Taxation of employer-provided stock options. Employer-provided stock options are generally taxable at the time of exercise. However, for an individual who has non-Hong Kong employment and is taxed on a pro rata basis by reference to the number of days of his or her services in Hong Kong only, part or all of the option gain may be excluded from taxable income. The amount excluded depends on various factors including whether the option is granted conditionally or unconditionally, and, if granted conditionally, the number of days on which the individual performed Hong Kong services during the vesting period.
Taxation of employment-related share awards. Employmentrelated share awards are generally considered to be perquisites from employment and taxed as part of the remuneration. In general, they become taxable when an employee is entitled to the full economic benefit of the shares awarded. If the employee has a non-Hong Kong employment, proration of the income by reference to the number of days of his or her services in Hong Kong that is similar to the proration applicable to stock option benefits may also be allowed.
Capital gains. Hong Kong does not tax capital gains.
Deductions
Deductible expenses. To be deductible for purposes of salaries tax, expenses must be incurred wholly, exclusively and necessarily in the production of a taxpayer’s assessable income. Depreciation allowances (capital allowances) may also be claimed on plant and machinery used in the production of assessable income.
Personal deductions and allowances. For salaries tax, certain education expenses paid to specified institutions are deductible up to HKD100,000 per year. Approved charitable donations are deductible up to 35% of assessable income. Mandatory contributions to “recognized retirement schemes,” as defined, are deductible up to HKD18,000 per year. Qualifying premiums paid to a Qualifying Deferred Annuity Policy and/or tax-deductible Mandatory Provident Fund contributions are deductible, up to the aggregate of HKD60,000 per taxpayer per year. Premiums paid into a Voluntary Health Insurance Scheme are deductible, up to HKD8,000 per qualified insured person per year. Home mortgage interest is deductible, up to HKD100,000 per year for a maximum of 20 years. Rent paid by an individual or his or her spouse (who is not living apart from him or her) under a qualifying tenancy of domestic premises used as place of residence is deductible, up to HKD100,000 per year. Effective from the 2024-25 tax year, additional home mortgage interest or rent payments in the amount of HKD20,000 are deductible for the individuals who reside with their qualifying child and if the specified conditions are met. It is also proposed that expenses on assisted reproductive services would be deductible with a cap of HKD100,000, subject to the enactment of a legislative amendment.
Personal allowances are also available under salaries tax to individuals with an income level at below the “break-even” point (that is, the point where the standard rate of 15% (for the first HKD5 million) or 16% (for the portion exceeding HKD5 million) applies (see Rates). For the 2024-25 tax year, the following are the amounts of personal allowances available.
B. Estate tax
Estate duty was abolished, effective from 11 February 2006. Estates of persons who pass away on or after that date are not subject to estate duty.
C. Social security
Hong Kong does not impose any social security taxes. Employers and employees are each required to contribute the lower of 5% of the employees’ salaries or HKD1,500 per month to approved mandatory provident fund schemes unless the employees are covered by other recognized occupation retirement schemes.
D. Tax filing and payment procedures
The tax year in Hong Kong runs from 1 April to 31 March. Penalties apply for breaches of time limits in filing returns. Individual taxpayers are usually issued composite tax returns and are required to report all income from the various sources subject to profits tax, salaries tax or property tax. Salaries tax is automatically levied separately on the employment income of married couples and is paid separately by each spouse. However, a married couple not wishing to be assessed separately may elect joint assessment on their salaries, or, if beneficial, elect a combined assessment of their income from all sources under personal assessment.
No payroll or withholding tax requirements apply for purposes of salaries tax, except for a taxpayer who is about to leave Hong Kong for over one month (other than in the course of his or her employment). Profits, property and salaries tax all operate under a system of prepaid tax, known as provisional tax. The provisional assessment for a tax year is an estimate, normally based on the preceding year’s assessment, and is payable in two installments: one equal to 75% of the preceding year’s tax liability, usually payable in the final quarter of the relevant tax year, with the remaining 25% payable three months later. When the actual income for the tax year is determined, a final tax assessment is issued, giving credit for provisional tax already paid. The final tax assessment is combined with a provisional tax assessment for the following year. The final tax is payable at the same time as the 75% installment of provisional tax for the following year.
E. Double tax relief and tax treaties
Employment income derived from services rendered outside Hong Kong is exempt from salaries tax if the person is chargeable to and has paid tax of substantially the same nature as salaries tax with respect to that income.
Effective from the 2018-19 tax year, for employment income derived by Hong Kong tax residents from services rendered outside Hong Kong in a territory that has entered into a double tax agreement with Hong Kong, any relief from double tax is by way of a tax credit rather than an income exemption. An individual is a Hong Kong tax resident if (a) they ordinarily reside in Hong Kong or (b) they stay in Hong Kong for more than 180 days in the year of assessment for which the foreign tax credit claim is made, or for more than 300 days in two consecutive years of assessment, one of
which is the year of assessment for which the foreign tax credit claim is made.
The income exemption or tax credit allowable must not exceed the relief that would be allowed if the taxpayer had taken reasonable steps to minimize the foreign tax payable. Subsequently, if the relief is excessive, the taxpayer has an obligation to inform the Hong Kong tax authority to have the Hong Kong salaries tax correctly adjusted.
Hong Kong has entered into double tax agreements with Austria, Belarus, Belgium, Brunei Darussalam, Cambodia, Canada, China Mainland, the Czech Republic, Estonia, Finland, France, Georgia, Guernsey, Hungary, India, Indonesia, Ireland, Italy, Japan, Jersey, Korea (South), Kuwait, Latvia, Liechtenstein, Luxembourg, the Macau SAR, Malaysia, Malta, Mauritius (effective from 2024-25), Mexico, the Netherlands, New Zealand, Pakistan, Portugal, Qatar, Romania, the Russian Federation, Saudi Arabia, Serbia, South Africa, Spain, Switzerland, Thailand, the United Arab Emirates, the United Kingdom and Vietnam.
Double tax agreements have also been signed with Armenia, Bahrain, Bangladesh and Croatia, and the effective date of each of these agreements has not yet been fixed.
F. Visitor status
Most foreign nationals may easily enter Hong Kong for visiting purposes with their passports. The length of time one is permitted to stay in Hong Kong under visitor status depends on the jurisdiction that issued the passport. For example, a US passport holder is allowed to stay in Hong Kong as a visitor for 90 days while passport holders from some jurisdictions may only be allowed to stay for 14 days. Foreign nationals who do not enjoy the visitor visa-free period must apply before traveling to Hong Kong. Visitor status does not permit the passport holder to undertake employment in Hong Kong.
G. Work and self-employment visas
To work in Hong Kong, a foreign national must obtain an employment visa.
Because of the change of sovereignty on 1 July 1997, the immigration policies relating to British subjects have been revised. Under the new law, British subjects may obtain a 90-day visitor visa free period for visiting Hong Kong, and must obtain employment visas to work in Hong Kong. The procedures for obtaining visas are the same for British subjects as for other foreign nationals.
Work visas. The Immigration Department recommends that foreign nationals apply for work visas from their home jurisdictions or where they reside prior to their arrival in Hong Kong. The entire process takes four to six weeks. However, an employee urgently needed by his or her employer in Hong Kong may enter Hong Kong with a visitor visa, then apply for a work visa while in Hong Kong. This method is not encouraged by the Hong Kong Immigration Department. If the applicant is applying for a work visa in Hong Kong while still holding a visitor visa, he or she
Capital Investment Entrant Scheme. In January 2015, the government announced that the Capital Investment Entrant Scheme was suspended, effective from 15 January 2015, until further notice. The Immigration Department will continue to process applications received on or before 14 January 2015, whether already approved (including approval-in-principle and formal approval) or still being processed.
New Capital Investment Entrant Scheme. Hong Kong began accepting applications under the New Capital Investment Entrant Scheme (new CIES) from 1 March 2024. The new CIES seeks to further enrich the talent pool and attract more new capital to Hong Kong. Successful applicants will generally be granted an initial stay of 24 months, subject to the condition that they continue to satisfy the requirements of the new CIES. Visas issued pursuant to the new CIES can be extended up to three years per extension, provided holders remain eligible for the visa. Throughout the scheme, verification for continuous compliance with the portfolio maintenance requirements prepared by a practicing certified public accountant is required to be submitted annually to the new CIES office to confirm that the applicants continue to meet the investment requirement to avoid forfeiting their visas.
After continuously residing in Hong Kong for at least seven years, eligible individuals may apply for permanent residence. Those who do not qualify for permanent residence at the end of the seventh year but satisfy the CIES portfolio maintenance requirements may apply for unconditional stay, which will enable them to reside in Hong Kong without any condition or limit.
Top Talent Pass Scheme. The goal of the Top Talent Pass Scheme (TTPS) is to attract top talent with rich work experience and good academic qualifications, including high-income talents and graduates from the world’s top universities. It is issued to qualifying individuals coming to Hong Kong to explore opportunities. Applicants are not required to have secured an offer of employment upon initial application.
Persons admitted under TTPS will normally be granted an initial stay of 24 months. To obtain an extension (under a three-three years extension pattern), applicants must have secured an employment offer (which is at a level commonly taken up by degree holders or persons with good professional and technical qualifications, proven professional abilities, and has a renumeration package that is at market level) or established or joined a business in Hong Kong.
Quality Migrant Admission Scheme. The goal of the Quality Migrant Admission Scheme (QMAS) is to attract highly skilled or talented persons to settle in Hong Kong to enhance Hong Kong’s economic competitiveness. Applicants are not required to have secured an offer of employment upon initial application.
Persons admitted under the General Points Test of QMAS will normally be granted an initial stay of 36 months. To obtain an extension (under a three-two years extension pattern), a QMAS visa holder under the General Points Test must provide evidence demonstrating that he or she has taken steps to settle in Hong
Kong by taking up residence and has made contribution to Hong Kong (for example, by securing gainful employment at the graduate, specialist or senior level or establishing a business of reasonable size in Hong Kong).
Persons admitted under the Achievement-based Points Test of QMAS will normally be granted a stay of eight years. To obtain an extension (if required), QMAS visa holders under the Achievement-based Points Test must demonstrate that they are capable of supporting and accommodating themselves and their dependents, if any.
H. Residence visas
In addition to work visas, other visas permitting residence in Hong Kong include the following:
• Training visas: Issued to foreign nationals coming to Hong Kong for training purposes. This visa is granted for the period of training (a limited period of not more than 12 months).
• Student visas: Issued to foreign nationals coming to Hong Kong to study. They are granted for the normal duration of the post-secondary program, subject to a maximum period of six years, or for up to 12 months in accordance with the duration of their studies for those studying other courses. The visa generally does not allow its holder to take up employment in Hong Kong.
• Dependent visas: See Section I.
• Admission Scheme for the Second Generation of Chinese Hong Kong Permanent Residents (ASSG): See Section I.
Residence visas and the procedures for obtaining visas are the same for British subjects as for other foreign nationals. All visa applications are subject to being reviewed on a case-by-case basis and are approved by the Immigration Department at its own discretion.
I. Family and personal considerations
Family members
Dependent visas. If an applicant wants to bring his or her family to Hong Kong, the family members (that is, his or her spouse or the other party to a same-sex civil partnership, same-sex civil union, “same-sex marriage,” opposite-sex civil partnership or opposite-sex civil union entered into by him or her in accordance with the local law in force of the place of celebration and with such status being legally and officially recognized by the local authorities of the place of celebration, and unmarried children under age 18) may apply together with the applicant as his or her dependents for dependent visa status. Dependent visas are normally granted for the same time period as the work visa. A dependent visa holder (except a dependent of a person who has been admitted to study unless prior permission is obtained from the Immigration Department) is allowed to work in Hong Kong without prior approval from the Immigration Department under current Hong Kong immigration policy.
Identity cards. Within one month after the activation of the work visa and residence visas, the applicant and his or her family must apply for Hong Kong identity cards from the Immigration
Department if they are 11 years old or older and are permitted to stay in Hong Kong for more than 180 days. All Hong Kong residents are required by law to carry with them at all times identity cards or their passports for identification purposes.
Second Generation of Chinese Hong Kong Permanent Residents. Persons who are the second generation of emigrated Chinese Hong Kong permanent residents from overseas may apply to return to work in Hong Kong under the Admission Scheme for the Second Generation of Chinese Hong Kong Permanent Residents (ASSG). The following are the key requirements:
• Aged 18 to 40 and born overseas
• At least one parent holding a valid Hong Kong permanent identity card at the time of the ASSG application who was a Chinese national settled overseas at the time of the applicant’s birth
• Good educational background, technical qualifications or proven professional experience
• Proficient in written and spoken Chinese (Putonghua or Cantonese) or English
• Sufficient financial means and ability to meet the living expenses for maintenance and accommodation in Hong Kong without recourse to public funds
No quota applies under the ASSG, and applicants are not required to have secured an offer of employment upon initial application. Persons admitted under the ASSG are normally granted an initial stay of 24 months.
Persons admitted under the ASSG may apply for extension of stay in Hong Kong within four weeks before their visas expire. Although applicants are not required to have secured an offer of employment in Hong Kong on application for entry under ASSG, when applying for extension, applicants are required to have secured an offer of employment (which is at a level commonly taken up by degree holders and has a remuneration package that is at market level). For individuals who have established or joined in business in Hong Kong, they are required to produce proof of their business. Successful applicants for extension of stay are normally permitted to remain in Hong Kong on the three-years’ extension pattern.