Tax changes in Hong Kong

ON 28 FEBRUARY 2007, THE PROPOSAL FOR HONG KONG'S TAX CHANGES FOR 2008/2009 HAS BEEN ANNOUNCED. TAXPAYERS BENEFIT FROM NUMEROUS TAX CONCESSIONS AND HANDOUTS.

Profits tax: reduced

A person carrying on a trade, profession or business is taxable on profits arising in or derived from Hong Kong. For 2008/09, the standard rate applicable to persons other than companies will be reduced by 1% to 15%; the profits tax rate for corporations will be reduced by 1% to 16.5%. This is one of the lowest rates around the world.

Salaries tax: reduced / Allowances: increased

A person is subject to salaries tax on his or her Hong Kong-sourced employment income, any income from an office held in Hong Kong and any Hong Kong pension. The stan-dard rate will be reduced by 1% to 15% for 2008/09. The basic and married person’s allowances will be increased from HKD100,000 to HKD108,000 and from HKD200,000 to HKD216,000 respectively for 2008/09.

Property tax: reduced

The standard rate (for non-corporate owners) will be reduced by 1% to 15% of the net assessable value for 2008/09. The net assessable value is calculated as the amount of rental income less allowable deduction less a statutory 20% allowance for repairs and outgoings.

Duty on alcoholic beverages: exempt

The proposal includes the exemption of duties on wine, beer and all other alcoholic beverages except spirits with immediate effect, and the removal of the related administrative controls upon amendment of the relevant legislation, so as to facilitate the development of trading, storage and distribution of these alcoholic beverages Documentation troubles

Liability to tax

Only income or profits arising in or derived from Hong Kong are taxable. HK and China have a mutual understanding regarding tax relief for HK companies in order to avoid double taxation. Also, individual income will not be subject to mainland individual income tax if that resident stays in for a period not exceeding 183 days in any 12-month period commencing or ending in the taxable period concerned.

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