Hong Kong taxation is an important consideration for every businessman planning to open a business in Hong Kong. The Basic Law of Hong Kong sets out the tax system of examinations and penalties in Hong Kong. However, under the provision of Article 108 of the Basic Law, the tax system in Hong Kong is separate from, and distinct from, that of the tax system in mainland China. The interpretation of the Basic Law as it applies to Hong Kong taxation is therefore largely dependent on interpretation of the Confidential Treatise, which covers tax matters in China. However, there are some significant points of similarity between the two jurisdictions.
Hong Kong taxation is based primarily on the value of property and transactions made within the territorial area of Hong Kong. Basic laws of Hong Kong tax system provide for personal incomes and expenses to be taxed upon the basis of income from sources outside the corporate boundaries of Hong Kong. There are two basic categories of income: salary or wages and other incomes such as interest, dividends, rent, and capital gains.
The concept of hong kong taxation is not based on a national standard, because the taxes are levied according to the wealth of individuals. Thus, the assessment of taxes depends upon the economic conditions in individual cities. In addition, income tax on salaries and wages is charged at a local rate, whereas the corporate tax rate is higher, depending on the size of company. The central government and municipalities levy income tax in Hong Kong on behalf of the Hong Kong people by collecting fees from businesses and individuals. Collectively, these fees are known as "anti-incumbent remuneration taxes" in Hong Kong.
The concept of the hong kong tax system is also based on the receipt of "stamp duty". Stamp duty is a tax paid to the Hong Kong authority by a person buying property in the city. The stamp duty is collected from the seller of the property for the amount determined by the prescribed rates. The amount is payable by the seller only once, and for commercial purposes only. For residential purposes, the amount of stamp duty is payable twice, and for residential leasehold properties only once. There is no limit on the number of times the stamp duty can be paid.
The taxation for Hong Kong companies also involves the payment of income tax to the Hong Kong jurisdiction. Generally, Hong Kong taxation on businesses is less strict than that of other parts of China. Companies do not have to pay income tax on their business profits, either through salaries or otherwise. Also, companies can keep the earnings of their business in any personal hand, except the excess of the profits may be taxed through the income tax system of Hong Kong. Businesses can also choose to register for a tax identification number (TIN), which is an official registration number of a business.
Besides these general taxes, there are several specific taxes, depending upon the nature of the business. These taxes are collected by the Hong Kong taxation authority and administered through them. Basic taxes include income tax, property tax, corporate tax, stamp duty, vehicle tax, Import tax, and Excise tax. Other taxes include services tax, sales tax, custom duty, and the licensing fee. In addition, Hong Kong also has local taxes, which are collected from employers and consumers. These taxes range from the public transport charges to amusement park charges. This post: https://simple.wikipedia.org/wiki/Tax elaborates more on the topic, so you may need to check it out.
