Are you thinking of living or working in Hong Kong as an expat? Or you have already started earning and want to understand how taxes work in Hong Kong. Hong Kong’s income tax system is refreshingly simple compared to many countries. No tax on overseas income, no capital gains tax, and a low, flat rate for most individuals. But there are still a few things you need to know especially if you’re self-employed, an expat, or just moved here.
In this blog, we will walk you through things you need to know about taxes for expats in Hong Kong and how to avoid common tax mistakes.
Content Outline
Understanding Hong Kong Expat Tax System
Hong Kong’s tax system is territorial, meaning individuals are only taxed on income derived from or arising in Hong Kong. Unlike many countries, Hong Kong does not tax worldwide income, making it an attractive destination for expatriates and foreign companies. With no capital gains tax, no sales tax, and no tax on dividends, it offers a simplified and competitive environment for global professionals.
Who is Required to Pay Taxes in Hong Kong?
Apart from the residents in Hong Kong, people include those who earn income from the Hong Kong office or Hong Kong employment, and those that provide services in Hong Kong for a period of more than 60 days in any tax year, are subjected to salary tax. Hong Kong applies the territorial taxation rule – the concept of tax residency does not influence the tax liability (except for some narrow cases).
A tax rate imposed on individuals is progressive and starts from 2% on net chargeable income (i.e. assessable income after deductions and allowances) and is capped at 17% or 15% of net income (i.e. income after deductions).
| Net Chargeable Income (in HKD currency) | Tax rate |
| 1 – 50,000 HKD | 2% |
| 50,001 – 100,000 HKD | 6% |
| 100,001 – 150,000 HKD | 10% |
| 150,001 – 200,000 HKD | 14% |
| Above 200,000 HKD | 17% |
Related Article: 2025 Tax Filing Season: Tax Deadline in Hong Kong You Need To Know About
Employers & Employees
Employers are not bound by law to withhold tax from employees, even if the employees are Hong Kong residents. If it is termination or employee are about to leave Hong Kong within 1 month after employment ceases, the employer will then have to fill a form and to send it to the Inland Revenue Department (IRD) for the letter of release and temporarily withhold ALL payment (including salary) due to the employees until “Letter of Release” is issued.
Please get more info on the issue of leaving the job in Hong Kong through this link.
Freelancer/Self-Employed
If you are taking goods or you are providing professional or personal services, you fall within the category of self-employed people engaged in business.
The self-employed may be either a sole proprietor or a partner of a partnership business. On the other hand, it must be registered with the Inland Revenue Department (IRD) if you are an unincorporated company.
Every sole proprietor or partnership business owner is liable to profit tax on the assessable profits of the business.
All self-employed individuals must adhere to the following obligations:
- Maintain adequate business records for a minimum of seven years.
- Generate financial statements using your accounting records.
- File a tax return to report business earnings or losses.
- Inform the Inland Revenue Department in writing about your tax liability unless you have already received a tax return from the department.
- Also, inform the Inland Revenue Department about the possible cessation of your business and any change of address.
- Additionally, ensure timely payment of taxes.
Expats
The Hong Kong legal system generally operates under a territoriality principle. Therefore, only the income derived in Hong Kong is taxable in Hong Kong. While this on the one hand could be seen as a certain benefit, since income that has been taxed once before could be rewarded with an exemption from the salary tax in Hong Kong, but on the other hand, income earned for work done outside of Hong Kong can only be regarded as outside the jurisdiction.
Furthermore, the income obtained locally by the visitors who stay for less than 60 days is also excluded from payment of Hong Kong salaries tax.
In general, there is no specific Hong Kong expatriation tax, so the tax calculation methods still apply the same to everyone. Generally, most of the expatriates are employed in Hong Kong and pay taxes on salaries in Hong Kong.
What is Tax Residency for Expats?
Tax residency in Hong Kong is determined primarily by the source of income and the individual’s duration of stay. An expatriate is considered a Hong Kong tax resident if they spend more than 180 days in a year or more than 300 days across two years in the city. However, even non-residents may be taxed if they earn income sourced from Hong Kong.
How Tax Residency Affects Expat Tax Obligations
For expats living and working in Hong Kong:
- Only income earned within Hong Kong is subject to salaries tax.
- Income derived from overseas sources is not taxable in Hong Kong.
Non-resident expats who earn income from Hong Kong-based activities may still have tax obligations, even if they live abroad.
Special Features of the Hong Kong Tax System for Expats
No Capital Gains Tax or Sales Tax
Expats investing in properties or shares in Hong Kong benefit from zero capital gains tax. There is also no general sales tax or value-added tax (VAT), reducing the overall tax burden. Additionally, Hong Kong does not levy any form of income tax on non-Hong Kong-sourced earnings, which is a stark contrast to tax regimes in countries like the U.S. or the U.K.
Low Corporate Tax Rate and Tax Concessions
Hong Kong’s corporate tax rate stands at 16.5% on assessable profits. However, the government offers significant concessions for specific sectors:
- Offshore fund profits and shipping profits are fully tax-exempt.
- Qualified Corporate Treasury Centres enjoy a reduced tax rate of 8.25%.
- Reinsurance of offshore risks is also taxed at a reduced rate.
These incentives aim to attract multinational companies and high-net-worth expats looking to establish operations or manage wealth from within Hong Kong.
Key Tax Regulations for U.S. and Other Foreign Expats
While Hong Kong’s tax laws are relatively lenient, expatriates must consider tax obligations in their home countries:
- Foreign Earned Income Exclusion (FEIE): U.S. expats may exclude a certain amount of their foreign income from U.S. tax.
- Foreign Tax Credit (FTC): This allows expats to offset U.S. tax liabilities with the taxes paid in Hong Kong.
- FBAR and FATCA Reporting: U.S. citizens must disclose foreign bank accounts and assets under FATCA and FBAR regulations.
- No Estate or Death Tax in Hong Kong: Assets passed on after death are not subject to inheritance or estate tax.
Hong Kong Tax Treaties and Its Impact on Expat Taxation
How Tax Treaties Help Expats
Double taxation can be a major concern for expatriates. However, tax treaties prevent this by defining which country has the primary right to tax specific income sources. This ensures fair treatment and eliminates redundant tax liabilities.
Hong Kong’s Tax Treaty Network
Hong Kong has signed double taxation agreements (DTAs) with over 40 jurisdictions, including:
- China
- United Kingdom
- France
These treaties often offer reduced withholding tax rates and clearly define tax residency, making tax compliance easier for expats.
Learn more about Double Taxation Agreements (DTAs)
Common Tax Mistakes Expats Should Avoid
Navigating dual tax systems can be complex. Here are some typical pitfalls to avoid:
- Failure to report global income: Some home countries tax their residents on worldwide income, regardless of where it was earned.
- Not reporting foreign bank accounts: Especially critical for U.S. expats under FATCA/FBAR rules.
- Missing tax deadlines: Hong Kong’s tax year runs from April 1 to March 31. Extensions may be granted but missing deadlines can lead to penalties.
Tips For Expats And Foreign Companies In Hong Kong
To maintain compliance and optimize tax positions, consider the following best practices:
- Keep comprehensive records: Income, deductions, bank statements, and tax filings should be well documented.
- Seek professional tax advice: A tax consultant familiar with both local and international tax laws can help you avoid costly mistakes.
- Stay informed on policy changes: Hong Kong regularly adjusts deductions, allowances, and business incentives.
The government has recently expanded deductible allowances and reimbursements to attract more foreign investment. These include tax breaks for specific sectors and grants facilitated through chambers of commerce and international economic partnerships.
How FastLane Group Can Help?
FastLane Group specializes in HK income tax, accounting, and advisory services, which address specific individual needs. We, a team of tax experts, give the necessary advice on tax planning, compliance, and reporting. We provide our services for all of your financial objectives to ensure that you have the assistance you need to prosper in the dynamic business scene of Hong Kong. Contact us now.
