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This guide provides an overview of Hong Kong’s withholding tax rules including scope of withholding tax, payments that are subject to withholding tax, withholding tax rates, etc.
Hong Kong follows a territorial system of taxation; tax is levied only on profits arising in or derived from carrying on a trade, business or profession in Hong Kong.
The territorial principle does not distinguish between residents and non-residents. A non-resident company or individual that derives income from a Hong Kong source, for services provided or work done in Hong Kong, is liable to pay tax in Hong Kong.
When a Hong Kong-resident company or individual makes specific types of payments to a non-resident entity for services rendered in Hong Kong, a certain portion of the payment must be withheld and paid to Hong Kong’s Inland Revenue Department. The percentage of amount withheld is the withholding tax.
Withholding tax is only applicable to non-resident companies or individuals.
Note that the information provided is for general guidance only and not meant to replace professional advice.
Withholding tax is the tax charged to a non-resident entity that derives income from a Hong Kong source for services provided or work done in Hong Kong.
For tax purposes, non-resident individuals are foreigners who have stayed or worked in Hong Kong for less than 180 days in the tax year.
A non-resident company is one whose central management and control is exercised from outside Hong Kong. Central management and control refers to the highest level of control exercised by the board of directors.
Only specific types of payments are subject to withholding tax in Hong Kong such as royalties and fees paid to non-resident entertainers or sportsmen for their performances in Hong Kong.
There are no withholding taxes levied on dividends and interest.
Royalty payments made to a non-resident company or individual for the use of intellectual property both in and outside Hong Kong are subject to withholding tax.
The withholding tax rates for royalty payments vary depending upon whether the non-resident recipients are associates or non-affiliates of the Hong Kong company.
The following entities are regarded as ‘associates’ of the Hong Kong entity:
Tax must be withheld for fees due to a non-resident entertainer or sportsman for:
The withholding tax rate varies depending upon whether the Hong Kong promoter or sponsor entered into an agreement directly with the non-resident entertainer or sportsman; or if the agreement was made with a non-resident agent i.e. the representative of a non-resident entertainer or sportsman.
The rates of withholding tax are as follows:
Hong Kong has concluded tax treaties with more than 30 countries in order to eliminate double taxation of income.
Every tax treaty will specify the conditions for withholding tax between Hong Kong and the treaty country.
For details, please refer to Hong Kong Double Tax Treaties Guide.
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