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Tax summary

Tax summary

The summary outlines key proposed changes to the Hong Kong tax legislation and policy, and provides comments on their implications.

The summary outlines key proposed changes to the Hong Kong tax legislation and policy.

Profits Tax

Key proposed changes

Reduction of 75% in Profits Tax payable for 2018-19, subject to a ceiling of HKD 20,000

Continue to enhance tax concessions related to qualifying corporate treasury centres

Consider establishing a limited partnership regime and introducing tax arrangement to attract private equity funds to set up and operate in Hong Kong

Provide a 50% tax concession to marine insurance business

Key proposed changes

    Reduction of 75% in Profits Tax payable for 2018-19, subject to a ceiling of HKD 20,000

    Continue to enhance tax concessions related to qualifying corporate treasury centre

    Consider establishing a limited partnership regime and introducing tax arrangement to attract private equity funds to set up and operate in Hong Kong

    Provide a 50% tax concession to marine insurance business

Tax rates
Corporation Unincorporated business
Standard tax rate 16.5% 15%
Two-tiered Profits Tax regime
Qualifying taxpayers may be taxed at the following reduced rates:
  • First HKD 2 million of assessable profits
  • Remaining balance
Only one entity within a group can benefit from the above reduced rates.


  • 8.25
  • 16.5%


  • 7.5
  • 15%

No changes proposed in tax rates in 2019-20

Royalties paid to non-residents

When payment is derived from an associated company and the relevant intellectual property has once been owned by any Hong Kong taxpayer, the assessable profits are deemed to be 100% of the payment (i.e. effective tax rate is 16.5%). In other cases, the assessable profits are generally deemed at 30% of the payment (i.e. effective tax rate is 4.95%). The effective tax rate may be reduced under the terms of the applicable double taxation agreement or election of the two-tiered Profits Tax rate.

Capital allowances
Depreciation allowances for plant and machinery
  • Initial allowance
  • Annual allowance

  • 60%
  • 10%, 20% or 30%
Industrial building allowances
  • Initial allowance
  • Annual allowance

  • 20%
  • 4%
Commercial building allowance 4%
Building refurbishment 20% deduction for 5 years
Expenditure on computer hardware and software 100% deduction
Expenditure on environmentally friendly machinery and equipment 100% deduction
Enhanced tax deduction for qualifying research and development expenditure 300% (for the first HKD 2 million)
200% (for the remaining balance)


Source: Inland Revenue Ordinance

Salaries Tax

Key proposed changes

No changes proposed to tax rates and allowances for individuals

Reduction of 75% in Salaries Tax payable for 2018-19, subject to a ceiling of HKD 20,000

New deduction – annuity premiums and MPF voluntary contributions which is capped at HKD 60,000

Key proposed changes
  • No change proposed to tax rates and personal allowances for individuals
  • Reduction of 75% in Salaries Tax payable for 2018-19, subject to a ceiling of HKD 20,000
  • New deduction – annuity premiums and MPF voluntary contributions which is capped at HKD 60,000

Tax rates

The tax charge for Salaries Tax is the lower of the:

  1. Net assessable income less charitable donations and allowable deductions at the standard rate (15%); or
  2. Net assessable income less charitable donations, allowable deductions and personal allowances, charged at the progressive rates below.
2013-14 to 2016-17
Rate HKD
2017-18
Rate HKD
2018-19/2019-20
Rate HKD
First HKD 40,000 2% 800 First HKD 45,000 2% 900 First HKD 50,000 2% 1,000
Next HKD 40,000 7% 2,800 Next HKD 45,000 7% 3,150 Next HKD 50,000 6% 3,000
Next HKD 40,000 12% 4,800 Next HKD 45,000 12% 5,400 Next HKD 50,000 10% 5,000
Next HKD 50,000 14% 7,000
Balance 17% 17% 17%

 

Allowances for individuals
2013-2014
HKD
2014-2015
HKD
2015-2016
HKD
2016-2017
HKD
2017-2018
HKD
2018-2019
HKD
2019-2020
HKD
Personal allowances Basic 120,000 120,000 120,000 132,000 132,000 132,000 132,000
Married 240,000 240,000 240,000 264,000 264,000 264,000 264,000
Single parent 120,000 120,000 120,000 132,000 132,000 132,000 132,000
Disabled - - - - - 75,000 75,000
Child allowances 1st to 9th child (each)
- Year of birth 140,000 140,000 200,000 200,000 200,000 240,000 240,000
- Other years 70,000 70,000 100,000 100,000 100,000 120,000 120,000
Dependent parent and grandparent allowances Aged 60 or above 38,000 40,000 40,000 46,000 46,000 50,000 50,000
Aged between 55 and 59 19,000 20,000 20,000 23,000 23,000 25,000 25,000
Additional dependent parent and grandparent allowances Aged 60 or above 38,000 40,000 40,000 46,000 46,000 50,000 50,000
Aged between 55 and 59 19,000 20,000 20,000 23,000 23,000 25,000 25,000
Disabled dependent (spouse/child/parent/ grandparent/brother/sister) allowances 66,000 66,000 66,000 66,000 75,000 75,000 75,000
Dependent brother/sister allowances 33,000 33,000 33,000 33,000 37,500 37,500 37,500

 

Deductions – maximum limit
2013-2014
HKD
2014-2015
HKD
2015-2016
HKD
2016-2017
HKD
2017-2018
HKD
2018-2019
HKD
2019-2020
HKD
Self-education expenses 80,000 80,000 80,000 80,000 100,000 100,000 100,000
Elderly residential care expenses 76,000 80,000 80,000 92,000 92,000 100,000 100,000
Mandatory contributions to recognised retirement schemes 15,000 17,500 18,000 18,000 18,000 18,000 18,000
Home loan interest 100,000
Approved charitable donations 35% of assessable income
Qualifying voluntary health insurance scheme policy premiums - - - - - - 8,000 per insured person
Annuity premiums and MPF voluntary contributions - - - - - - 60,000*

* Proposed bill subject to Legislative Council’s approval

Source: Inland Revenue Ordinance

Property Tax, Rates and Stamp Duty

Key proposed changes

Stamp Duty

No changes proposed

Property Tax

No changes proposed

Rates

Rates waiver for all four quarters of 2019-20, subject to a ceiling of HKD 1,500 per quarter for each rateable property

Key proposed changes
Stamp Duty

No changes proposed

Property Tax

No changes proposed

Rates

Rates waiver for all four quarters of 2018-19, subject to a ceiling of HKD 2,500 per quarter for each rateable property

Stamp Duty

Sale and purchase of Hong Kong stock

0.2% of the consideration or the value of the stock as at the transfer date – whichever is higher

Lease of immovable properties
Lease term Rate
Not defined or is uncertain 0.25% of the yearly or average yearly rent
Does not exceed 1 year 0.25% of the total rent payable over the term of the lease
Exceeds 1 year but not exceeding 3 years 0.5% of the yearly or average yearly rent
Exceeds 3 years 1% of the yearly or average yearly rent
Sale on transfer of immoveable properties
Ad valorem stamp duty
Property consideration
Exceeds Does not exceed Flat rate (for residential properties) Scale 1 rates* (for non-residential properties) Scale 2 rates* (for Hong Kong permanent residents who do not own other residential properties and in other specified circumstances)
HKD 2,000,000 15% 1.5% HKD 100
HKD 2,000,000 HKD 3,000,000 3.0% 1.5%
HKD 3,000,000 HKD 4,000,000 4.5% 2.25%
HKD 4,000,000 HKD 6,000,000 6.0% 3.0%
HKD 5,000,000 HKD 20,000,000 7.5% 3.75%
HKD 20,000,000 8.5% 4.25%

* Subject to marginal relief

Special stamp duty on disposal of residential properties
Property holding period
Tax rate
6 months or less 20%#
More than 6 months but not exceeding 12 months 15%#
More than 12 months but not exceeding 36 months 10%#
Buyer’s stamp duty on acquisition of residential properties
Tax rate
For non-Hong Kong permanent residents 15%#

# On the sales consideration or market value of property at the date of sale (whichever is higher)

Property Tax

Tax rate 15%

The tax rate is applied to the “net assessable value” of the property which is calculated at the total rent receivable (net of rates) less 20% statutory allowance for repairs and outgoings.

Rates

Tax rate 5%

The tax rate is applied to the “rateable value” which is the estimated annual rental value of the property at a designated valuation reference date.

Sources:
Inland Revenue Ordinance
Stamp Duty Ordinance
Rating and Valuation Department’s website