Hong Kong's tax system is simple, transparent, and business-friendly. Corporations benefit from a low CIT rate, a territorial tax system, and no GST or VAT, sales tax, or export duties. The import duties on certain goods are generally low, which makes it easy for corporations to import goods into Hong Kong. The Inland Revenue Ordinance governs the CIT system and provides clear guidelines on tax exemptions, allowances, and deductions. Overall, Hong Kong's tax system is one of the key reasons why it is a popular destination for corporations looking to expand their operations in Asia.
Corporate Income Tax:
Corporate income tax (CIT) is the primary form of taxation for corporations in Hong Kong. The current CIT rate is 16.5%, which is one of the lowest in the world. In addition, Hong Kong operates a territorial tax system, which means that only income derived from Hong Kong is subject to CIT. Therefore, income derived from outside Hong Kong is exempt from CIT.
The CIT is governed by the Inland Revenue Ordinance (IRO), which was last updated in 2018. The IRO outlines the rules and regulations for calculating and paying CIT in Hong Kong. It also provides details on tax exemptions, allowances, and deductions that corporations can claim to reduce their tax liability.
Hong Kong does not have a progressive tax system, which means that all corporations are subject to the same tax rate of 16.5%. There are no tax brackets or different tax rates based on a company's size or profitability.
Goods and Services Tax (GST) or Value-Added Tax (VAT):
Hong Kong does not have a GST or VAT system. Therefore, corporations do not need to charge or pay any GST or VAT on their products or services.
Hong Kong does not have a sales tax system. Therefore, corporations do not need to charge or pay any sales tax on their products or services.
Hong Kong has a simple and transparent customs tariff system. Most imported goods are not subject to any import duty or tax, with the exception of four types of goods: tobacco, liquor, hydrocarbon oil, and methyl alcohol. The import duties on these goods vary, with rates ranging from 0% to 100%.
Hong Kong does not have any export duties. Therefore, corporations do not need to pay any export duties on their products or services.