Every tax system, regardless of the location it governs, is comprised of multiple different areas of taxation. The tax system of Hong Kong is no different in this regard. There are many different taxes which are imposed by the tax authorities of Hong Kong.
The most well-known of these are, of course, personal income tax and corporate tax. This is because these taxes have the most direct impact on taxpayers and business owners in Hong Kong. However, these are not the only forms of tax which are to be paid in Hong Kong. Other forms of taxation in Hong Kong include property tax, profits tax, and stamp duty.
Property tax is one of the forms of taxation which is imposed in Hong Kong. It is charged in relation to income earned through land and buildings located in Hong Kong. This income is usually earned by the owner of the land or buildings who rents the property in question to anyone else.
The standard rate of property tax in Hong Kong is 15% of the net assessable value of the property which is to be taxed. Net assessable value of a property is first determined by the value of a property after rent which cannot be recovered, and rates paid by the owner of the property are deducted. From this total, an allowance of 20% is deducted for the purposes of repairs and outgoings. This allowance is active regardless of whether any repairs and outgoings genuinely took place.
Property tax in Hong Kong is imposed on the property owner. The owner is legally required to keep records of all rent which has been received including duplicates of rent receipts as well as lease agreements, receipts for rates, recovery of rents in arrears, and correspondence related to modification of lease terms. This must be done for a minimum of seven years.
A related tax which is also imposed in Hong Kong is stamp duty. Stamp duty is imposed to specific documents. As has just been mentioned, stamp duty is sometimes related to immovable property; thus, stamp duty and property tax are often connected. Stamp duty may also be related to stocks and shares.
The details of stamp duty in Hong Kong are mentioned in the First Schedule to the Stamp Duty Ordinance. This important legislation causes a fixed duty to be imposed on certain documents as well as a percentage-based duty on others. The fixed duty’s value ranges from HK$3 to HK$100 while the percentage-based duty’s value ranges from 0.1% to 4.25%.
Profits tax is another important part of the tax system of Hong Kong. It is imposed on profits gained from business activities which have been conducted in Hong Kong. This is because Hong Kong’s tax system uses the concept of territorial taxation. For this reason, only profits which originate from Hong Kong are to be taxed by its tax authorities.
It is not only corporations which are required to pay profits tax to the tax authorities of Hong Kong. Partners, sole proprietors, and trustees are also to pay profits tax. The standard rate of profits tax in Hong Kong varies depending on whether an individual or a corporation pays the tax. Individuals pay profits tax at a 15% rate, while corporations do so at a 16.5% rate.
Property tax, stamp duty, and profits tax are but just a few of the many features of Hong Kong’s tax system. Thus, some might have trouble in understanding and navigating the complexities of this tax system. This is where we at Paul Hype Page & Co play our role. By working with us, you will gain a deeper level of understanding about everything that being a taxpayer in Hong Kong entails as well as how your tax obligations will impact your own financial situation.