Hong Kong SAR
Mandatory provident fund (MPF) scheme
Hong Kong SAR’s MPF system came into operation on 1 December 2000. The MPF scheme is designed to provide a formal, compulsory system of retirement protection by way of a privately managed contribution scheme. An employee is required to contribute 5% of their monthly income, and the employer must make a monthly contribution matching this amount. The maximum level of income for contribution purpose is HKD 30,000 per month. Accordingly, the maximum mandatory contribution for each of the employee and employer is HKD 1,500 per month. The employee’s mandatory contributions will be withheld from monthly income by the employer.
An employee whose income is less than HKD 7,100 per month is not required to make mandatory contributions. However, the employer of such employee is required to contribute an amount that is equal to 5% of the employee’s monthly income.
Exemption from joining the MPF scheme is available for some very limited categories of employees, including people from overseas who enter Hong Kong SAR for employment for not more than 13 months or who are covered by an overseas retirement scheme.
An employee or an employer may make voluntary contributions in addition to the mandatory contributions required.
Business profits with a Hong Kong source derived by individuals are taxable under profits tax irrespective of whether they are residents. While there is no capital gains tax in Hong Kong SAR, gains from disposal of assets in Hong Kong SAR may be considered as trading gains which are taxable under profits tax. Hong Kong sourced royalties received by resident individuals are taxable as business profits under profits tax. Withholding tax is applicable to royalties received by non-resident individuals if the use of the relevant intellectual property is in Hong Kong SAR or the use is outside Hong Kong SAR and the royalties paid can be claimed as deduction under profits tax by the payer.
Value-added tax (VAT)/Good and services tax/Sales tax
Value-added, good and services, and sales taxes do not apply in Hong Kong SAR.
Net wealth/worth taxes
There are no net wealth/worth taxes in Hong Kong SAR.
Estate and gift taxes
Hong Kong SAR does not have an estate duty or a gift tax.
Property tax is charged to the owner of any land or buildings (except government and consular properties) in Hong Kong SAR 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. Property occupied by the owner for self-use is not subject to property tax as no rent is receivable with respect to that property.
Government rates and rent
Rates are an indirect tax levied on properties in Hong Kong SAR. 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 SAR is normally held by way of a government lease under which rent is payable to the government of the Hong Kong SAR 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.
Treatment of foreign owned real estate
Offshore rental income or capital gain from disposal of foreign real estate owned by a Hong Kong resident individual is not subject to Hong Kong tax.
Custom 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. As far as individuals are concerned, the duties are usually included in the sale prices of such commodities by the retailers.
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 SAR.
For conveyance on sale of immovable property in Hong Kong SAR, the stamp duty payable depends on the type of property transferred (i.e. residential property vs non-residential property) and the property consideration. Currently, 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 a single residential property by a Hong Kong permanent resident who does not own any other residential property in Hong Kong SAR at the time of acquisition (see 2 below).
- Acquisition of a single residential property by a Hong Kong permanent resident who does not own any other residential property in Hong Kong SAR 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).
- 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.
For lease of immovable property in Hong Kong SAR, 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).
Special stamp duty (SSD)
There is an SSD on resale of residential property in Hong Kong SAR within 36 months from the date of acquisition. The SSD is imposed on top of the ad valorem 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 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, whichever is higher. The BSD is imposed on top of the ad valorem stamp duty and the SSD (if applicable), with exemptions in certain situations.
Transfer tax/Turnover tax/Registration tax
Transfer, turnover, and registration taxes do not apply in Hong Kong SAR.