Tax Facts
The Hong Kong tax system is one of the most straightforward and attractive anywhere. It is a territorial system that levies tax on income arising in or originating from Hong Kong, with a statutory rate set at 16.5 per cent for corporations and up to 17% for unincorporated business or individuals. Start-ups and smaller businesses benefit from a two-tier profits tax regime that taxes the first HK$2 million of assessable profits at 8.5% for corporations and 7.5% for unincorporated business.
There is no Hong Kong tax on dividend payments or capital gains. That applies also on dividends from foreign companies because they count as foreign-sourced income.
The tax year runs from 1st April to 31st March.
Pacific Jade’s highly-qualified expert Hong Kong tax team is happy to advise on the detail of the Hong Kong tax regime and to handle compliance work, covering issues ranging from arms-length transactions and country-by-country reporting, through to specialised sector incentives, salaries tax and statutory annual filings. We have deep experience managing the tax affairs for a range of local and international businesses, including publicly-listed companies, and can advise on individual tax matters.
The key elements of the Hong Kong tax regime for the 2025-26 tax year, announced in the February 2025 budget statement, are immediately below. Updates are shown in our blog pages.
Hong Kong 2025-26 Budget – Tax Highlights
Wednesday 26th February 2025: Both businesses and individuals will benefit from a proposed one-off tax rebate of 100% up to HK$1,500 (decreased from HK$3,000 for 2023/24) for salaries tax, tax under personal assessment and profits tax. The rebates will be applied to tax levied for the current fiscal year, 2024/25. They will be against the final tax assessment after 2024/25 Individual Income Tax Returns and Profits Tax Returns are filed.
In the face of pressure on public finances, the Government is seeking to increase the fiscal revenues as a matter of urgency. In spite of the relatively narrow tax base, we welcome the Government’s decision to maintain the competitiveness of Hong Kong's simple and low tax regime, and to avoid considerable increase in tax rates or introducing new taxes.
We also appreciate the Government paying attention to review the relevant tax deduction arrangements for various expenditures and improve preferential tax regimes for funds, single family offices and carried interest.
But it is disappointing to note that – as last year - the Government did not enhance the City’s competitiveness by proposing further tax incentives such as profits tax concessions for qualifying regional headquarters and company set-up expenses, or tax credits for start-up companies, allowances for leased plant and machineries used within Great Bay Area (GBA), or enhanced R&D deductions for R&D activities carried out in GBA, among possible concessions.
Furthermore, it is disappointing that the Government did not introduce more tax measures to help the SME sector to conduct business in Hong Kong and alleviate the living costs of Hong Kong citizens by revising the amounts of allowances and deductions for personal tax purpose.
The highlights of the Budget are as follows:
I. Salaries Tax / Personal Assessment
-
No change is proposed for the below existing two tiered standard rates regime for salaries tax and tax under personal assessment commencing from 2024/25:
Net income |
Standard Rate |
First HK$5,000,000 |
15% |
Remainder |
16% |
|
-
No change is proposed for the allowance and deductions. A summary of the allowances and deductions for 2024/25 and 2025/26 is shown as below:
Allowances |
2024/25
HK$ |
2025/26
HK$ |
Basic Allowance |
132,000 |
132,000 |
Married Person Allowance |
264,000 |
264,000 |
Single Parent Allowance |
132,000 |
132,000 |
Child Allowance |
130,000 |
130,000 |
For each child born during the year |
130,000 |
130,000 |
Dependent Brother or Dependent Sister Allowance |
37,500 |
37,500 |
|
Dependant Parent and Dependant Grandparent Allowance
|
|
|
- for aged 60 or above or eligible to claim allowance under the Disability Allowance Scheme
|
50,000
|
50,000
|
|
|
25,000 |
25,000 |
|
Additional Dependant Parent and Dependant Grandparent Allowance
|
|
|
- for aged 60 or above or eligible to claim allowance under the Disability Allowance Scheme
|
50,000
|
50,000
|
|
|
25,000 |
25,000 |
Disabled Dependant Allowance |
75,000 |
75,000 |
Personal disability allowance |
75,000 |
75,000 |
Expenses of self-education |
100,000 |
100,000 |
MPF Contribution |
18,000 |
18,000 |
Home Loan Interest |
100,000 (Basic) 20,000 (Additional) |
100,000 (Basic) 20,000 (Additional) |
Elderly Residential Care |
100,000 |
100,000 |
Approved Charitable Donations |
35% of income after deductions |
35% of income after deductions |
Voluntary Health Insurance Scheme |
8,000 |
8,000 |
Annuity Premiums and MPF Voluntary Contributions |
60,000 |
60,000 |
Domestic rental expenses |
100,000 (Basic) 20,000 (Additional) |
100,000 (Basic) 20,000 (Additional) |
Expenses on Assisted Reproductive Services |
100,000 |
100,000 |
|
II. Marginal bands for salaries tax
III. One-Off Tax Rebate
- A one-off 100% tax rebate or HK$1,500 (whichever is lower) on 2024/25 Salaries Tax, Personal Assessment and Profits Tax has been proposed. The rebate will be deducted from the 2024/25 final tax (i.e. after the 2024/25 Individual Income Tax Returns and Profits Tax Returns are filed).
IV. Other tax measures
The Financial Secretary noted the following:
- The Government will review the relevant tax deduction arrangements for various expenditures, including the lump sum licensing fees for acquiring the rights to use intellectual property (IP), and related expenses incurred on purchase of IP or the rights to use IP from associates, so as to accelerate the development of IP-intensive industries and promote the development of IP trading in Hong Kong.
- Proposals will be formulated on the preferential tax regimes for funds, single family offices and carried interest this year, including expanding the scope of “fund” under the tax exemption regime, increasing the types of qualifying transactions eligible for tax concessions for funds and single family offices, enhancing the tax concession arrangement on the distribution of carried interest by private equity funds, etc.
- The Government has also been conducting preparatory work to allow the stamp duty payable on the transfer of stocks at RMB counters to be paid in RMB, with a view to putting forward a legislative proposal next year.
- The Government is expending the network of Comprehensive Avoidance of Double Taxation Agreements (CDTAs) by conducting negotiations with 17 countries on CDTAs.
- In light of changes of international tax rules, the Government introduce tax deduction on ship acquisition cost for ship lessors under an operating lease. To drive the development of maritime services, the Government will also propose to provide half-rate tax concession to eligible commodity traders.
- The Government will provide tax exemption for green methanol used for bunkering.
- The Government confirms to maintain the competitiveness of Hong Kong's simple and low tax regime, and to avoid considerable increase in tax rates or introducing new taxes.
- The rate of air passenger departure tax will be increased from HK$120 to HK$200 per passenger starting from the third quarter of 2025 26.
- The Government will explore introducing a boundary facilities fee on private cars departing via land boundary control points.
- in January 2025, the Government submitted a bill to LegCo on the implementation of the global minimum tax proposal drawn up by the Organisation for Economic Co operation and Development to address base erosion and profit shifting, which aims to apply the global minimum tax rate of 15 per cent on large multinational enterprise groups with an annual consolidated group revenue of at least EUR 750 million and impose the Hong Kong minimum top up tax.
V. Property Owners
- Although there will be no tax concession on property tax, property owners will enjoy waiver of rates for the first quarter in 2025/26, subject to a ceiling of HK$500 for each rateable domestic property.
VI. Companies
- Rates for non-domestic properties will be waived for the first quarter of 2025/26, subject to a ceiling of HK$500 for each rateable non-domestic property.
- The Government extended the principal moratorium application period for SME Financing Guarantee Scheme to last until November 2025.
- HK$100 million will be embarked to provide funding of up to HK$250,000 per enterprise operating production lines in Hong Kong to support formulation of smart production strategies and introduction of advanced technologies into existing production lines.
- The Government will inject HK$1.5 billion in total into the Dedicated Fund on Branding, Upgrading and Domestic Sales and the Export Marketing and Trade and Industrial Organisation Support Fund, and streamline application arrangement.
- The funds dedicated for SME financing by participating banks of the Taskforce on SME lending have recently been increased to over HK$390 billion.
- HKTDC will launch the E-Commerce Express to provide Hong Kong enterprises with consultation services.
VII. Miscellaneous measures for relieving people’s burden
- An extra half-month allowance of standard Comprehensive Social Security Assistance (CSSA) payments, Old Age Allowance, Old Age Living Allowance or Disability Allowance will be provided. Similar arrangements will apply to Working Family Allowance.
- The maximum value of properties for domestic and non-domestic property transactions chargeable to a stamp duty of $100 will be increased to from HK$3 million to HK$4 million with immediate effect.
VIII. Others measures
- HK$1 billion will be set aside to establish the Hong Kong Artificial Intelligence Research and Development Institute to promote the application of research outcomes.
- The Government will review listing requirements and post-listing ongoing obligations, evaluate listing-related regulations and arrangements to improve the vetting process, optimise the thresholds for dual primary listing and secondary listing, and review the market structure, including exploring the establishment of a post-delisting over-the-counter trading mechanism.
- The Government will launch a new round of Research Matching Grant Scheme, totalling HK$1.5 billion, to attract organisations to support research endeavours of institutions.
- The Government will relax the requirements for joining the GBA Youth Employment Scheme to include people aged 29 or under with sub-degree or higher qualifications, and increase the allowance limit to HK$12,000 a month.
- The Government will explore regulating basketball betting activities and invite Hong Kong Jockey Club to submit proposal.
- A HK$300 million subsidy scheme in the middle of the year will be launched to encourage the industry to install fast chargers across the city.
- The Government will earmark HK$470 million for subsidising franchised bus operators to purchase 600 electric buses and over HK$130 million for subsidising the taxi trade to purchase 3 000 electric taxis.
- No commercial sites will be put on sale in the coming year.
- The Government and the Construction Industry Council (CIC) will jointly allocate funding totalling about HK$95 million to continue the provision of on-the-job training subsidies to trainees enrolling in part-time construction-related degree programmes over the next two academic years. The CIC will allocate around HK$150 million to subsidise the construction industry to provide on-the-job training.
- For the HK$2 Scheme, the Government will change the concessionary fare to “HK$2 flat rate cum 80 per cent discount”, which means that beneficiaries will continue to pay HK$2 for trips with fare below or equal to HK$10. For trips with fare above HK$10, the beneficiaries will have to pay the amount of full fare after 80 per cent discount. Furthermore, the number of concessionary trips will also be limited to 240 per month.
- For the Public Transport Fare Subsidy Scheme, the threshold of monthly public transport expenses incurred for receiving the subsidy under the Scheme will be raised from HK$400 to HK$500. The Government will continue to provide a subsidy amounting to one-third of the expenses in excess of HK$500, and the prevailing subsidy cap at HK$400 per month will remain unchanged.
We trust you will find the above useful information. Should you have any questions, please do not hesitate to contact us on (852) 3705 0095 or [email protected].
