Profits, Salaries, and Stamp Duty: Understanding Hong Kong’s Tax Landscape

Hong Kong is globally recognized for its low-tax, business-friendly environment—and for good reason. The city has built a reputation on simplicity, transparency, and predictability when it comes to taxation. But while Hong Kong’s tax system is relatively straightforward compared to many jurisdictions, it’s critical for companies and individuals to understand the core tax categories, recent regulatory updates, and how they may apply to your business operations.

Here’s a clear breakdown of what you need to know about profits tax, salaries tax, and stamp duty in Hong Kong as of 2025.

1. Profits Tax: For Companies Operating in Hong Kong

All companies carrying on a trade, profession, or business in Hong Kong are subject to profits tax on income arising in or derived from Hong Kong. The key here is that only Hong Kong-sourced profits are taxable—foreign-sourced income may be exempt, depending on the circumstances.

Tax Rates

• 8.25% on the first HK$2 million of assessable profits

• 16.5% on profits above that threshold

Hong Kong uses a territorial tax system, meaning there is no tax on capital gains, no withholding tax on dividends, and no VAT or GST. However, updates introduced in 2023 and 2024 now impose profits tax on certain types of foreign-sourced income (like dividends, interest, and IP income) if specific substance or nexus requirements aren't met.

Key Deductions & Losses

• Expenses incurred in producing assessable profits are generally deductible.

• Capital expenses are not deductible, but depreciation allowances may apply.

• Losses can be carried forward indefinitely but cannot be offset against group companies.

Companies must also maintain proper business records and submit tax filings annually, with assessment periods running from April 1 to March 31.

2. Salaries Tax: For Individuals Working in Hong Kong

Salaries tax is imposed on individuals earning income from employment, offices, or pensions sourced in Hong Kong—regardless of nationality. This includes salary, bonuses, commissions, housing benefits, and allowances.

Rates

• Progressive rates up to 17%

• A standard flat rate of 15% applies if it's lower than the total from progressive rates.

Employers are not required to withhold tax at source, but are responsible for:

• Filing Employer’s Returns

• Notifying the tax authorities if an employee leaves Hong Kong

• Ensuring proper reporting of benefits, allowances, and employment packages

Employees are personally responsible for filing annual tax returns and paying any taxes owed. For expatriates, double taxation relief may be available depending on their home jurisdiction’s treaty with Hong Kong.

3. Stamp Duty: Real Property and Securities Transactions

Stamp duty is levied on certain transactions involving:

• Transfer of Hong Kong shares

• Leases or transfers of Hong Kong immovable property
  

  Key Rates
  

• 0.2% total on the sale and purchase of Hong Kong stock (0.1% buyer, 0.1% seller)

• Up to 4.25% on transfers of immovable property, depending on property value

• Leases attract duty between 0.25% and 1% of annual rent, based on lease term

Stampable instruments must be submitted for stamping within 2 to 30 days, depending on where and how the transaction was executed. Failure to comply may result in fines or the document being inadmissible in court.

There are also reliefs available, such as those for transfers between associated companies with 90% common ownership, provided certain conditions are met.

Simple, Transparent, and Still Evolving

Hong Kong’s tax regime is one of the most straightforward in the region—but that doesn’t mean it’s static. New rules around foreign-sourced income, updated stamp duty thresholds, and shifting global tax standards mean businesses must stay agile and informed.

At Woodburn Accountants & Advisors, we support companies and individuals in navigating Hong Kong’s tax system with confidence. From profits tax structuring to payroll compliance and tax-efficient business setup, we ensure you’re optimized, compliant, and future-ready.

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Woodburn Accountants & Advisors is one of China’s most trusted business setup advisory firms.

Woodburn Accountants & Advisors is specialized in inbound investment to China and Hong Kong. We focus on eliminating the complexities of corporate services and compliance administration. We help clients with services ranging from trademark registration and company incorporation to the full outsourcing solution for accounting, tax, and human resource services. Our advisory services can be tailor-made based on the companies’ objectives, goals and needs which vary depending on the stage they are at on their journey.

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