Hong Kong employs a territorial system of taxation. Only income arising in or derived from within the territory of Hong Kong will be liable to tax. Direct tax is only levied on income derived from Hong Kong.
The three direct taxes in Hong Kong are Profits Tax, which applies to business profits, Salaries Tax, which applies on individual's employment income, and Property Tax, which applies to rental income from real estate.
There are a few indirect taxes in Hong Kong such as hotel accommodation tax, estate duty, entertainment tax etc.
Hong Kong has no value added tax, sales tax, consumption tax or capital gains tax. Dividend income in general is not chargeable to tax. Stamp duty is levied on shares, stocks and real estate transfers. Estate duty is levied on property passing on death of a person.
The Inland Revenue Department ("IRD") is the government department which administers the tax law, the Inland Revenue Ordinance ("IRO").
There are no tax treaties between Hong Kong and other countries, apart from one agreement entered into 1989 with the United States in connection with shipping profits. Accordingly, tax protection under treaty provisions is generally not available.
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