INDIVIDUAL TAXATION

Taxation in Hong Kong is based on the territorial source principle; i.e., where the income was earned. Income derived from outside Hong Kong is not taxed in Hong Kong. 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

Taxable income is classified into different categories. Applicable income tax rates depend on the income classification.

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%