Expatriate tax ebook - Hong-Kong

What taxes?

Capital gains tax
Inheritance, estate and gift taxes
Investment income
Local taxes
Real estate taxes
Social security taxes
Stock options
Wealth taxes
Other specific taxes

Capital gains tax
There is no Capital Gains Tax in Hong Kong. However individuals who regularly buy and sell Hong Kong property may be subject to Profits Tax on the proceeds if the IRD consider they are carrying on the business of trading in property.

Investment income
Interest income, dividends and other investment income arising to individuals are not taxable in Hong Kong.

Local taxes
There are no local taxes imposed on the income of individuals in Hong Kong.

Real estate tax
There is no real estate tax in Hong Kong other than Stamp Duty on the transfer of property.

Social security taxes
There are no social security taxes in Hong Kong.

However Hong Kong does operate a Mandatory Provident Fund (MPF) scheme whereby both employers and employees contribute to a mandatory pension plan. Expatriates who are members of an overseas retirement scheme are generally exempted from joining an MPF scheme until such time as they obtain a Hong Kong Permanent Identity Card (which can normally be obtained after seven years).

Mandatory contributions to an MPF scheme are limited to a maximum of HK$1,000 per month for both the employer and employee.

Stock options
Any gain realised by the exercise, assignment or release of an option to acquire shares is taxable if the option was granted to an individual because of his employment or office. It should be noted that it is the exercise rather than the granting of the option which is the taxable event. The taxable gain is the difference between the market value of the shares at the time of exercise of the option and the price paid. Expatriate employees who arrive in Hong Kong with unvested stock options may be subject to Salaries Tax if the options vest and are exercised while the employee is in Hong Kong.

Expatriate employees leaving Hong Kong may be subject to Salaries Tax on options granted for employment in Hong Kong but exercised after the employee has left Hong Kong.

This area is complex and specialist advice should be sought in each case.

Wealth tax
There are no wealth taxes in Hong Kong.

Other specific taxes
Profits Tax is charged on persons carrying on business in Hong Kong. It is levied on profits with a source, or deemed to have a source, in Hong Kong.

Property Tax is charged on rental income from Hong Kong property.

Information about Hong Kong:

• introduction
• facts and figures
• basis of taxation
• what taxes?
• tax planning opportunities