Hong Kong SAR does not impose income tax based on an individual's total income. Scenario 2: You have income chargeable to tax. Hong Kong launches new Ship Leasing Concession - KPMG China • Allowances, Deductions and Tax Rate Table. If you are liable to tax and did not receive the tax returns, you are obliged to inform the IRD of your chargeability to tax no later than 4 months after the end of the basis period (i.e. Regardless of whether the employees are residents in Hong Kong, employers are not required to withhold tax for employees. For income to be subject to tax, it must fall within one of the specific heads of taxation. Income up to HK$2 million is taxed at 8,25%. Taxpayer will be charged salaries tax on your income arising in or derived from Hong Kong from any employment, office, and pension. on or before 31 July). Assumptions: Gross rental income is /US$1,500/month. Related Infomation - Inland Revenue Department Total interest paid by your spouse: Property A (1/4/2020 - 31/3/2021) = $120,000 Australian Expatriate Property Tips and Traps - Negative ... Hong Kong has an attractive corporate tax regime highlighted by low Hong Kong tax rates. When you rent out a property in HK you have to notify the revenue authority (the real estate agent will normally do this). i) Negative Gearing Should your tax deductions exceed your rental income and you make a tax loss in Australia, then you can carry forward in This article is an extract from:7 Critical Financial Strategies for Australian Senior Executives living in Asia (Feb 2018 edition) by Dale Hoy. How to reduce your personal tax in Hong Kong 200,000 +. Zheng gives this example: a person earns HK$100,000 per month and pays HK$20,000 a month rent. Yet, when a REIT holds real estate in Hong Kong directly, Hong Kong property tax is applicable on rental income. Given him with profit or loss at rent less than rental value as described in Section 9 (1) (c) of Hong Kong tax law. Prevailing Tax Policy - Financial Services and the ... In general, expenses incurred for the production of business income are tax deductible. Top 10 tips for tax returns | South China Morning Post Tax on trustee: $2,000 at 17%. The types of payments and withholding tax rates prescribed in Section 70 are: For international payments of dividend/share of profits income. 384,000 Those who receive less than their share of entitlement will still be assessed on the full share as they are legally entitled to the income. No Offshore Income Tax. Yet, when a REIT holds real estate in Hong Kong directly, Hong Kong property tax is applicable on rental income. 30% for unfranked dividend and royalty payments. Can I get any relief for the mortgage interest paid? In Hong Kong, personal tax is often referred to salary tax. This article provides you with an overview of the salary tax system in Hong Kong, Hong Kong tax rate and Hong Kong income tax. We only levy taxes on business profits under profits tax, property rental income under property tax and employment income under salaries tax. Does this mean I can gross up the amount I want to spend on rent . Income derived from property held outside Hong Kong would usually be exempt from tax in Hong Kong. British and EEA citizens living in Hong Kong are entitled to the UK "Personal Allowance", which is a £NIL band rate that means the first £12,570 of profit from rental may be tax free and profits between £12,570 and £50,270 are taxed at 20%. Scenario 2: You have income chargeable to tax. Withholding rate. This means that your income is split into multiple brackets where lower brackets are taxed at lower rates and higher brackets are taxed at higher rates. $340.00. The company that is subject to profits tax may apply for an exemption from property tax in respect of the property. It is one of the most business-friendly tax systems in the world. During the year of assessment 2020/21, her annual income was $600,000 and she stayed in Hong Kong for 250 days. Rental income - If an individual receives rental income but the rental activities do not constitute a business, the income is subject to property tax rather than profits tax. The main advantage is that the taxable value of the housing allowance is taken as (normally) 10% of the employee's total income other than the housing allowance. Only profits made in Hong Kong are taxed. There is a two-tiered system. You will then be asked to fill in a property tax return (BIR 57 if it is in your name(s)) disclosing your rent and deductions (generally limited to rates (not government rent) and a statutory allowance for repairs, maintenance and interest on your mortgage (20% of gross . Income from $0.00. $50,000.00. We provide a comprehensive range of tax advisory and compliance services to both local and multinational companies. Property tax is charged on 80% of rent received from real estate located in Hong Kong at a rate of 15%, resulting in an effective rate of 12%. 6%. This post is also available in: 繁體中文 (Chinese (Traditional)) 简体中文 (Chinese (Simplified)) Company to Focus on Jobs in the Energy and Chemicals Sector. Hong Kong Non-Residents Income Tax Tables in 2020: Income Tax Rates and Thresholds (Annual) Tax Rate. Taxable income band HKD. However, according to the Inland Revenue Department of Hong Kong, the following expenses are not tax deductible: Certain capital expenses or losses that are defined as "non-deductible" as stipulated in Sec 17 of the Hong Kong Inland Revenue Ordinance. $2,000. For international payments of services income, royalty or rights income, interest income, capital gains income, property rental income, and professional services income. 4 The Hong Kong Inland Revenue Ordinance stipulates a flat rate of 20% on the assessable value (gross income less rates paid by the owners) as allowance deductible for repairs and outgoing expenses. Hong Kong: Rental income taxes (%). Profits tax - on income from a trade, profession or business. Let us take for example a total remuneration package is HK$80,000 per month, HK$25,000 of which will be . So to help make this process as painless as possible, here are some handy hints and tips on how to get it done and submitted asap. Since ownership may be split (e.g. Less: 20% allowance for repair and outgoings (96,000) Net assessable value . Supersedes HKAS 17 Leases, HK (IFRIC)-Int 4 Determining whether an Arrangement contains a Lease, HK (SIC)-Int 15 Operating Leases—Incentives and HK (SIC)-Int 27 Evaluating the Substance of Transactions Involving the Legal Form of a . If no exemption is applied, the property tax paid can be used to offset against the profits tax payable by the company. There is no general income tax in Hong Kong (SAR). 14%. If this is the case, the lower treaty rate will apply. Rent at $1,000 per month was deducted from her salary. The resident beneficiaries will be assessed on their share of entitlement ($4,000*) at their personal tax rates in YA 2021. There are two types of taxes on property. Capital gains and receipts that are capital in nature are not subject to profits . Salaries tax is charged on employment income 'arising in' or 'derived from' Hong Kong sources.A more detailed analysis is then applied to determine the extent of its taxability by looking at the type of employment (Hong Kong vs Overseas employment) and time spent in Hong Kong. The existing taxes to which this Agreement shall apply are: (a) in the case of the Hong Kong Special Administrative Region, the taxes imposed by the Government of the Hong Kong Special Administrative Region under the Inland Revenue Ordinance ("Hong Kong Special Administrative Region tax"); (b) in the case of Canada, the taxes imposed by the Government of Canada under the Income Tax Act . If the tenant fails to pay rent, can I report the uncollected rent and claim deductions in Property Tax? an entity with a 100 year lease may grant a 50 year sublease to a 3rd party) separate assessments may be made on the same parcel of land. For 2021 tax year. 15% WHT. • Joint Assessment and Personal Assessment for Married Couples. Salaries tax is a type of income tax that is levied in Hong Kong, chargeable on income from any office, employment and pension for a year of assessment arising in or derived from the territory. Sole Proprietorship / Partnership Profits arising from trade, professions or business in Hong Kong. A Hong Kong private company (limited liaility company) requires one shareholder, one director, a Hong Kong addresss and a Company Secretary. Answer: Rental income from a solely-owned property should be declared in the owner's Tax Return ¡V Individuals (B.I.R. Hong Kong does not tax overseas income such as foreign investment profits and rental income on overseas properties, which not only helps multimillionaires who hold assets around the world but also encourages foreign companies to shift tax burden via the city. Salaries tax - on income from an office, employment and any pension. instead, there is another system in place that is still deemed rather effective. Tax assessment forms are sent out from Wednesday, 1 May, but actually filling in the form can linger on your "to do" list for far too long. Regardless of whether the employees are residents in Hong Kong, employers are not required to withhold tax for employees. Should I deduct them from the rental income and report the net amount of the income? Total interest paid by your spouse: Property A (1/4/2020 - 31/3/2021) = $120,000 Hong Kong has adopted the following principles in formulating tax policy - Low and simple tax regime. In Hong Kong, personal tax is often referred to salary tax. Both owners are foreigners and non-residents. Salaries tax is essentially the only form of income tax levied on an individual and, unlike some other jurisdictions, Hong Kong does not have a general income tax that is imposed on the individual . to. 57) . You will learn about the salary tax rate, salary tax allowance and allowable deductions for employees, tax benefits for employers and requirements of filing tax returns. For rental of immovable property in Hong Kong, stamp duty is payable at up to 1 percent of the average yearly rent. More: The incoproration of a Hong Kong Limited Liability Company is a three step procedure. . Under a Hong Kong sourced employment, employment income is generally regarded as sourced in Hong Kong and hence wholly subject to Hong Kong salaries tax, unless certain tax exemption claims can be satisfied, such as the claim of no services rendered in Hong Kong, the 60-days exemption claim and the unilateral tax relief credit claim. In case of an intra-group transfer, a stamp duty exemption may apply. Filing taxes in Hong Kong is relatively quick and easy. Annual Property . Taxpayers pay whichever is lower. Living and working in Hong Kong as a British expat often doesn't mean you can forget about UK tax - when you depart the UK you should advise HM Revenue of your departure, and if you have a recurring source of income from the UK - such as income from a rental property - you will need to lodge a UK tax return each year. National income tax rates. Effective Date. Your spouse does not have income chargeable : to tax and wishes to nominate you to claim interest deduction. Answer: Rental income from a solely-owned property should be declared in the owner's Tax Return ¡V Individuals (B.I.R. The owners are responsible for reporting the rental income and paying the tax. Annual Property . 2%. My company has said I can claim back up to 50 per cent of my salary as rental reimbursement which they say has positive tax implications. Tax rates range from 2% to 17% with a maximum overall net cap of 15%. Higher rates apply to UK income in excess of £50,270 (2021-22 rates). With increasingly regularity we see a government initiative to bolster some or other section of the . Whilst in Hong Kong she lived in a flat provided by the employer throughout the year. They have no other local income. The Hong Kong tax rate is progressive, and capped at a rate of 17%. In Singapore, such income is exempted for individuals. I am moving to Hong Kong on this Thursday and was hoping someone could advise how rental reimbursement schemes work. Hong Kong's corporate income tax rate is only 16.5%. In Hong Kong, for Single-Tier Tax System: corporations are taxed at 16.5% on assessable profits and unincorporated businesses are taxed at 15%. a lower rate is specified in the relevant treaty. No, you may be liable to tax if you derive employment income, rental income or business profits from Hong Kong. The tax rates in Hong Kong are as follows: Net taxable income (2018/2019) Rate. If any part of the common areas is let out, the rental income derived is chargeable to Property Tax. As a matter of fact, Hong Kong taxes are among the lowest in the world. The withholding rate is: 10% for interest payments. 0-50,000 HKD. Income from $50,000.01. Provided the employee with a place for residence as described in Section 9 (1) (b) of Hong Kong tax law. That is, business or trading profits are taxed under profits tax, income from employment, office, or pension is taxed under salaries tax, and rental income from . No other expenses other than the rates paid by the owner,irrecoverable rent, and the 20% standard allowance can be deducted. Companies can choose to apply for a tax exemption from property tax if they are already paying corporate taxes on the rental income earned from the property or if the property is owned by the company for business purposes. Three separate income taxes are levied in Hong Kong instead of a single unified income tax. This tax is payable by the owner(s) at the standard rate 16% by the year of assessment of the net assessable value of the . Section 9(1)(b) of the IRO defined income from employment to include the Rental Value of place of residence provided rent-free by the employer or its related company.The question here is that, when a foreign employee is given a place of residence by the client during his / her business trip in Hong Kong, would the […] Hong Kong Tax Guide 2020 5 Taxation for businesses : profits tax Persons chargeable - Corporations, partnerships, trustees and bodies of persons carrying on a trade, profession or business in Hong Kong are subject to tax on Hong Kong-source profits (excluding profits arising from the sale of capital assets). Property A is owned by your spouse : and used by the family as residence. Hong Kong launches new Ship Leasing Concession. 57) . Property Tax payable . Chargeable income. The idea of raising rental property rates from the current 5 per cent to as much as 15 per cent under a progressive model hurts Hong Kong retirees, the middle-class and the poor alike. Hong Kong: Is a tax deduction for rental payments beneficial to individual taxpayers? If your HR refuses to do for you, then you work for a shitty company, because it costs the company $0 to do, just a bit of admin work for them, but can benefit you greatly. The Hong Kong tax on salaries is based on a person's income, less any personal allowances, allowable deductions, and donations to charity. As a recap, Property Tax is imposed to the owners of land and/or buildings in Hong Kong who earn income by giving the rights of using their properties to other in return for payment and/or charges (i.e. The tax rates in Hong Kong are as follows: Net taxable income (2018/2019) Rate. Filing taxes in Hong Kong is relatively quick and easy. • What is Personal Assessment. This simplicity of taxation also extends to individuals, with personal tax rates starting as low as 2 percent, and capping out at 17%. If Hong Kong real estate is held by the REIT is a special purpose vehicle, it is charged profits tax on profits generated from real estate. She also paid $3,000 in income taxes to the government of Hong Kong. Hong Kong practises a simple, low-rate tax system. For rental of immovable property in Hong Kong, stamp duty is payable at up to 1 percent of the average yearly rent. Rental Income). Hong Kong adopts the territoriality basis of taxation, i.e. 6. In Hong Kong, individual income is taxed at either a progressive rate on net chargeable income (similar to Adjusted Gross Income in the US) or at a standard rate of 15% on net income. April 6, 2018 In brief Financial Secretary Paul Chan recently stated that the government is looking into the option of allowing a tax deduction for rental payments, given the financial burden on Hong Kong residential tenants from rising rents. Like a few countries in Asia, Hong Kong does not have a capital gains tax per se. Eva owns her home in Hong Kong and paid $2,000 in real estate taxes and $1,000 in personal property taxes. These rates apply to all payees unless: the payment is made to a resident of a country which has a tax treaty with Australia. Salaries tax rate is capped at 15% whereas profits tax rate for corporations is 16.5%. Therefore, when a person is a either a U.S. citizen, Legal Permanent Resident, or Foreign National who meets the Substantial Presence Test, then they are subject to IRS Tax and Reporting on their worldwide income and assets. Related Infomation. Individuals Tax Return will be issued to individual taxpayer on the first working day of May for him/her to report his/her salaries, rental income from solely owned properties and profits from sole . If you simply own real estate, you pay 8% of its rental value. to HKFRS 16 Leases. Profits tax (Hong Kong's corporate income tax) is therefore imposed only on taxable income or profits arising in or derived from Hong Kong, or deemed as such. You will learn about the salary tax rate, salary tax allowance and allowable deductions for employees, tax benefits for employers and requirements of filing tax returns. If your income is $50k, rent is $12k, then with the benefit your income will effectively reduce from $50k to $41.8k for tax purposes ($50k - $12k, multiplied by 1.1). If the rent is packaged as a reimbursement, they can subtract the actual rent from their income (HK . Rental income from a jointly-owned or co-owned property can be declared by any owner in a Property Tax Return (B.I.R. • Keeping Business Records. It . 2%. Financial periods beginning on or after 1 January 2019. 4. 1. 10% WHT. • What deductions and allowances can I claim. The official name in the tax return for housing allowance, also called rent reimbursement scheme, is housing benefits. Salaries tax is also charged on the unrealized capital gain of shares or options . • Keeping Rent Records. Normally, the common areas of a building such as side shop, carpark, external wall, roof top etc are collectively owned by the individual owners of the building. Affected standards. Who Should File? Rental income derived by a company from a Hong Kong property is subject to profits tax. As an expat in Hong Kong, you're taxed on any Hong Kong sourced employment income, pension income and business profits and rental income derived from there. Tax assessment forms are sent out from Wednesday, 1 May, but actually filling in the form can linger on your "to do" list for far too long. Property A is owned by your spouse : and used by the family as residence. the situation where the person is a tax resident from a jurisdiction with which Hong Kong has signed a double tax agreement/arrangement (DTA). Income derived from property outside Hong Kong is typically not charged tax in Hong Kong. Hong Kong does not tax overseas income such as foreign investment profits and rental income on overseas properties, which not only helps multimillionaires who hold assets around the world but also encourages foreign companies to shift tax burden via the city. 2%. A person is subject to salaries tax on his/her Hong Kong sourced employment income, any income from an office held in Hong Kong and any Hong Kong pension. Rental income from a jointly-owned or co-owned property can be declared by any owner in a Property Tax Return (B.I.R. Instead, the three main types of income derived by individuals are taxed under different income taxes. It ensures that concessions and incentives can be better used to effectively reduce tax liabilities Refunded or paid all or part of rent for his profit or return as described in Section 9 (1A) (b) of Hong Kong tax law. This is significantly lower than many taxes in western nations, inclusive of United States expat tax. If the Assessor accepted Ms Lam's offshore claim and would assess her income The personal income (salaries) tax system in Hong Kong is a progressive tax system. Withholding tax: There is no withholding tax on distributions made from a REIT in Hong Kong . Are they deductible? Rental income earned by the property will be subjected to the standard Hong Kong corporate tax rate. She cannot claim a foreign tax credit for either the real estate taxes or the The above rates are the applicable salaries tax rates for the period from 1 April 2020 through 31 March 2021. There are no capitals gains tax, no VAT/GST, no estate duty, and no withholding tax on dividends or interest. Step 1: apply for Certificate of Incorporation; setp 2: appointments of officers; setp 3 . Taxable Income Threshold. It is said that the road to hell is paved with good intentions, and it can certainly feel that way looking at the stream of tax incentives which have been introduced in Hong Kong in recent years. Stamp duty • Which income is assessable. In Hong Kong, individual income is taxed at either a progressive rate on net chargeable income (similar to Adjusted Gross Income in the US) or at a standard rate of 15% on net income. Our in-depth experience and expertise of the taxation regimes in Hong Kong and Mainland China helps identify issues that are relevant to your business operations. 17%. Tax and Investment Facts | Hong Kong 5 2 Corporate Taxation Hong Kong operates a territorial tax system. In addition, there is no restriction on the amount of share capital. The income tax rates range from 2% to 17%. Would like to know whether a non uk resident (from Hong Kong) have tax allowance or tax relief from the UK rental income. The jurisdiction of Hong Kong has a simple tax structure and favors company setup. I bought a property and took out a mortgage loan for 10 years. In Singapore, such income is exempted for individuals. 0-50,000 HKD. 5. The rent is not that high, only £130 per week about two years ago. Taxpayers pay whichever is lower. Property Tax Rental income arising from properties situated in Hong Kong. Assessment. For purposes of calculating liability, the period of assessment is from April 1 to March 31 of the following year. With effect from 1 April 2018, a two-tiered profits tax rates regime applies. Hong Kong is of course a magnet for international investment with among other things, its low and simple tax structures. 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