Hong Kong taxes individuals on a territorial basis: only income arising in or derived from Hong Kong is taxed. Salaries tax applies to income from a Hong Kong employment and is charged at the lower of progressive rates or a standard rate, after allowances. Foreign-sourced income is generally outside the charge.
How does Hong Kong tax individuals?
Hong Kong follows a territorial source principle: tax applies to income that arises in or is derived from Hong Kong, not to a resident's worldwide income. There is no general capital gains tax, no sales tax or VAT, and no tax on most investment income for individuals. People are taxed under three separate headings - salaries tax on employment income, profits tax on business income, and property tax on rental income from Hong Kong property - each administered by the Inland Revenue Department.
What is salaries tax?
Salaries tax applies to income from an office, employment, or pension arising in or derived from Hong Kong. The tax is worked out two ways, and you pay the lower amount: progressive rates applied to your net chargeable income (income after deductions and personal allowances), or a standard rate applied to your net income with fewer allowances. The Inland Revenue Department publishes the current allowances, deduction limits, and rate bands, so check its figures for the year of assessment that applies to you.
Who needs to file in Hong Kong?
The Inland Revenue Department issues an individual tax return (the BIR60) each year, usually in May. You complete and submit it, on paper or through eTAX, reporting employment income, rental income, and any business income. The department then issues an assessment. People who arrive partway through a year, or whose duties are partly performed outside Hong Kong, may have a more detailed position to report.
How does provisional tax work?
Hong Kong collects salaries tax partly in advance through provisional tax. In a typical year you pay tax on the year just assessed plus a provisional amount toward the current year, which is later set against your actual liability. If your income falls, you can apply to hold over part of the provisional tax. The assessment notice sets out the amounts and the payment dates.
| Feature | How Hong Kong treats it |
|---|---|
| Basis of tax | Territorial - only Hong Kong-sourced income |
| Employment income | Salaries tax, the lower of progressive or standard rate |
| Capital gains | No general capital gains tax |
| Sales tax / VAT | None |
How do allowances and other taxes fit in?
Salaries tax is reduced by personal allowances before the progressive rates apply. The Inland Revenue Department grants a basic allowance to every taxpayer and further allowances for situations such as a married couple, dependent children, dependent parents, or a single parent, along with deductions for items like approved charitable donations, mandatory pension contributions, and certain home loan interest. Because the amounts change, the department's current schedule is the place to confirm them.
It also helps to see where salaries tax sits among Hong Kong's other charges. Business profits are taxed under profits tax, rental income from Hong Kong property under property tax, and an individual can sometimes elect personal assessment to combine these and apply allowances across them. There is no capital gains tax, no estate duty, and no VAT, which keeps the system narrow but makes the source of each item of income the central question.
Where to get help
Source and residence questions in Hong Kong can be technical. To find recognized professional bodies and qualified help, see the recognized professional bodies for Hong Kong.
Sources
- Inland Revenue Department (IRD), Hong Kong - guidance on salaries tax, the territorial source principle, individual returns (BIR60), and provisional tax (ird.gov.hk).