Hong Kong Income Tax Rates 2015-16 and Deductions

Hong Kong Income Tax Rate for Individual Tax Payers

Lowest Individual Tax Rate is 2% and Highest Rate is 17%

Income (HKD)	Tax Rate %
1 - 40,000	2%
4,0001 - 80,000	7%
8,0001 - 1,20,000	12%
Above 1,20,000	17%

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

Corporate Tax Rates in Hong Kong

Hong Kong corporate tax rate for 2015-16 is 16.5%. Unincorporated businesses pay a lower corporate tax rate of 15%.

Capital Gains Tax in Hong Kong

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

Tax Deductions at Source in Hong Kong

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 7,100 or more.
Self employed pay 5% social security too.

Other Tax deductions 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 capitalization 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 120,000 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 17,500 per year are tax deductible.
Self education expenses up to HKD 80,000 per year are deductible.

Hong Kong Dates of filing Returns / Reporting and Payment

The tax year in Hong Kong ends on December 31st. Advance payments of tax are made on the following basis.

An Individual

An individual whose only income is from a salary is not obligated to file an annual tax return. His employer deducts tax from the employee and transfers the payment immediately to the tax authorities on a monthly basis.

A Self-Employed Individual is obliged to pay 100% of the tax forecast for a year, or an amount that is the equivalent of 98% of the tax paid in the previous year, whichever is the lower, The pre-payment is made in two installments. 40% of the total is paid by June 20th and the remaining 60% is paid on November 30. The date for filing an annual return for an individual is July 31.

Fines are imposed for arrears in filing an annual return at the rate of 120% - 240% of the tax, depending on the length of time that the return is in arrears.

A Limited Company

A limited company is obligated to submit Financial Statements within 30 days of the date of approval of the Statements.
Up until the date of approval of the Statements, the Company is obligated to pay the amount of tax due for the previous year as well as 40% of the advance on account of the tax forecast for the current year.

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.