Taxpayers with a net income surpassing HK$5 million will face a raised tax rate of 16 percent on earnings exceeding that threshold.
The government of Hong Kong has announced the prospect of establishing a graduated salaries tax scale starting from the 2024-2025 fiscal year, through which those earning over HK$5 million in annual net income will face higher taxes.
Paul Chan who is the Financial Secretary announced that the high net-income taxpayers who earn over HK$5 million would be imposed an increased tax rate of 16%. However, the first HK$5 million will be accounted for at the standard 15% rate.
According to Chan, the policy change concerns about 12,000 taxpayers which is only 0.6 % of the total population, and predicts that this change will generate an additional HK$910 million per year in revenue for the government.
“Even with the two-tiered standard rates factor above in place, new tax rates will still be lower than those of other advanced economies, ” Chan said in Cantonese shortly after presenting the budget for the 2024-25 fiscal year.
To calculate salary tax in Hong Kong, a progressive scale from 2 to 17% is applied to an individual’s net chargeable income or a standard rate of 15% on the total net income whichever is lower. The standard rate is traditionally considered the normal rate for the high-income earners.
In early January, Chan posted to his own blog that the proper tax measure should be implemented by authorities to increase revenue but with due consideration to the constraints and current conditions.
Chan also added, “We need to keep the benefits of our simple and low taxation system while considering the burden on the local residents in mind as well.”
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