Straightforwardness and low tax structures have long made Hong Kong one of Asia’s most attractive places to reside, work, and do business. For maximum benefit from such features and to avoid costly mishaps understanding how the 2025 Hong Kong tax rate works for both individuals and corporates alike remains imperative.
Whether you’re a local business individual or global business entrepreneur, this guide comprehensively covers all that you need to know about prevailing tax rates, how they are levied, and how FastLane HR can assist you in being tax-compliant as well as tax-effective.
Working of the tax system of Hong Kong
Hong Kong has a territorial tax regime, i.e., income or profits that are earned or that arise in or from Hong Kong are taxed.
That sets it apart from nations such as the US or UK, where global revenues get taxed.
The below are a few highlights:
- No capital gains tax
- No value-added tax
- No tax on dividend or interest income
- No inheritance tax
This simplicity stands as one of the primary reasons why global entrepreneurs opt to establish their companies in Hong Kong.
But, as a definition, “simple” does not necessarily mean “risk-free.” Determining if income constitutes as a “Hong Kong-sourced” income requires expert judgment—come FastLane HR’s tax professionals.
Individual (Salaries) Tax Rate 2025
If you work or live in Hong Kong, you are taxed for Salaries Tax, which falls on income from employment, offices, and pensions which come or are received from Hong Kong.
Progressive Rates of Duty for 2024/25 onwards
|
Net Chargeable Income (HKD) |
Tax Rate |
|
First 50,000 |
2% |
|
Next 50,000 |
6% |
|
Next 50,000 |
10% |
|
Next 50,000 |
14% |
|
Remaining income |
17% |
The amount of tax payable will not exceed 15% or 16%, as the case may be, of your net assessable income prior to allowance, whichever is least.
Deductions and Allowances
The Hong Kong provides liberal personal allowances, such as:
- Basic Allowance: HKD 132,000
- Married Person’s Allowance: HKD 264,000
- Child Allowance: HKD 120,000 per child
- Dependent Parent/Grandparent Allowance
Payment to the Mandatory Provident Fund, charitable gifts, interest on home loan, as well as expenses on self-education, may also be deducted.
Tip: Your income from work as an expatriate is taxed just for work performed in Hong Kong — so workdays need to be carefully recorded.
Corporate (Profits) Tax Rate 2025
For companies, the two-tier profits tax system continues to stand as one of the most competitive in the world.
Corporate tax rates for Hong Kong
|
Company Type |
First HKD 2 millions of Profits |
Remaining Profits |
|
Corporations |
8.25% |
16.5% |
|
Unincorporated Businesses |
7.5% |
15% |
The two-bands structure was aimed at facilitating small and medium enterprises (SMEs), so that they get a concession at a reduced rate of tax applicable on profits of the first HKD 2 million.
Prominent Advantages
- No tax on foreign-source profits (tentatively subject to Inland Revenue Department’s “source of income” test).
- No withholding tax upon payment of interest or dividends.
- No capital gains tax.
- Extensive double taxation agreements (DTAs) with almost all countries.
Example
If your Hong Kong-registered business generates HKD 3 million in assessable profits, you will remit:
- 8.25% for first HKD 2 million = HKD 165,000
- 16.5% on the remaining HKD 1 million = HKD 165,000
Total tax payable: HKD 330,000
A Comparison between Foreigners' and Locals' Tax Rates
|
Category |
Local Business Owner |
Foreign Business Owner |
|
Tax System |
Territorial |
Territorial |
|
Offshore Profits Exemption |
Possible if income sourced outside HK |
Also possible, subject to proof |
|
Dividends Tax |
None |
None |
|
Double Tax Agreements |
Yes |
Yes |
|
Payroll Tax on Expat Employees |
Yes, only for HK-based services |
Yes, for HK-based services only |
To international businesspersons, understanding the term “source of profits” comes as a must. If your business derives profits outside of Hong Kong’s jurisdiction, it may be exempt from tax as an offshore tax exemption — if duly documented, that is.
Compliance with record-keeping, computation of profits, and use of two-tier tax levied appropriately are key for businessmen to avoid penalties.
The 2025 Tax Planning Checklist for Individuals and Businesses
For Indivudals
- Check your residency and presence days in Hong Kong.
- Ensure you’re claiming all available allowances and deductions.
- Compare progressive vs standard rate to find out which will result in lowest tax.
- Pay at point of submission.
For Enterprises
Ensure that you qualify for the 8.25% small business rate.
- Verify offshore income and keep proper supporting documentation.
- Verify payroll and MPF responsibilities for employees.
- Prepare for provisional profits tax payment.
- Seek advice from professionals before year-end to tax efficiently.
Pro Tip: Prepaying your tax early will save individuals and businesses thousands of needless tax dollars — as well as avoid compliance with the Inland Revenue Department.
Why Choose FastLane HR for Your Hong Kong Tax Services
At FastLane HR, we understand that while Hong Kong tax might look simple at a glance, it may get complicated at times of interpretation, reporting, as well as compliance.
That’s why our clients trust us:
Experience: Decades of experience in serving SMEs, start-ups, and overseas players in Hong Kong.
Specialism: Advanced knowledge of IRD tax rulings, double taxation agreements, as well as relief related to MPF.
Authoritativeness: Trusted partner for accounting, payroll, and corporate compliance for Hong Kong.
Trustworthiness: Transparent, compliant, and results-oriented tax advisory services.
Whether you are a sole practitioner, business proprietor, or expatriate director, FastLane HR assists in having your tax submission, payroll configuration, as well as compliance, undertaken properly while maximizing your tax position.
Frequently Asked Questions
Company tax: 8.25% on initial HKD 2 million, 16.5.
Tax upon wages: Progressive to 17%, or 15% of adjusted income.
In Hong Kong, there is no tax on capital gains.
It will need to be registered in Hong Kong and will need to generate assessable profits of HKD 2 million or less.
In fact, it covers only income accruing from services provided in Hong Kong.
Top Insights
- Tax regime and low taxation in Hong Kong make it attractive for international business persons.
- There are progressive salaries tax rates up to 17%, while there are two-tier profits tax rates for corporations.
- The non-taxation of foreign income, dividends, or capital gains makes it world competitive.
- Staying compliant and structuring optimally requires specialized advice, most notably where cross-border issues are involved.
Get Professional Guidance from FastLane HR
Tax time does not have to be a headache. If it’s your initial time or you’re redirecting your business, FastLane HR tax specialists will guide you with:
- Assess your Hong Kong-sourced income
- Strategically consider your deductions and allowances.
- Process precise returns to the IRD.
- Be sure to observe Hong Kong tax and MPF rules.
Contact FastLane HR now to arrange a consultation, ensuring that your tax planning remains both cost-competitve and fully-compliant.