Living There

February 03, 2016

INDIVIDUAL TAXATION

Hong Kong luxury apartments

Taxation in Hong Kong is based on a territorial source principle; the residence status of an individual does not affect his tax liability. The crux of the matter is whether the income of the taxpayer was derived from sources in Hong Kong or not. Only income that is sourced in Hong Kong is subject to tax. Married couples are assessed and taxed separately unless they elect for joint taxation.

The tax year in Hong Kong starts on 01 April and ends on 31 March the following year. The tax year 2014-2015 is from 01 April 2014 to 31 March 2015. The tax year 2015-2016 is from 01 April 2015 to 31 March 2016.

INCOME TAX

Consequently, an individual residing in Hong Kong is not subject to any form of tax (i.e. salary, profit, and property tax) if his income is derived abroad. Foreign remittances to Hong Kong therefore are not subject to tax. Rental income is subject to Hong Kong Tax if the property is located in Hong Kong.

Profits Tax

Profits are taxed if they arise in or are derived from Hong Kong as a result of a trade, profession or business. The tax rate is 16.5% for corporations and 15% for other businesses.

Salaries Tax

Individuals earning income from employment are liable to pay salaries tax. The rate of tax after deductions and allowances is applied on a graduated scale, but the total salaries tax charged will not exceed 15% of a person´s total assessable income after deductions.


SALARY TAX 2015-2016

TAXABLE INCOME, HKD (US$) TAX RATE
Up to 40,000 (US$5,000) 2%
40,000 – 80,000 (US$10,000)

7%

80,000 – 120,000 (US$15,000)

12%

Over 120,000 (US$15,000)

17%

Source: Global Property Guide

Tax allowances for tax year 2015-2016:

  • HKD120,000 (US$15,000) - personal allowance
  • HKD240,000 (US$30,000) – married person allowance
  • child allowance, maximum allowance

    • HKD200,000 (US$25,000) child allowance for child born during the tax year
    • HKD100,000 (US$12,500) - child allowance for child not born during the tax year

  • Dependent parent and grandparent allowance:

    • HKD80,000 (US$10,000) for parents and grandparents 60 years old or older residing with taxpayer
    • HKD40,000 (US$5,000) for parents and grandparents 60 years old or older not residing with taxpayer
    • HKD40,000 (US$5,000) for parents and grandparents older than 55 years old but less than 60 years old, and residing with taxpayer
    • HKD20,000 (US$2,500) for parents and grandparents older than 55 years old but less than 60 years old, and not residing with taxpayer

  • HKD33,000 (US$4,125) – dependent brother or sister allowance
  • HKD66,000 (US$8,250) – disabled dependent allowance
  • HKD120,000 (US$15,000) – single parent allowance

Tax allowances for tax year 2014-2015:

  • HKD120,000 (US$15,000) - personal allowance
  • HKD240,000 (US$30,000) – married person allowance
  • child allowance, maximum allowance

    • HKD140,000 (US$17,500) child allowance for child born during the tax year
    • HKD70,000 (US$8,750) - child allowance for child not born during the tax year

  • Dependent parent and grandparent allowance:

    • HKD80,000 (US$10,000) for parents and grandparents 60 years old or older residing with taxpayer
    • HKD40,000 (US$5,000) for parents and grandparents 60 years old or older not residing with taxpayer
    • HKD40,000 (US$5,000) for parents and grandparents older than 55 years old but less than 60 years old, and residing with taxpayer
    • HKD20,000 (US$2,500) for parents and grandparents older than 55 years old but less than 60 years old, and not residing with taxpayer

  • HKD33,000 (US$4,125) – dependent brother or sister allowance
  • HKD66,000 (US$8,250) – disabled dependent allowance
  • HKD120,000 (US$15,000) – single parent allowance

RENTAL INCOME

Property Tax

Income derived from renting out property is subject to property tax. Property tax is charged at a standard rate of 15% of the property’s net assessable value. The net assessable value (NAV) is the assessable value (after deduction of rates paid by the owner, if applicable, and irrecoverable rent), and then less an allowance of 20% of that assessable value for repairs and outgoings, regardless of whether or not repairs and outgoings were actually incurred.

Gross Rent
Less: Irrecoverable Rent
Less: Rates Paid By Owners
= Assessable Value
Less: Statutory Allowance for Repairs and Outgoings (20% of Assessable Value)
= Net Assessable Value

Property tax is levied on the owner of the property. The owner is obliged to keep sufficient records of rent received, such as lease agreements and duplicates of rent receipts, receipts for rates, correspondence relating to modification of lease terms and recovery of rents in arrears etc, for at least 7 years.

Stamp Duty on Property Leases
For property leases, stamp duty is calculated at a specified rate of the annual rental value, which varies with the term or duration of the lease.

STAMP DUTY ON PROPERTY LEASES

LEASE PERIOD
RATE
Lease term is undefined or uncertain
0.25%
Up to 1 year
0.25 %
1 year – 3 years
0.50%
Over 3 years
1.00%

CAPITAL GAINS
No capital gains tax exists in Hong Kong.

Ad Valorem Stamp Duty (AVD) on Property Sales

Ad valorem stamp duty is levied on sale or transfer of property in Hong Kong as of 23 February 2013, unless there are specific exemptions provided by the government.

AD VALOREM STAMP DUTY (AVD) ON PROPERTY SALES

PROPERTY VALUE, HKD (US$)
RATE
Up to 2 million (US$250,000)
1.50%
2 million – 3 million (US$375,000)
3.00%
3 million – 4 million (US$500,000)
4.50%
4 million – 6 million (US$750,000)
6.00%
6 million – 20 million (US$2,500,000)
7.50%
Over 20 million (US$2,500,000)
8.50%

The following stamp duty rates are applicable to residential properties acquired by Hong Kong permanent residents who do not have any other residential properties in Hong Kong when they acquired the property.

STAMP DUTY ON PROPERTY SALES

PROPERTY VALUE, HKD (US$)
RATE
Up to 2 million (US$250,000)
HKD100 (US$13)
2 million – 3 million (US$350,000)
1.50%
3 million – 4 million (US$500,000)
2.25%
4 million – 6 million (US$750,000)
3.00%
6 million – 20 million (US$2,500,000)
3.75%

Over 20 million (US$2,500,000)

4.25%

Special Stamp Duty (SSD) on Residential Property Sales

There is a special stamp duty that applies for residential property as of 20 November 2010, if it is resold within 24 months or 36 months. The applicable rate varies, depending on when the property was acquired and the holding period of the property before it was sold.

SPECIAL STAMP DUTY FOR PROPERTIES ACQUIRED NOV 20 2010 TO 26 OCT 2012

HOLDING PERIOD
RATE
Up to 6 months
15%
6 months – 12 months
10 %
12 months – 36 months
5%

SPECIAL STAMP DUTY FOR PROPERTIES ACQUIRED 27 OCT 2012

HOLDING PERIOD
RATE
Up to 6 months
20%
6 months – 12 months
15 %
12 months – 36 months
10%

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