Taxation and life are always closely linked. Many friends who have immigrated to Hong Kong have asked about the Hong Kong tax system. Here, we have summarized some general common knowledge about Hong Kong taxes, hoping to provide assistance to those who are settling in Hong Kong for the first time.
A simple tax system, low tax burden, and flexible tax policies are the three keywords most commonly used by economists to summarize the characteristics of Hong Kong's personal income tax system. In Hong Kong, personal income is subject to three types of taxes: Salaries Tax, Profits Tax, and Property Tax.
Ordinary office workers usually only need to pay Salaries Tax, which is similar to the personal income tax in mainland China. Generally speaking, a society that considers itself fair uses light taxation to encourage capable people to earn more money. Hong Kong is such a society, and the support behind its low tax burden is that under a sound legal system, an individual deserves to own the wealth they have earned through their own efforts. Although Hong Kong's personal income tax system does not "rob the rich to help the poor," hidden behind the "tailor-made" tax bill for every individual is a more humane and fair role.
Unlike the method in mainland China where taxes are withheld by the employer every month, Hong Kong office workers declare their Salaries Tax to the Inland Revenue Department themselves during the annual tax season. The calculation method for Salaries Tax is also relatively simple. Compared with the 7-tier progressive system in mainland China, Hong Kong's Salaries Tax uses a 4-tier progressive tax rate ranging from 2% to 17% to calculate the tax amount. This means that the maximum tax rate will not exceed 17%, whereas in mainland China, the maximum personal income tax rate is as high as 45%. Earlier, a Hong Kong resident posted their tax bill on Weibo, showing that they only had to pay 729 Hong Kong dollars in personal income tax on an annual income of 178,000 Hong Kong dollars, which immediately made white-collar workers in mainland China feel "envious, jealous, and hateful."
Opening the "Salaries Tax Computation" form on the Hong Kong Inland Revenue Department's website, the simple form takes into account the actual personal circumstances of every taxpayer. In the "Deductions" section, taxpayers can fill in "Self-education expenses," "Approved charitable donations," "Mandatory contributions to recognized retirement schemes" (equivalent to the housing provident fund in mainland China), "Home loan interest," and other items. In the subsequent "Allowances" section, the situation is broken down in more detail. Taxpayers can report whether they are married, the number of children they need to support, the number of parents and grandparents, whether they live with their parents, and the age of the parents they live with, etc. Each of these items corresponds to a certain amount of tax allowance. Calculated this way, if a middle-to-low-income family in Hong Kong with an annual salary of 200,000 Hong Kong dollars has both elderly parents and young children to support, they may hardly need to pay any personal income tax for the year.
Among the various taxes levied on personal income in Hong Kong, the government takes into account the costs and expenses paid by the taxpayer to obtain taxable income, as well as factors such as education and housing, and considers the taxpayer's own family situation. Although the calculation method is relatively complex and the government has put in more effort, the public receives fair and reasonable treatment.
