Over 120,000 new migrants arrived into Hong Kong to work or start a new business in 2025. In a city infamous for its high living expenses, it also offers a low tax environment and additional tax benefits to help lower the financial burden on its residents. If you’re planning to relocate to Asia’s World City, you’ll need to understand its various tax mechanisms to succeed. This guide breaks down what you can expect as an expat, from salaries tax to profits tax, and ways you can further lower your tax bill.
Income Tax
Hong Kong uses a progressive tax rate system for personal income, with the lowest tax rate charged starting at 2% for the first HK$50,000. When working in the city, your salary tax will be calculated based on your earnings after deducting allowable expenses and personal allowances. To file your individual tax return, you will need to complete the BIR60 form, which the Inland Revenue Department typically issues in May and requires you to submit within one month.
The Mandatory Provident Fund (MPF)
The Mandatory Provident Fund (MPF) is a compulsory retirement scheme designed to help employees build a retirement fund, where Hong Kong employers are responsible for handling the administration of these contributions for their staff. In practice, both the employer and the employee are required to contribute 5% of the employee’s relevant income into the fund, where the employer matches the employee’s contribution. These contributions are tax deductible for both employee and employer.
Profits Tax
Hong Kong’s famous business-friendly environment is built on a territorial tax system, where you only pay tax on profits that arise in or are derived directly from the city. Meaning that if your company earns income entirely outside of Hong Kong, you can file an offshore profits tax claim to exempt that revenue from local profits tax entirely when they file their profits tax return with supporting evidence. Any profits derived from within the city will be taxed between 8.25% and 16.5% progressively when you submit your profits tax return.
Establishing a New Business
The incorporation process in Hong Kong is very quick, straightforward and can even be completed entirely remotely within three days. Directors can all be foreign, alongside a locally appointed company secretary and a physical registered office address in the city, which can be included with the city company secretary services.=
If you already have an established company overseas that you’d like to move to Hong Kong, you can take advantage of the new company re-domiciliation regime that came into effect on May 23, 2025. This regime allows non-Hong Kong companies to transfer their domicile over to the jurisdiction while preserving their legal identity, which companies originating from locations like Luxembourg, the Cayman Islands, and Bermuda have successfully re-domiciled under.
To qualify, your company must be registered in a jurisdiction that permits outward re-domiciliation, have completed at least one financial year, demonstrated solvency for the past 12 months, and be free from liquidation or bankruptcy proceedings.
Withholding Tax
Unlike many other jurisdictions, Hong Kong does not charge withholding tax on dividends or interest paid to individuals or corporations, making it incredibly efficient to repatriate profits from your Hong Kong company back to your home country. In fact, the only withholding tax applied locally is on royalties and specific fees paid to non-resident entertainers or sportspeople.
Rental Reimbursement
You can further reduce your taxable income through a rental reimbursement scheme, a housing benefit where your employer partially or fully reimburses your residential rent. Because this reimbursement is taxed separately rather than as a regular cash salary, it can provide significant tax relief against Hong Kong’s high rental costs.
Personal Assessment
If you end up earning and salary and running a side business, like many of Hong Kong’s residents, you may end up paying multiple taxes across your multiple income streams. You can lower your overall tax burden further by electing for a personal assessment, which is a tax relief mechanism that combines all your taxable income into a single assessment and a single tax bill.
Instead of paying separate taxes on your salary, business profits, and rental income, they are aggregated so you can apply various deductions and allowances across your total income.
The benefits of this approach include deducting business losses from your other income sources and claiming interest paid on money borrowed to buy rental properties. You can also claim benefits related to raising a family or caring for an elderly relative through the personal assessment. It is worth noting however that if you only earn a salary, electing for a personal assessment will not benefit you and could actually result in a higher tax bill.
Conclusion
If after reading this makes you all the more excited to establish yourself in the Pearl of the Orient, drop us a message and we’d be happy to help answer tax and company set-up questions to help you orient yourself to life in the city.
