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Withholding Tax in Hong Kong

Hong Kong applies the same tax rules to resident and non-resident businesses. Both are required to pay taxes on profits earned in or originating from Hong Kong.

When a Hong Kong-based company pays for services provided by a foreign entity, a portion of that payment must be withheld and sent to the Hong Kong Inland Revenue Department (IRD). This portion is known as the withholding tax.

Eligibility for Withholding Tax

Non-resident enterprises and individuals who derive income from a Hong Kong source for services rendered in Hong Kong are subject to withholding tax. Non-resident enterprises are defined as companies managed and controlled outside Hong Kong, while non-resident individuals are foreigners who have stayed or worked in Hong Kong for less than 180 days in the tax year.

Payments Subject to Withholding Tax

Not all payments are subject to withholding tax in Hong Kong. There is no withholding tax on interest and dividends from investments, deposits, and shareholding. However, royalties and certain performance service fees are subject to withholding tax.

Withholding Tax for Royalties

Royalties include fees for using, distributing, or exhibiting copyrighted materials (e.g., music, books, films), patents, trademarks, and intellectual property (IP).

Withholding Tax Rates for Royalties Paid to Non-Resident Enterprises:

  • Associated/affiliated non-resident companies: 16.5%

  • Non-affiliated non-resident companies: 4.95%

If a Hong Kong company previously owned the IP held by a non-resident company, the entire royalty amount may be included in the Hong Kong company's taxable income.

Withholding Tax Rates for Royalties Paid to Non-Resident Individuals:

  • Associated non-resident individuals: 15%

  • Non-affiliated non-resident individuals: 4.5%

Definition of “Associate”

Entities regarded as ‘associates’ of a Hong Kong entity include:

  • Natural Person: Relatives, partners, partnerships, and controlled corporations.

  • Corporation: Controlling corporations, controlled corporations, individuals controlling the entity, partners, directors, and their relatives.

  • Partnership: Partners, partners’ relatives, controlled corporations, and directors of controlled corporations.

Withholding Tax for Service Fees

Service charges paid to non-residents providing performances (e.g., entertainers and sportsmen) are subject to withholding tax. Taxable performance service fees include:

  • Performances at commercial events in Hong Kong

  • Participation in recordings, films, videos, radio transmissions, and TV broadcasts

Withholding Tax Rates for Performances:

  • Direct contracts with non-resident performers: 10%

  • Contracts via non-resident individual or partnership agents: 10%

  • Contracts via non-resident company agents: 11%

Withholding Tax Rates

Here are the withholding tax rates for different payment categories in Hong Kong:

Category

Payment Type

Rate (%)

Royalty Payments

Non-resident companies (associates)

16.5%

Royalty Payments

Non-resident companies (non-affiliated)

4.95%

Royalty Payments

Non-resident individuals (associates)

15%

Royalty Payments

Non-resident individuals (non-affiliated)

4.5%

Entertainers or Sportsmen

Direct contracts with non-resident performers

10%

Entertainers or Sportsmen

Contracts via non-resident individual or partnership agents

10%

Entertainers or Sportsmen

Contracts via non-resident company agents

11%

Dividends and Interest

Not Applicable

Not Applicable

Double Tax Treaties

Double tax treaties may offset taxes withheld if there is a treaty between the jurisdiction and Hong Kong. Hong Kong has entered into 45 treaties with different jurisdictions, with withholding tax rates varying by treaty. In most cases, the rate ranges between 2.475% and 4.95%.

Withholding Tax Rates under Double Tax Treaties:

Jurisdiction

Withholding Tax Rate (%)

Non-Treaty

2.475 to 4.95

Austria

2.475 to 3

Belarus

2.475 to 3/2.475 to 4.95

Belgium

2.475 to 4.95

Brunei

2.475 to 4.95

Cambodia

2.475 to 4.95

Canada

2.475 to 4.95

China, PRC

2.475 to 4.95

Czech Republic

2.475 to 4.95

Estonia

2.475 to 4.95

Finland

2.475 to 3

France

2.475 to 4.95

Georgia (9)

2.475 to 4.95

Guernsey

2.475 to 4

Hungary

2.475 to 4.95

India

2.475 to 4.95

Indonesia

2.475 to 4.95

Ireland

2.475 to 3

Italy

2.475 to 4.95

Japan

2.475 to 4.95

Jersey

2.475 to 4

Korea

2.475 to 4.95

Kuwait

2.475 to 4.95

Latvia

0/2.475 to 3

Liechtenstein

2.475 to 3

Luxembourg

2.475 to 3

Macau (8)

2.475 to 3

Malaysia

2.475 to 4.95

Malta

2.475 to 3

Mexico

2.475 to 4.95

Netherlands

2.475 to 3

New Zealand

2.475 to 4.95

Pakistan

2.475 to 4.95

Portugal

2.475 to 4.95

Qatar

2.475 to 4.95

Romania

2.475 to 3

Russia

2.475 to 3

Saudi Arabia

2.475 to 4.95

Serbia (8)

2.475 to 4.95

South Africa

2.475 to 4.95

Spain

2.475 to 4.95

Switzerland

2.475 to 3

Thailand

2.475 to 4.95

United Arab Emirates

2.475 to 4.95

United Kingdom

2.475 to 3

Vietnam

2.475 to 4.95

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