Hong Kong Personal Income Tax
The tax experts at Hawksford get asked questions daily about how to better manage personal taxes in Hong Kong and how to best file them, so we've listed below their guidance.
If you have a question not covered below, please use the form after the questions to contact us.
What is meant by territorial system of taxation?
Salary tax is imposed on all employment income arising in or derived from Hong Kong. In other words, if your source of employment is in Hong Kong, i.e. you are employed by a Hong Kong company to work in Hong Kong, your full income is chargeable to salaries tax. However, you can claim full or partial exemption of income or tax relief under the following circumstances:
- If all services are rendered outside Hong Kong during a year of assessment (unless you are a civil servant or a crew member of a ship or an aircraft) you are exempt from paying salaries tax for that particular year of assessment. Income from services rendered in Hong Kong during visits not exceeding a total of 60 days in a year is also exempt from tax.
- If part of your income has already been charged to tax in another jurisdiction (for services rendered abroad) during the year of assessment, you can claim partial exemption of income from salaries tax in Hong Kong.
If your source of employment is outside Hong Kong, i.e. you are employed by an overseas company but are assigned to work in Hong Kong for a few years by your overseas employer; you are only assessed on the income attributable to the services you rendered in Hong Kong.
I work for a Hong Kong company but rendered services in Hong Kong for only about 100 days. I spent rest of the time traveling overseas on business trips. Will I be taxed in Hong Kong?
Yes. Since your source of employment is in Hong Kong and you have spent more than 60 days rendering services in Hong Kong, your full income is chargeable to salaries tax. However, if part of your income has already been charged to tax in another jurisdiction (for services rendered abroad) during the year of assessment, you can claim partial exemption of income from salaries tax in Hong Kong.
I was originally working for an American company in the United States. I have recently been deputed to the Hong Kong branch of the company to work as a full-time executive. How will I be taxed?
As you have been deputed to work full-time in Hong Kong, you will be assessed on the income attributable to the services you rendered in Hong Kong.
I am working for a foreign company but have rendered services in Hong Kong for less than 60 days. Will I be taxed in Hong Kong?
No. Since your duration in Hong Kong does not exceed 60 days in the year, your income derived from services rendered in Hong Kong during this period is excluded from tax
I have been employed by my Hong Kong employer for the whole year but was deputed by the employer for a project offshore. Do I pay taxes in Hong Kong?
No. Although your source of employment is in Hong Kong, you have rendered all services outside Hong Kong for the entire year of assessment and are therefore exempt from paying salaries tax for the year.
What is the annual due date for filing personal tax return in Hong Kong?
Tax filing due date for individuals is June 1st of each year. A year of assessment runs from April 1st to March 31st of the following year. You will be subject to penalties for late filing of returns or failing to submit returns.
Both my wife and I are working in Hong Kong. From taxation point of view, is it better for us to file personal tax returns individually or jointly?
Joint assessment can be advantageous if the assessable income of one spouse is less than his/her tax allowance. Under joint assessment, both your incomes will be aggregated and allowances that you and your spouse are eligible for will be deducted from the joint total income. A notice of assessment will be issued to the higher income earner. However, if joint assessment does not result in less tax, each of you will receive a separate notice of assessment. The election for joint assessment must be made on a yearly basis.
If my company provides me with a car for private use, will there be tax consequences for me?
This benefit comes under the umbrella of benefits-in-kind that refer to benefits received by employees, from the employer, in non-cash form. The benefit is taxable if it can be converted into cash by way of a sale. In such cases, tax will be imposed on the sum that the asset might expect to fetch if sold in the open market at the time of receipt of the benefit.
If you are provided with an employer owned car for private use the benefit is not taxable, provided it is non-convertible into cash form. However, if ownership of the car is transferred to you, the benefit is taxable. Reimbursements on private mileage are also taxable.
If I pay self-education expenses from my own pocket, are they tax deductible?
Yes. Self-education expenses are tax deductible provided they are non-reimbursable by your employer, the Government or any other person. Education expenses include registration fees or enrolment fees, examination fees and tuition fees in connection with a prescribed course of education. You cannot claim living expenses, expenses for textbooks or traveling. General interest classes, for example, a Tai Chi course, will not qualify as an employment-related course. You can claim up to a maximum of HK$ 60,000 each year, regardless of the number of courses you attend.
Is mortgage payment tax deductible in Hong Kong?
Monthly installment repayment of housing loan or mortgage is not a tax-deductible expense. However, interest paid on the loan or mortgage can be deducted from your assessable income for up to 10 years of assessment. The maximum amount of deduction for each year is HK$ 100,000.
If my company pays for my overseas travel expenses, will there be tax consequences for me?
Reimbursement of overseas travel expenses for business purposes, (e.g. meeting overseas clients, attending seminars, conferences and training) are not taxable. However, reimbursement of travel expenses for holiday purposes is taxable. If your overseas travel is partly for business and partly for holiday purposes and there is no clear-cut distinction, the tax department will consider the immediate purpose of the trip in determining your tax liability. If your holiday is merely incidental to a business trip, there will be no tax consequences. However, if your business dealing is merely incidental to the holiday journey, such as if you visit a business contact while on the way, you are liable to pay tax as your trip was primarily undertaken for holiday purposes. In cases where it is clear that part of the travel relates to holiday purposes, expenses paid or reimbursed by your employer relating to that part of the journey will have to be included in your assessable income.
Are gains on my stock investments taxable?
As an employee, you may receive share options or you may own or purchase shares in the company using the share awards and other similar forms of employee share purchase plans. Gains from such benefits are taxable.
Profits from the buying and selling of shares or other financial instruments on your own account are viewed as personal investments or capital gains and are not taxable in Hong Kong.
Are charitable donations made by me tax deductible?
Only approved charitable donations are tax deductible. An approved charitable donation is a donation of money either a)to a charitable institution or Trust of Public Character that is exempt from tax or b) to the government for charitable purposes. Additionally, to qualify for deduction, the aggregate of donations must not be less than HK$ 100 and must not exceed 35% of your net chargeable income. Note that the following types of payment do not qualify as charitable donations:
- Payments for purchase of lottery tickets or raffle tickets
- Payments for admission tickets for film shows or charity shows
- Payments made for prayer services
If my company provides me with a place of residence, will there be tax consequences for me?
Yes. Provision of a place of residence from your employer is a housing benefit and is considered as part of your income. In such cases, the rental value of the place of residence provided by your employer must be included in your assessable income. The rental value (RV) is calculated as a percentage of your net total income (after deducting employment related expenses). For a residential unit or serviced apartment the RV is calculated at 10% of your net income. For a single room in a hostel, hotel or boarding house RV is calculated at 4% of your net income.
What is the personal income tax rate in Hong Kong?
Salaries tax is charged at the lower of:
- Net assessable income, less charitable donations and allowable deductions at the standard rate of 15%;
- Net assessable income less charitable donations, allowable deductions and personal allowances, charged at the progressive rates starting at 2% and ending at 17%.
For a detailed guide, please refer to Hong Kong Personal Income Tax Guide.
Are my Mandatory Provident Fund contributions (both mine and my employer's contributions) considered income to me? If so, what is the taxation policy on it?
Yes, MPF contributions (both by you and your employer) are considered income. Only compulsory employee MPF contributions are tax deductible. The maximum deduction is HK$18,000 for each year of assessment. Employer MPF contributions are deductible. Note that contributions other than mandatory contributions are voluntary and are not tax deductible.
Are contributions to a recognized occupational retirement scheme, in lieu of a MPF scheme, tax deductible?
Yes. Any contributions made by you to a recognized occupational retirement scheme are tax deductible. The maximum deduction allowed for each year of assessment is the lower of the following three amounts:
- The amount of contribution you made to the recognized occupational retirement scheme
- The amount of the mandatory contributions that you would have been required to pay if you had contributed as an employee in a MPF scheme or
I am a director of a Hong Kong company and I am residing overseas. The company pays me salary and director's fee. Am I liable to pay tax in Hong Kong?
In general, if you are a director of a Hong Kong resident company, your full income derived from that office in Hong Kong is chargeable to salaries tax, irrespective of (i) whether you are residing in Hong Kong or not; (ii) location of the services performed.