not assessed according to your flat's market sale value. From my experience, it seems you don't end up having to pay quite as much as the definition from the Inland Revenue suggests.

If you're renting, you'll often find the phrase 'rates included' in ads for rental properties, but you'll have to pay them if the landlord doesn't (this is something for flat-hunters should always check).

Odaiwai adds: Just to clarify a little further -- the rates will usually be several thousand Hong Kong dollars a year, payable quarterly.


But don't US citizens have to pay US tax wherever they live in the world?

A reader replies: Yes, US citizens' income tax liabilities are based on worldwide income. But if you live/work overseas, you can get an income tax exclusion up to $80,000 of your income. Which means you save a lot in paying Uncle Sam. There are also things such as foreign tax credits, but that really works better if you work in a country with a higher tax rate than the USA (like Germany or Italy); HK tax is lower, so you're better off just paying Inland Revenue and probably taking the exclusion.

Mr Tall adds: There's no escaping this for US citizens like me. It infuriates me sometimes, in that I'm still liable for tax when I haven't lived in the States for well over a decade, but there are no signs the US government will ever change this policy. Perversely, what does come up every few years in Congress (according to my tax accountant) is the possibility that the exclusion will be eliminated. This hasn't happened, but it would have a very, very bad effect on US expats in Hong Kong if it did!

Finally, if doing my Hong Kong salaries tax return is incredibly easy, doing my US taxes is the polar opposite. I get it done professionally, at a cost of about HKD10,000 per year. It's money well-spent, in my opinion: my returns are literally book-length. They're fine evidence of the breathtaking complexity of the US tax code.

See also Mr Tall's article on doing his Hong Kong tax return.

Comments

Working for Hong Kong based company and living on the mainland

Dear Sirs,

If I am working for an Hong Kong based company and I am actually living and working in China Mainland, do I have to pay taxes in China Mainland ?

Kind regards

Taxes for employee of HK-based company working on the mainland

You may need to pay taxes on the mainland, if certain conditions are met (see below). You'll probably want to contact the inland revenue department (IRD) to be sure. What does your employer say?

Here are a couple of places to get started:

  • The IRD have a web page 'FAQ : Double Taxation Relief', which gives some examples of Hong Kong residents working in China.
  • That page mentions the pamphlet 'Arrangement between the Mainland of China and the HKSAR for Avoidance of Double Taxation – A Guide for Hong Kong Residents Working across the Mainland Border', which you can download here. That pamphlet has a section:

    Mainland Individual Income Tax
    12. The income attributable to services rendered by a Hong Kong resident in the Mainland is chargeable to Individual Income Tax in the Mainland. However, it will be exempt from the Mainland Tax if the following three conditions are satisfied.
    (i) the Hong Kong resident stays in the Mainland for a period or periods not exceeding in the aggregate 183 days in the calendar year concerned; and
    (ii) the income is paid by, or on behalf of, an employer who is not a resident of the Mainland; and
    (iii)the income is not borne by a permanent establishment or a fixed base which the employer has in the Mainland.

Have any readers been in this situation, and can share their experience?

MrB

Live in Hong Kong / Work in China - taxes?

I currently live in China. Most of my salary is paid in the USA to my USA bank account with a portion paid in China through our China Rep Office. I'm considering a move to Hong Kong. My work would remain in China, and no actual value added work would be done in Hong Kong. Under this situation do I have to pay Hong Kong taxes? Do I have to have a Hong Kong Rep Office if I already work for a China Rep Office?

Many thanks for any help!

Live in HK / work in China - taxes

Sorry, no idea on this one. The links in my previous comment are probably still relevant as background info, but beyond that I don't know.

Good luck, MrB

Ask your HR, Finance and/or Legal advisors

Hi there,

If your employer is a big enough corporation, they should have Human Resources, Finance & Accounts Departments, as well as Legal Advisors both for Hong Kong and Chinese Laws. Asking one of them or all should get you the most accurate answer.

If not, I still think you should be able to make an appointment with one of the officers of the Inland Revenue Department for advise. They are the most efficient department of all, especially if a potential customer walk into their doors on their own. :-P

Best Regards,
Thomas

Is it possible to completely

Is it possible to completely remove my citizenship from the US? I am considering moving to HK in search of a web development job and just reading this post pisses me off. The US is going to tax me on my income from another country!!!!?1? My hatred for this government grows daily.

 

Great blog by the way, I am going to eat it up.

To relinquish US citizenship

Hi there,

For that I guess you have to talk to the respective departments of the US government.  I believe Canadians would be easy.  They could claim non-resident status if they are really living out of the country and then they would not tax your foreign income.  One of my supervisors had been doing just that.  Don't know if that is possible with US citizenship.  Asking US Lawyers/CPAs might help, but they charge an arm and a leg for anything..........

Best Regards,

T

Paying tax in HK but living in mainland china

Hi,

 Is it possible to be an Australian citizen, reside in mainland china and be paid by a subsidiary of an Australian business based in HK and consequently only pay HK income taxes? 

re: Paying tax in HK but living in mainland china

Not something I have any personal experience of, but there are some links in the second comment in this thread for some guides on whether or not mainland taxes apply to workers from HK. I guess you'd also need to be employed in HK with an HK visa if you are to be under HK taxes?

Please let us know what you find out.

HK taxes for consultants on assignment

I was in Hong Kong for 6 months in 2008 on a project assignment through my company.  I was still being paid a US salary out of my US office.  My company hasn't figured out yet whether I need to pay HK taxes [small, disorganized consulting firm :(] since taxes aren't due there for a few months.  I'm trying to do my US taxes which are due in just a few weeks, however, and am trying to figure out if I'm supposed to do the foreign tax exclusion. Would you have any advice on this?

I believe so but it's always

I believe so but it's always best to get information like this from the horse's mouth and call the Inland Revenue department directly.

http://www.ird.gov.hk/eng/tax/ind_stp.htm

If you are liable to tax in Hong Kong for your US income, you maybe able to take advantage of the double taxation treaty.

Good Luck!
hkp

RE: IRS

Hi there,

Just like any IRS department they are the most efficient government department.  I'm pretty sure you should be able to find your answer very soon.  Not to mentioned the Tax system in Hong Kong is among the most simple ones on Earth.  You don't have to pay for a Public Certified Accountant to fill in the forms for you.

Best Regards,

T