When you consider to register one company in China SAR Hong Kong (HK) region, you may want to know answers to below questions:
Please read below articles to know detailed explaination for each questions above.
How about Hongkong company tax rate?
In 2024, the tax rates in Hong Kong are as follows:
1. Profits Tax:
- For corporations, the two-tiered profits tax rates regime is applicable. The tax rate is 8.25% for the first HK$2 million of assessable profits, and 16.5% for the remaining balance. - For unincorporated businesses (such as sole proprietorships and partnerships), the tax rate is 7.5% for the first HK$2 million of assessable profits, and 15% for the remaining balance. - There is a tax reduction measure for the 2023/24 tax year, with a maximum limit of HK$3,000.
2. Salaries Tax:
- There is a two-tiered standard tax rate system. For the 2024/25 tax year, the first HK$5 million of net assessable income is taxed at 15%, and the part exceeding HK$5 million is taxed at 16%. - There is a tax reduction for the 2023/24 tax year, with a maximum limit of HK$3,000.
3. Property Tax:
The property tax rate is 15% of the net assessable value of the property.
Are there any tax breaks or deductions available for start up company in Hong Kong?
Here are some tax incentives applicable to start-ups in Hong Kong:
1. Two-tiered profits tax rate:
- For the first HK$2 million of profits of Hong Kong companies, the profits tax rate is only 8.25%; for the portion exceeding HK$2 million, the profits tax rate is 16.5%. For unincorporated businesses such as sole proprietorships or partnerships, the two-tiered profits tax rates are 7.5% and 15% respectively. This policy greatly reduces the tax burden of start-ups in the early stage of development.
2. Loss carry-forward:
- Start-ups may incur losses in the early stage of operation. Hong Kong allows enterprises to carry forward losses to future profits to reduce future income tax burdens. Enterprises can offset the losses of the current year with the profits within the past six years. However, there are certain limitations on loss carry-forward. Losses can only be made up within the next six years, and the amount of compensation cannot exceed 75% of future profits.
3. Additional deduction for research and development expenses:
- If a start-up is engaged in research and development activities, relevant research and development expenses can be additionally deducted under certain conditions. This encourages enterprises to actively invest in research and development and enhance innovation ability and competitiveness.
4. Industry-specific incentives:
- In some specific industries, such as technology, environmental protection, cultural creativity, etc., the Hong Kong government may introduce targeted tax incentives. For example, for eligible environmental protection-related enterprises, their expenditures on purchasing environmental protection equipment and carrying out environmental protection projects may obtain additional tax reductions or exemptions.
5. Tax exemptions and concessions:
- The Hong Kong government will introduce tax exemptions or concessions from time to time according to economic conditions and policy orientations. For example, during a specific period, a certain percentage of reduction may be given to the profits tax of start-ups, or stamp duty may be exempted for specific types of transactions (such as certain financial businesses).
How does the tax rate in Hong Kong compare to other regions?
The comparison of Hong Kong's tax rate with other regions has the following characteristics:
I. Corporate Tax
1. Compared to Western Developed Countries
- United States: - The federal corporate tax rate in the US is 21% after the Tax Cuts and Jobs Act. However, when considering state and local taxes, the overall tax burden can be significantly higher in some states. For example, in California, the combined corporate tax rate can be around 26.9% or more. In contrast, Hong Kong's corporate tax rate of 8.25% for the first HK$2 million of assessable profits and 16.5% for the remaining balance is generally lower.
- United Kingdom: - The UK has a corporate tax rate of 19% (as of 2023). While this is relatively competitive on a global scale, Hong Kong still offers a more favorable rate for small - and medium - sized enterprises with its two - tiered system.
2. Compared to Asian Neighbors
- Singapore: - Singapore has a corporate tax rate of 17%. Although the difference between Singapore and Hong Kong is not large, Hong Kong's two - tiered system may provide more tax incentives for certain levels of corporate profits.
- Mainland China: - In Mainland China, the corporate tax rate generally is 25% for most enterprises. However, there are also various tax incentives and preferential policies for certain industries and regions. Hong Kong's corporate tax rate
is generally lower than the standard rate in Mainland China, which makes it an attractive location for some companies looking for a lower tax burden in the Greater China region.
II. Personal Income Tax (Similar to Salaries Tax in Hong Kong)
1. Compared to Western Developed Countries
- Sweden: - Sweden has a relatively high - income tax rate with a progressive system that can reach up to around 57.1% for high - income earners. In Hong Kong, the highest rate for salaries tax is 17% (in certain cases) which is much lower.
- Australia: - Australia has a progressive personal income tax system with the top marginal rate of 45% (plus a 2% Medicare levy for higher - income earners in some cases). Hong Kong's salaries tax rates are significantly lower in comparison.
2. Compared to Asian Neighbors
- Japan: - Japan has a progressive personal income tax system with a top rate of 45% for high - income earners. Hong Kong's salaries tax system is more lenient in terms of tax rates.
- South Korea: - South Korea also has a progressive income tax system with a top marginal rate of 42% for high - income earners. Hong Kong's salaries tax rates are generally lower.
III. Property Tax
1. Compared to Western Developed Countries
- France: - In France, property tax is complex and varies by location. The overall property tax burden can be relatively high in some areas. Hong Kong's 15% property tax rate on net assessable value may be lower compared to some high - tax regions in France.
2. Compared to Asian Neighbors
- Malaysia: - Malaysia has a property tax system with rates that can range from 0.2% - 0.7% depending on the type of property and location. Hong Kong's 15% property tax rate is higher in comparison, but the assessment bases and property market characteristics in both regions are quite different.
In general, Hong Kong's tax rates are relatively low compared to many Western developed countries and are also competitive in some aspects when compared to its Asian neighbors, which is one of the factors contributing to its attractiveness as an international business and financial center. SODA Global Marketing has professional team to help you to handle all works about Hong Kong company, such as HK company registration, Hong Kong trademark registration, bank open, BR renewal, annual tax audit...Kindly contact us to know more details.
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