Page 72 - 2016_SpecialReport_web
P. 72
6 Special Report on the State of Business in South China
The Chinese central government plans to develop Hong from abroad without being taxed, while non-residents may be
Kong as an offshore RMB market and an increasingly promi- taxed on profits arising in Hong Kong. Hong Kong regulations
nent cross-border RMB trade channel. These measures will sup- also allow companies to claim offshore status, allowing them
port Hong Kong enterprises in making RMB-denominated di- total tax exemption on profits sourced outside of Hong Kong.
rect investments into the mainland, according to statements by
Chinese Vice Premier Li Keqiang in August 2011. Li also stated All expenditures incurred in the generation of assessable
that the central government will support the development of profits, including most interest costs, rent for office and fac-
offshore RMB financial products in Hong Kong and that cross- tory premises, bad debts, and salaries and payments to approved
border trade settlements in RMB should be extended to cover pension schemes, are deductible from gross income. Sums paid
the whole country. out on capital expenditures are not tax deductible. Losses can be
carried forward without any limits.
As of the end of 2014, Hong Kong held the world’s largest
pool of offshore RMB funds with total deposits of RMB1150 VAT and Withholding Tax
billion . To further increase the city’s competitiveness against Value-added tax (VAT) is non-existent in Hong Kong.
foreign rivals such as London and Singapore, last year the There is also no withholding tax in Hong Kong for profit repa-
central government allowed foreign investors to invest in triated back to the overseas parent company.
RMB-denominated exchange trade funds in Hong Kong.
Additionally, the government will support third parties using Salary Tax
Hong Kong as a venue to settle trade and investments in RMB, There are two ways of calculating salary tax in Hong Kong
and further enrich offshore RMB products in Hong Kong, for the individual taxpayers who have assessable income from
according to Xinhua. employment:
In terms of infrastructure development, the Hong Kong- 1. Progressive rate. Taken on a sliding scale (2-17 percent)
Zhuhai-Macau Bridge (construction scheduled for 2009-2016) against the taxpayer’s annual net chargeable income
is expected to reduce travel time between Hong Kong and each (i.e. less allowable deduction and personal allowances);
city from 4.5 hours to approximately 40 minutes. The SAR is and
currently undergoing an ambitious transport infrastructure
program, and has allocated a budget of HK$15.5 billion to be 2. Standard rate. 15 percent, based on the annual net
spent on major road and railway projects. The entirety of this income (i.e. less allowable deductions only). The final
program is expected to be completed in 2020. payable income tax is the lower of the two tax liabili-
ties. The maximum average tax rate in Hong Kong is
Hong Kong follows a free trade policy and hence maintains thus 15 percent for the current tax year. Dividends
basically no barriers to trade: there are no customs tariffs on received from any corporation enjoy a tax exemption.
goods imported into or exported from Hong Kong. Import and
export licensing are kept to a minimum. Most products do not Infrastructure
need licenses to enter or leave Hong Kong and where licenses or
notifications are required, they are only intended to fulfill obli- The city is currently undergoing an ambitious transport
gations under various international agreements, or to maintain infrastructure program, and has a recent annual budget of
public health, safety or security. HK$15.5 billion to be spent on major road and railway projects.
The entirety of this program is expected to be completed in
Spotlight on Hong Kong Taxes 2020.
Corporate Income Tax Air
Hong Kong’s simple and business-friendly tax system is a The Hong Kong International Airport at Chek Lap Kok is
major attraction for foreign investors. Corporate income tax
rates may differ slightly from year to year in Hong Kong. For the busiest airport in the world for international cargo. In 2014,
the year of assessment 2008/09 onwards, the tax rate for corpo- HKIA handled 63.3 million passengers, 4.38 million tons of
rations is 16.5 percent, and the profit tax rate for partnerships cargo . By 2040, efforts to expand the airport will increase its
and sole traders is 15 percent. capacity to handle up to 87 million passengers and million tons
Hong Kong adopts a territorial source principle of taxation, of cargo per year. The airport’s marine cargo terminal is linked
which means that only profits sourced in Hong Kong are taxable with 18 ports in the Pearl River Delta.
in Hong Kong. There is no distinction made between residents
and non-residents, which means that residents can derive profits
72
The Chinese central government plans to develop Hong from abroad without being taxed, while non-residents may be
Kong as an offshore RMB market and an increasingly promi- taxed on profits arising in Hong Kong. Hong Kong regulations
nent cross-border RMB trade channel. These measures will sup- also allow companies to claim offshore status, allowing them
port Hong Kong enterprises in making RMB-denominated di- total tax exemption on profits sourced outside of Hong Kong.
rect investments into the mainland, according to statements by
Chinese Vice Premier Li Keqiang in August 2011. Li also stated All expenditures incurred in the generation of assessable
that the central government will support the development of profits, including most interest costs, rent for office and fac-
offshore RMB financial products in Hong Kong and that cross- tory premises, bad debts, and salaries and payments to approved
border trade settlements in RMB should be extended to cover pension schemes, are deductible from gross income. Sums paid
the whole country. out on capital expenditures are not tax deductible. Losses can be
carried forward without any limits.
As of the end of 2014, Hong Kong held the world’s largest
pool of offshore RMB funds with total deposits of RMB1150 VAT and Withholding Tax
billion . To further increase the city’s competitiveness against Value-added tax (VAT) is non-existent in Hong Kong.
foreign rivals such as London and Singapore, last year the There is also no withholding tax in Hong Kong for profit repa-
central government allowed foreign investors to invest in triated back to the overseas parent company.
RMB-denominated exchange trade funds in Hong Kong.
Additionally, the government will support third parties using Salary Tax
Hong Kong as a venue to settle trade and investments in RMB, There are two ways of calculating salary tax in Hong Kong
and further enrich offshore RMB products in Hong Kong, for the individual taxpayers who have assessable income from
according to Xinhua. employment:
In terms of infrastructure development, the Hong Kong- 1. Progressive rate. Taken on a sliding scale (2-17 percent)
Zhuhai-Macau Bridge (construction scheduled for 2009-2016) against the taxpayer’s annual net chargeable income
is expected to reduce travel time between Hong Kong and each (i.e. less allowable deduction and personal allowances);
city from 4.5 hours to approximately 40 minutes. The SAR is and
currently undergoing an ambitious transport infrastructure
program, and has allocated a budget of HK$15.5 billion to be 2. Standard rate. 15 percent, based on the annual net
spent on major road and railway projects. The entirety of this income (i.e. less allowable deductions only). The final
program is expected to be completed in 2020. payable income tax is the lower of the two tax liabili-
ties. The maximum average tax rate in Hong Kong is
Hong Kong follows a free trade policy and hence maintains thus 15 percent for the current tax year. Dividends
basically no barriers to trade: there are no customs tariffs on received from any corporation enjoy a tax exemption.
goods imported into or exported from Hong Kong. Import and
export licensing are kept to a minimum. Most products do not Infrastructure
need licenses to enter or leave Hong Kong and where licenses or
notifications are required, they are only intended to fulfill obli- The city is currently undergoing an ambitious transport
gations under various international agreements, or to maintain infrastructure program, and has a recent annual budget of
public health, safety or security. HK$15.5 billion to be spent on major road and railway projects.
The entirety of this program is expected to be completed in
Spotlight on Hong Kong Taxes 2020.
Corporate Income Tax Air
Hong Kong’s simple and business-friendly tax system is a The Hong Kong International Airport at Chek Lap Kok is
major attraction for foreign investors. Corporate income tax
rates may differ slightly from year to year in Hong Kong. For the busiest airport in the world for international cargo. In 2014,
the year of assessment 2008/09 onwards, the tax rate for corpo- HKIA handled 63.3 million passengers, 4.38 million tons of
rations is 16.5 percent, and the profit tax rate for partnerships cargo . By 2040, efforts to expand the airport will increase its
and sole traders is 15 percent. capacity to handle up to 87 million passengers and million tons
Hong Kong adopts a territorial source principle of taxation, of cargo per year. The airport’s marine cargo terminal is linked
which means that only profits sourced in Hong Kong are taxable with 18 ports in the Pearl River Delta.
in Hong Kong. There is no distinction made between residents
and non-residents, which means that residents can derive profits
72
