Hong Kong is a major international trading center. Goods shipped to Hong Kong from overseas are generally subject to local sales tax, which is a 17% value-added tax (VAT) on the final retail price.
The general principle is that goods sold to customers in Hong Kong are subject to local sales tax. However, there are some exceptions to this rule. For example, goods that are exempt from sales tax in Hong Kong include:
- Certain medical and health products
- Educational materials
- Food and beverages
- Basic necessities such as clothing and shoes
In addition, there are some special rules that apply to the taxation of goods sold to customers in Hong Kong.
Luckily for you, we’ve put together an overview of the tax environment in Hong Kong.
Understanding the Hong Kong Customs and Trade Environment
Hong Kong is a free port and does not levy customs tariffs on imports, impose tariff quotas or surcharges. There is no system of value-added tax or equivalent, which means that the cost of goods and services is relatively low.
This makes Hong Kong an attractive place to do business, as it is easy to import and export goods without incurring significant costs.
The main taxes that companies doing business in Hong Kong need to be aware of are income tax and profits tax.
Income tax is levied on profits generated by a company, while profits tax is levied on the net profits of a company after certain allowable deductions have been made.
Many of the customs and trade challenges faced by companies are to do with managing transit, transshipment, and temporary importation.
Common Hong Kong taxes on your trading business
There are a few common Hong Kong taxes that your trading business will need to pay.
This is a tax on the profits of your company. The rate is currently 16.5%, although there are some deductions that may apply. You will need to submit a corporate tax return every year, detailing your company’s income and expenses.
This is a tax on certain types of goods that are produced or imported into Hong Kong. Hong Kong imposes excise duty on the following:
- Hydrocarbon oil
- Methyl alcohol
This is a tax that is deducted from certain types of payments made by your company, such as interest, dividends, and royalties. The rates vary depending on the type of payment but are typically between 5% and 15%.
There are a few other taxes that may apply to your trading business, such as stamp duty and property tax. It is important to consult with a tax specialist to determine which taxes apply to your business and how to best pay them.
As a Hong Kong trader, you will need to be aware of the various taxes that apply to your business. The most common taxes are corporate tax, excise duty, and withholding tax.