Value-added tax (VAT)
Hong Kong does not have a VAT, goods and services tax, or sales tax.
There is no tariff on general imports in Hong Kong.
Duties are levied on limited categories of dutiable commodities (i.e. tobacco, liquor, methyl alcohol, and hydrocarbons), regardless of whether they are imported or locally manufactured.
Property tax is charged annually to the owner of any land or buildings (except government and consular properties) in Hong Kong at the standard rate of 15% on the net assessable value of such land or buildings. Net assessable value of a property is the consideration payable to the owner for the right to use the land or buildings less rates paid by the owner and a 20% notional allowance.
Rental income derived by a company from a Hong Kong property is subject to profits tax. The company that is subject to profits tax may apply for an exemption from property tax in respect of the property. If no exemption is applied, the property tax paid can be used to offset against the profits tax payable by the company.
Stamp duty is charged on transfer of Hong Kong stock by way of sale and purchase at 0.2% of the consideration (or the market value if it is higher) per transaction. Hong Kong stock is defined as stock the transfer of which must be registered in Hong Kong.
For conveyance on sale of immovable property in Hong Kong, the stamp duty payable depends on the type of property transferred (i.e. residential property vs non-residential property) and the property consideration. Effective from 5 November 2016, stamp duty on transfer of properties is charged as follows:
- transfer of residential property: a flat rate of 15%, with certain exemptions. One common exemption is acquisition of residential property by a Hong Kong permanent resident who does not own any other residential property in Hong Kong at the time of acquisition (see (2) below);
- acquisition of residential property by a Hong Kong permanent resident who does not own any other residential property in Hong Kong at the time of acquisition and some other specified circumstances: Scale 2 rates ranging from HKD 100 (for property consideration of up to HKD 2 million) to 4.25% (for property consideration exceeding HKD 20 million); and
- transfer of non-residential property: Scale 1 rates ranging from 1.5% (for property consideration of up to HKD 2 million) to 8.5% (for property consideration exceeding HKD 20 million).
The stamp duty payable is computed by applying the relevant rate to the consideration or market value of the property (whichever is higher). When Scale 1 or Scale 2 rates are applicable, marginal relief is available for transfer where the consideration is marginally above the lower bound of each rate band.
The Hong Kong Special Administrative Region (SAR) Government has proposed that, effective 5 November 2016, the stamp duty rate on transfer of residential properties be increased from Scale 1 rates (i.e. 1.5% to 8.5%) to a flat rate of 15%. The relevant Bill was gazetted on 27 January 2017 and is currently under scrutiny of the legislators. Although the relevant legislation has yet to be enacted, the 15% rate will apply retrospectively from 5 November 2016 when the related legislative amendments enter into force. In addition, stamp duty at 15% will be collected for all instruments on transfer of residential property executed on or after 5 November 2016 and kept in escrow accounts in the meantime, unless where the Scale 2 rates apply.
Furthermore, the Hong Kong SAR Government has proposed that, unless specifically exempted or otherwise provided, any instrument executed on or after 12 April 2017 for acquisition of more than one residential property under that instrument will be subject to stamp duty at a flat rate of 15%, even if the acquirer is a Hong Kong permanent resident who does not own any residential property in Hong Kong at the time of acquiring the multiple residential properties. The relevant Bill was gazetted on 26 May 2017 and is currently under scrutiny of the legislators. Although the Bill has yet to be enacted, the proposed measure will apply retrospectively from 12 April 2017 when the related legislative amendments enter into force.
For lease of immovable property in Hong Kong, stamp duty is calculated at a specified rate of the annual rental that varies with the term of the lease. Currently, the applicable rate ranges from 0.25% (for lease period of not more than one year) to 1% (for lease period of more than three years).
Exemption is available for certain transactions, such as transfer of shares between associated corporate bodies, transfer of shares or units of exchange traded funds listed in Hong Kong, and certain stock borrowing and lending transactions, provided that the specified conditions for exemption (if any) are satisfied.
Special Stamp Duty (SSD)
There is an SSD on resale of residential property within 36 months from the date of acquisition. The SSD is imposed on top of the stamp duty payable on conveyance on sale or agreement for sale of residential property, with a few exemptions. The SSD payable will be calculated based on the stated consideration or the market value (whichever is higher) of the resold property at the regressive rates indicated below.
- 20% for residential properties held for six months or less.
- 15% for residential properties held for more than six months but for 12 months or less.
- 10% for residential properties held for more than 12 months but for 36 months or less.
Buyer's Stamp Duty (BSD)
A BSD is payable on acquisition of Hong Kong residential properties by any person (including Hong Kong and foreign companies) other than a Hong Kong permanent resident. The BSD is charged at a flat rate of 15% on the stated consideration or the market value of the property acquired, whichever is higher. The BSD is imposed on top of the stamp duty and the SSD (if applicable), with exemptions in certain situations.
Business registration fees
Every person who carries on a business in Hong Kong is required to apply for business registration with a fee within one month from the date of commencement of the business. The business registration certificate has to be renewed either on an annual basis or every three years with a payment of a business registration (renewal) fee. Special registration and licence fees are applicable to banks and deposit-taking companies.
There is currently no capital duty in Hong Kong.
Government rates and rent
Rates are an indirect tax levied on properties in Hong Kong. Rates are charged at 5% of the rateable value, which is the estimated annual rental value of a property at the designated valuation reference date of 1 October.
Privately owned land in Hong Kong is normally held by way of a government lease under which rent is payable to the Hong Kong SAR Government in return for the right to hold and occupy the land for the term (i.e. duration) specified in the lease document. Currently, government rent is calculated at 3% of the rateable value of the property and is adjusted in step with any subsequent changes in the rateable value.
Mandatory Provident Fund (MPF) contribution
Under the MPF scheme, an employer is required to make a mandatory contribution for an employee in the amount equal to 5% of the monthly income of that employee. The maximum level of income for contribution purpose is HKD 30,000 per month. An employer may make voluntary contributions in addition to the mandatory contribution required.