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Taxation
 

Taxation System in Hong Kong
 

There are three types of direct tax in Hong Kong which are as follows:

a. Profits Tax

b. Salaries Tax

c. Property tax
 

Profits Tax 

The territorial concept has always been fundamental to the taxation of profits in Hong Kong. According to Section 14 of the Inland Revenue Ordinance (“the Ordinance”) makes it clear that only profits arising in or derived from Hong Kong are chargeable to profits tax. The residence of a taxpayer is not relevant. Only those profits which arise in or are derived from Hong Kong are liable to tax here. However, where the territorial concept is clear, its application in particular cases at times remains a contentious issue between the Department and practitioners with numerous disputes being referred to the Board of Review and the Courts.

 

In general, there three conditions that must be satisfied before a profits tax liability arises:

(a) The person must carry on a trade, profession or business in Hong Kong;

(b) The profits to be charged must be from such trade, profession or business carried on by the person in Hong Kong; and

(c) The profits must be profits arising in or derived from Hong Kong.

 

Salaries Tax

 

The territorial concept has always been fundamental to the taxation. Accordingly to the Section 8(1) of the Inland Revenue Ordinance lays the charge to Salaries Tax on every person in respect of his income arising in or derived from Hong Kong” from any office or employment of profit and any pension. There is no exhaustive definition of “income from any office or employment”. However, some of the more common kinds of income are enumerated in section 9(1) and the word “perquisite”, albeit undefined, has been included since the introduction of the Ordinance.
 

 

Property tax

 

Property Tax is imposed under section 5(1) of the Ordinance. It is

charged on the owner of any land or/and buildings wherever situated in Hong

Kong and shall be computed at the standard rate on the net assessable value of

such land or/and buildings for each year.


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