Profits tax
The tax system in Hongkong is simple and clear. Corporate profits tax rate is 17.5%. The highest personal income tax rate, which is only 15.5% (to be increased from two OO four O five to 16%), is one of the lowest rates in the world, and no hidden "additional" taxes are imposed. Only direct from Hongkong's income and profits, was taxable; Hongkong does not levy capital gains tax, tax on dividends or interest tax provisions; capital allowances and generous depreciation; Hongkong has no sales tax or value-added tax.
General tax information
The corporate profits tax rate is 17.5%, which is one of the lowest tax rates in the district. Imports of machinery and raw materials are not subject to customs duties; dividends are not taxed. Hongkong does not impose capital gains tax, VAT and sales tax. The offshore business of recognized professional reinsurance companies in Hongkong can enjoy a preferential corporate profits tax as low as 8.75%. For research and development, Hongkong has implemented generous tax concessions, tax deductible projects, including marketing research, feasibility studies, and other research activities related to business and management.
The depreciation allowance is also generous. Write off of new spending where the production of machinery and equipment and computer hardware and software are instant can get 100% of the capital expenditure; the construction of the Arts crafts emporium and several buildings can get 20% of the initial allowance, allowance for an additional 4% year period, until the expenditure of all write off. Commercial building receives an annual allowance of 4%. The government also provides funding to encourage technology enterprises and application development activities with business opportunities. In addition, the cost of training new staff to learn new technologies can be as high as 75% of the cost. Basically, only corporate profits, salaries and rental income are taxable. As a result, Hongkong's effective overall tax rate is indeed much lower relative to the tax rates of almost all other developing countries. In most countries, all income and profit items are subject to tax payments of up to 40% to 50%, while in Hongkong, the majority of the tax rates are only 17.5% or less. Only profits derived from trade, industry or business operating in Hongkong and in Hong Kong are taxable, and income derived from outside Hongkong is not required to pay taxes. Salaries tax is levied only on salaries from Hongkong, and any income from the field is exempt from tax.
Deductible items
Generally speaking, all the expenses incurred by taxpayers who earn taxable profits can be deducted, including the interest required for making profits, and the maintenance expenses of the necessary machines and equipment. Losses can be carried forward, and to the business day after the profit offset. An enterprise operating more than one business activity may offset the loss of one of its operations by offsetting the profits of another. In addition, Hongkong has a generous capital allowance and depreciation allowances for the capital expenditure incurred in the construction of industrial and commercial buildings and buildings, as well as the capital expenditure incurred in the acquisition of taxable profits. Generally speaking, the following may apply for tax deduction: (1) expenses and expenses (excluding family or private spending), as well as purely to earn taxable income from all necessary capital expenditures; (2) the taxable income earned depreciation and must use machinery and equipment and other capital allowances (3; the past year of assessment) transfer loss; (4) starting from the 1996 / 97 year, has to pay education expenses; (5) starting from the 1998 / 99 year old man, has been paid to the housing expenditure; (6) starting from the 1998 / 99 year mortgage interest has been paid.
Benchmark for tax assessment
Salaries tax is calculated according to the actual income tax year, but should be charged a provisional tax that the taxpayer shall be in accordance with the expected revenue of the tax year, first pay an estimated tax, and then receive a tax in the tax payable at the end of the year, to pay any additional tax. Income tax is not normally deducted from the employee's salary, so employees should remember to reserve a sum of money to pay the income tax payable at the end of the tax year.
Calculate salaries tax
The IRS produced a simple software to help calculate the salaries tax payable. You only need to select the tax year, the marital status, the total income and the number of dependents in the input page, and then press the "calculate" button at the bottom. Another picture will appear and list the salary tax you should pay.
Scope of Taxation
Any person, including corporations, partnerships, trustee or groups, in a trade, profession or business in Hongkong from the trade, profession or business arising in or derived from Hongkong assessable profits in Hongkong (except for the profits arising from the sale of capital assets), have to pay tax. The object of taxation is no difference between those living in Hong Kong or non residents. Therefore, the profits earned by Hong Kong residents from abroad may not have to be taxed in Hongkong; in other words, non resident persons who have earned profits from Hongkong will have to pay duty. The question of whether the business is operating in Hongkong and whether the profits will come from Hongkong is mainly based on the facts, but the principles used may refer to the tax cases which were decided in the courts of Hongkong and the Privy Council in england. Profits earned abroad shall not be taxed even if remitted to Hongkong. If any person who sells a building or property is part of a profit-making scheme, the person will be considered to operate a "business" and must pay taxes on any profit earned