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5 White Paper on the Business Environment in China
consecutively ranked as the world’s freest economy by the while non-residents may be taxed on pro ts arising in Hong
Wall Street Journal and Heritage Foundation. Kong. Hong Kong regulations also allow companies to claim
o shore status, allowing them total tax exemption on pro ts
e Chinese central government plans to develop Hong sourced outside of Hong Kong.
Kong as an o shore RMB market and an increasingly
prominent cross-border RMB trade channel. ese measures All expenditures incurred in the generation of assessable
will support Hong Kong enterprises in making RMB- pro ts, including most interest costs, rent for o ce and
denominated direct investments into the mainland, according factory premises, bad debts, and salaries and payments to
to statements by Chinese Vice Premier Keqiang Li in August approved pension schemes, are deductible from gross income.
2011. Li also stated that the central government will support Sums paid out on capital expenditures are not tax deductible.
the development of o shore RMB nancial products in Hong Losses can be carried forward without any limits.
Kong and that cross-border trade settlements in RMB should
be extended to cover the whole country. VAT and Withholding Tax
Value-added tax (VAT) is non-existent in Hong Kong.
As of the end of April 2012, Hong Kong held the world’s ere is also no withholding tax in Hong Kong for pro t
largest pool of o shore RMB funds with total deposits of repatriated back to the overseas parent company.
RMB67.4 billion. To further increase the city’s competitiveness
against foreign rivals such as London and Singapore, last year Salary Tax
the central government allowed foreign investors to invest ere are two ways of calculating salary tax in Hong Kong
in RMB-denominated exchange trade funds in Hong Kong.
Additionally, the government will support third parties using for the individual taxpayers who have assessable income from
Hong Kong as a venue to settle trade and investments in employment:
RMB, and further enrich o shore RMB products in Hong
Kong, according to Xinhua. 1. Progressive rate. Taken on a sliding scale (2-17
percent) against the taxpayer’s annual net chargeable
In terms of infrastructure development, the Hong Kong- income (i.e. less allowable deduction and personal
Zhuhai-Macau Bridge (construction slated for 2009-2016) is allowances); and
expected to reduce travel time between Hong Kong and each
city from 4.5 hours to approximately 40 minutes. e SAR 2. Standard rate. 15 percent, based on the annual net
is currently undergoing an ambitious transport infrastructure income (i.e. less allowable deductions only). The
program, and has allocated a budget of HK$15.5 billion to be final payable income tax is the lower of the two tax
spent on major road and railway projects. e entirety of this liabilities. The maximum average tax rate in Hong
program is expected to be completed in 2020. Kong is thus 15 percent for the current tax year.
Dividends received from any corporation enjoy a tax
Hong Kong follows a free trade policy and hence maintains exemption.
basically no barriers to trade: there are no customs tari s on
goods imported into or exported from Hong Kong. Import Infrastructure
and export licensing are kept to a minimum. Most products
do not need licenses to enter or leave Hong Kong and where e city is currently undergoing an ambitious transport
licenses or noti cations are required, they are only intended infrastructure program, and has a recent annual budget
to ful ll obligations under various international agreements, of HK$15.5 billion to be spent on major road and railway
or to maintain public health, safety or security. projects. e entirety of this program is expected to be
completed in 2020.
Spotlight on Hong Kong Taxes
Corporate Income Tax Air
Hong Kong’s simple and business-friendly tax system is a e Hong Kong International Airport at Chek Lap Kok
major attraction for foreign investors. Corporate income tax is the busiest airport in the world for international cargo. In
rates may di er slightly from year to year in Hong Kong. For 2013, HKIA handled 59.9 million passengers, 4.12 million
2010/11, the tax rate for corporations is 16.5 percent, and the tons of cargo and over 350,000 ight movements. By 2040,
pro t tax rate for partnerships and sole traders is 15 percent. e orts to expand the airport will increase its capacity to handle
up to 87 million passengers and nine million tons of cargo per
Hong Kong adopts a territorial source principle of year. e airport’s marine cargo terminal is linked with 18
taxation, which means that only pro ts sourced in Hong ports in the Pearl River Delta.
Kong are taxable in Hong Kong. ere is no distinction
made between residents and non-residents, which means that
residents can derive pro ts from abroad without being taxed,
260
consecutively ranked as the world’s freest economy by the while non-residents may be taxed on pro ts arising in Hong
Wall Street Journal and Heritage Foundation. Kong. Hong Kong regulations also allow companies to claim
o shore status, allowing them total tax exemption on pro ts
e Chinese central government plans to develop Hong sourced outside of Hong Kong.
Kong as an o shore RMB market and an increasingly
prominent cross-border RMB trade channel. ese measures All expenditures incurred in the generation of assessable
will support Hong Kong enterprises in making RMB- pro ts, including most interest costs, rent for o ce and
denominated direct investments into the mainland, according factory premises, bad debts, and salaries and payments to
to statements by Chinese Vice Premier Keqiang Li in August approved pension schemes, are deductible from gross income.
2011. Li also stated that the central government will support Sums paid out on capital expenditures are not tax deductible.
the development of o shore RMB nancial products in Hong Losses can be carried forward without any limits.
Kong and that cross-border trade settlements in RMB should
be extended to cover the whole country. VAT and Withholding Tax
Value-added tax (VAT) is non-existent in Hong Kong.
As of the end of April 2012, Hong Kong held the world’s ere is also no withholding tax in Hong Kong for pro t
largest pool of o shore RMB funds with total deposits of repatriated back to the overseas parent company.
RMB67.4 billion. To further increase the city’s competitiveness
against foreign rivals such as London and Singapore, last year Salary Tax
the central government allowed foreign investors to invest ere are two ways of calculating salary tax in Hong Kong
in RMB-denominated exchange trade funds in Hong Kong.
Additionally, the government will support third parties using for the individual taxpayers who have assessable income from
Hong Kong as a venue to settle trade and investments in employment:
RMB, and further enrich o shore RMB products in Hong
Kong, according to Xinhua. 1. Progressive rate. Taken on a sliding scale (2-17
percent) against the taxpayer’s annual net chargeable
In terms of infrastructure development, the Hong Kong- income (i.e. less allowable deduction and personal
Zhuhai-Macau Bridge (construction slated for 2009-2016) is allowances); and
expected to reduce travel time between Hong Kong and each
city from 4.5 hours to approximately 40 minutes. e SAR 2. Standard rate. 15 percent, based on the annual net
is currently undergoing an ambitious transport infrastructure income (i.e. less allowable deductions only). The
program, and has allocated a budget of HK$15.5 billion to be final payable income tax is the lower of the two tax
spent on major road and railway projects. e entirety of this liabilities. The maximum average tax rate in Hong
program is expected to be completed in 2020. Kong is thus 15 percent for the current tax year.
Dividends received from any corporation enjoy a tax
Hong Kong follows a free trade policy and hence maintains exemption.
basically no barriers to trade: there are no customs tari s on
goods imported into or exported from Hong Kong. Import Infrastructure
and export licensing are kept to a minimum. Most products
do not need licenses to enter or leave Hong Kong and where e city is currently undergoing an ambitious transport
licenses or noti cations are required, they are only intended infrastructure program, and has a recent annual budget
to ful ll obligations under various international agreements, of HK$15.5 billion to be spent on major road and railway
or to maintain public health, safety or security. projects. e entirety of this program is expected to be
completed in 2020.
Spotlight on Hong Kong Taxes
Corporate Income Tax Air
Hong Kong’s simple and business-friendly tax system is a e Hong Kong International Airport at Chek Lap Kok
major attraction for foreign investors. Corporate income tax is the busiest airport in the world for international cargo. In
rates may di er slightly from year to year in Hong Kong. For 2013, HKIA handled 59.9 million passengers, 4.12 million
2010/11, the tax rate for corporations is 16.5 percent, and the tons of cargo and over 350,000 ight movements. By 2040,
pro t tax rate for partnerships and sole traders is 15 percent. e orts to expand the airport will increase its capacity to handle
up to 87 million passengers and nine million tons of cargo per
Hong Kong adopts a territorial source principle of year. e airport’s marine cargo terminal is linked with 18
taxation, which means that only pro ts sourced in Hong ports in the Pearl River Delta.
Kong are taxable in Hong Kong. ere is no distinction
made between residents and non-residents, which means that
residents can derive pro ts from abroad without being taxed,
260
