Hong Kong Tax Guide 2025

Hong Kong boasts a simple, transparent, and straightforward tax system based on the territorial source principle. This means only income sourced within Hong Kong is subject to taxation. There are three main direct taxes: Salaries Tax, Profits Tax, and Property Tax. Hong Kong does not have a sales tax, VAT, capital gains tax, or estate duty.

Salaries Tax (Individual Income Tax)

Salaries tax is levied on income from employment, office, or pension arising in or derived from Hong Kong. The tax year runs from April 1st to March 31st of the following year.

Tax Rates:

Hong Kong employs a progressive tax rate system on net chargeable income (assessable income minus deductions and allowances). Alternatively, taxpayers can be taxed at a standard rate on their net income (assessable income minus deductions), whichever results in a lower tax liability.

The tax rates for the year of assessment 2024/25 onwards are as follows:

Net Chargeable Income (HKD)	Rate
On the first 50,000	2%
On the next 50,000	6%
On the next 50,000	10%
On the next 50,000	14%
Remainder	17%

A two-tiered standard rate also applies from the year of assessment 2024/25:

Net Income (HKD)	Rate
On the first 5,000,000	15%
Portion exceeding 5,000,000	16%

Allowances:

Taxpayers can claim various allowances to reduce their taxable income. Some key allowances for the 2024/25 tax year include:

Basic Allowance: HKD 132,000 (single), HKD 264,000 (married couple)
Child Allowance (per child): HKD 130,000 (with an additional HKD 130,000 in the year of birth)
Dependent Parent/Grandparent Allowance (aged 60 or above, not residing with taxpayer): HKD 50,000 (with an additional HKD 50,000 if residing with taxpayer)
Single Parent Allowance: HKD 132,000
Disabled Person Allowance: HKD 75,000

Deductions:

Certain expenses can be deducted from the assessable income, including:

Self-education expenses: Up to HKD 100,000
Elderly residential care expenses: Up to HKD 100,000
Home loan interest: Up to HKD 100,000 (with a potential additional HKD 20,000 under specific conditions)
Mandatory contributions to recognized retirement schemes: Up to HKD 18,000
Qualifying premiums under the Voluntary Health Insurance Scheme (per insured person): Up to HKD 8,000
Approved charitable donations: Up to 35% of assessable income

Tax Reduction for 2024/25:

The 2025-26 Budget proposes a 100% reduction in salaries tax and tax under personal assessment for the year of assessment 2024/25, subject to a ceiling of HKD 1,500. This means most taxpayers will see a significant reduction in their tax payable.

Profits Tax (Corporate Tax)

Profits tax is levied on profits arising in or derived from Hong Kong from a trade, profession, or business.

Tax Rates:

Hong Kong has a two-tiered profits tax rate regime:

Type of Business	First HKD 2 million of Assessable Profits	Profits Above HKD 2 million
Corporations	8.25%	16.5%
Unincorporated Businesses	7.5%	15%

Only one entity within a group of connected entities can benefit from the two-tiered rates.

Deductible Expenses:

Generally, expenses incurred in the production of taxable profits are deductible. However, capital expenditures are usually not deductible, with some exceptions for items like environmental protection facilities and computer hardware.

Losses:

Tax losses can be carried forward indefinitely to offset future taxable profits of the same business. However, losses cannot be carried back or transferred to other taxpayers.

Tax Incentives:

Hong Kong offers various tax incentives to encourage specific industries and activities, including:

Enhanced deductions for research and development (R&D) expenditure.
Tax exemptions for certain funds and family offices.
Concessionary tax rates for specific industries like aircraft leasing and shipping.
Tax deductions for capital expenditure on manufacturing equipment and green technology.

Global Minimum Tax (Pillar Two):

For fiscal years starting on or after January 1, 2025, Hong Kong intends to implement rules generally in line with the OECD's global anti-base erosion (GloBE) or "Pillar Two" model rules. This will affect multinational groups with annual consolidated revenue of at least EUR 750 million, ensuring a global minimum level of taxation.

Property Tax

Property tax is levied on owners of land or buildings in Hong Kong based on the net assessable value (rental income after a 20% standard deduction). The standard property tax rate is 15%.

Other Taxes

Besides the main income taxes, Hong Kong also levies Stamp Duty on certain transactions, such as property transfers and share transfers, and Customs and Excise Duties on specific goods like alcohol and tobacco. The Hotel Accommodation Tax, which was previously 0%, increased to 3% starting January 1, 2025.

Tax Filing and Payment

The tax year in Hong Kong typically runs from April 1st to March 31st of the following year. The Inland Revenue Department (IRD) usually issues tax returns in early May, and the deadline for submission is typically in early June for individuals and one month after the issue date for corporations. Extensions may be available under certain circumstances, especially when using a tax representative. Provisional tax is payable in advance based on the previous year's assessment.

This guide provides a general overview of the Hong Kong tax system for 2025. It is recommended to consult with a tax professional for specific advice based on your individual or business circumstances. The information provided is based on the latest available data and proposals as of April 20, 2025, and may be subject to further changes.

How Bestar can Help

Bestar can provide invaluable assistance in navigating the complexities of the tax system. Our expertise can save you time, money, and potential headaches. Here's how we can help:

1. Tax Preparation and Filing:

Accurate Filing: Bestar ensures your returns are prepared accurately and in compliance with the latest tax laws and regulations, minimizing the risk of errors and potential penalties from the tax authorities.
Time Savings: We can take the burden of tax preparation off your shoulders, freeing up your valuable time. The IRS estimates that preparing the average tax return can take many hours.
Maximizing Deductions and Credits: Bestar has in-depth knowledge of various deductions and credits that you might overlook, potentially leading to a larger refund or a lower tax liability. We can identify tax-saving opportunities specific to your situation.
Handling Complex Situations: If you have a complex financial situation involving multiple income sources, investments, self-employment, or significant life changes (like marriage, divorce, or the birth of a child), Bestar can navigate these complexities effectively.
Filing Different Tax Forms: We are familiar with various tax forms and schedules, ensuring all necessary documents are completed and submitted correctly.

2. Tax Planning and Advice:

Year-Round Planning: Bestar can provide proactive tax planning advice throughout the year, not just during tax season. This can help you make informed financial decisions to minimize your tax obligations in the future.
Understanding Tax Implications: We can explain the tax consequences of various financial decisions, such as investments, retirement contributions, and large purchases.
Developing Tax Strategies: For businesses and individuals with complex finances, Bestar can develop tailored tax strategies to optimize their tax position.
Keeping Up with Tax Law Changes: Tax laws are constantly evolving. Bestar stays updated on the latest changes and how they might affect you.

3. Representation and Audit Support:

Dealing with Tax Authorities: If you receive a notice or are facing an audit from the tax authorities, Bestar can act as your representative, communicating with them on your behalf and helping you navigate the process. Bestar has specific privileges to represent clients before the IRS.
Audit Assistance: We can help you prepare for an audit, gather necessary documentation, and ensure your rights are protected.
Resolving Tax Issues: If you have issues like back taxes, penalties, or liens, Bestar can help you explore options for resolution, such as installment agreements or offers in compromise.

4. Business Tax Services:

Business Structure Advice: We can advise on the most tax-efficient business structure for your needs (e.g., sole proprietorship, partnership, corporation).
Business Tax Planning and Compliance: Bestar helps businesses with tax planning, ensuring compliance with corporate tax regulations, and identifying relevant deductions and credits.
Payroll Tax: We can assist with the complexities of payroll taxes, ensuring accurate withholding and timely payments.
International Tax: For businesses with international operations or individuals working abroad, Bestar can provide guidance on complex cross-border tax issues.

When might you need Bestar?

You have a complex financial situation.
You are self-employed or own a business.
You have significant investment income or capital gains.
You've experienced major life changes.
You want to minimize your tax liability through strategic planning.
You've received a notice or are being audited by the tax authorities.
You simply dislike or find taxes overwhelming.

In conclusion, Bestar offers expertise and support that can simplify the tax process, ensures accuracy, potentially saves you money, and provides peace of mind. The cost of our services can often be outweighed by the benefits we provide, especially in more complex tax situations.

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Hong Kong Tax Guide 2025