Taxation in Hong Kong

Under Article 108 of the Basic Law of Hong Kong, the taxation system in Hong Kong is independent of, and different from, the taxation system in mainland China. In addition, under Article 106 of the Hong Kong Basic Law, Hong Kong has independent public finance, and no tax revenue is handed over to the Central Government in China.[1] The taxation system in Hong Kong is generally considered to be one of the most simple, transparent, and straightforward systems in the world.[2] Taxes are collected through the Inland Revenue Department (IRD).

Since the Common Law System is applied in Hong Kong, judgements by the Courts and Boards of Review in tax law cases are resorted to assist the interpretation of taxation rules and concepts. Furthermore, the Inland Revenue Department also issues Departmental Interpretation and Practice Notes (DIPNs) from time to time to clarify and elaborate on the tax rules and to smoothen the tax collection process.[3]

Taxes collected in Hong Kong can be generally classified as:

  • Direct tax – including Salaries Tax, Property Tax and Profits Tax; the guiding statue is Inland Revenue Ordinance (Cap 112);
  • Indirect tax – including Stamps Duty, Betting Duty, Estate Duty (abolished on 11 February 2006) and others.

In the fiscal year 2013/14, Profits tax, an income tax on corporations constituted the largest source of tax collected by the government, followed by Salaries Tax, an income tax on individuals.[4]