As we all know, Hong Kong is a low-tax paradise, but where is the specific "low"?
Today, Xiaoxing will give you a taste, where is the “l(fā)ow” Hong Kong salaries tax
[Salary Tax Interpretation]
1 salary Scope of tax payment
According to the provisions of Hong Kong’s Inland Revenue Ordinance, in Hong Kong, most people who earn income from holding positions, employment or receiving pensions are required to pay Salaries tax (equivalent to personal income tax in the Mainland). At the same time, the income must be generated in or derived from Hong Kong.
2Hong Kong salary tax tax year
The tax year for Hong Kong salaries tax is from April 1st to March 31st of the following year. Employees need to report to the tax bureau for all their income during this period.
3 Hong Kong Salaries Tax Calculation
There are two calculation methods:
The amount of salaries tax is calculated based on your actual taxable income in the tax year at a progressive tax rate; or based on your net income at a standard tax rate; whichever is greater The lower tax amount is levied.
Real taxable income = total income-total deductions-total allowances
Net income = total income-total deduction
Simply put, if you are a high-net-worth individual with an annual income of several million, you can choose to use the net income to be calculated at the standard tax rate of 15%. If it is an ordinary worker who earns less than 50,000 Hong Kong dollars per month and does not have equity options in hand, the actual taxable income of the tax year is used to calculate the progressive tax rate.
Today, let’s take a look at a comparison example of high-net-worth tax payment:
Hong Kong Mr. A
Mr. A is a Hong Kong resident, married, and has two minor children. Mr. A's parents live with him, and both of them are over 60 years old, and the elderly spend a total of 50,000 yuan. Mr. A’s annual income is 1 million Hong Kong dollars, and his annual study and training costs are 50,000 Hong Kong dollars. In addition, he pays 80,000 Hong Kong dollars for home mortgage interest.
Mr. A’s total taxable income is: 1000000-264000-120000*2-50000*2-50000-50000-80000=216000
Annual income-married person allowance-child allowance*2-supporting the elderly over 60*2-and residential care expenses for the elderly-personal education expenses-home loan interest= Total taxable income
According to the tax rate in Hong Kong, the tax deduction is skipped, and the tax concession of 20,000 is subtracted. The tax payable by Mr. A is:
50000*2%+50000*6%+50000*10%+50000*14%+16000*17%-20000=HK$8000
Mainland Mr. B
Mr. B is an inland Shanghai citizen, an only child, dependent parents, and two minor children. After deducting five insurances and one housing fund, Mr. B's annual salary is RMB 900,000 (approximately HKD 1 million, exchange rate 1:0.9), of which monthly salary is RMB 60,000 per month, annual salary is RMB 720,000, and a one-time bonus at the end of the year is RMB 180,000 . Mr. B insists on studying and training every month, and has a building in Shanghai.
Mr. B’s monthly taxable income is: 5000+2000+2000+400+1000=10400
Starting point + support for the elderly + children's education + continuing education + housing loan interest = taxable income reduction and exemption
The taxable income that Mr. B can reduce or exempt for the whole year is: 10400*12=124800
Mr. B’s annual taxable income is: 720000-124800=595200
Mr. B, the tax deduction is skipped according to the tax rate in the Mainland. A total of:
595200*35%-85920=122400
In addition, Mr. B’s year-end one-off bonus is RMB 180,000, corresponding to a tax rate of 3%, and the tax payable is: (180000-5000)*3%=5250
Therefore, Mr. B is taxable throughout the year:
122400+5250=127650元
Seeing this, I believe everyone can't help but wonder why the tax payable of Hong Kong high-net-worth individuals is so much less than that of the Mainland?
The reason is here, please see ↓
*There are 13 items of tax deduction and exemption in Hong Kong.
In Hong Kong, whether you are married, having children, adopting parents, living with your parents, raising younger siblings, divorced single parents, injured or sick, buying a house, studying, or doing charity, you can get tax deductions and exemptions very high.
Take raising children as an example. The annual tax allowance for having a child in Hong Kong is HK$120,000, and the average monthly tax exemption is HK$10,000 (approximately RMB 9,000). The mainland only has a monthly allowance of 1,000 yuan.
For other specific tax exemptions, please refer to the following details:
*Hong Kong has 8 types of tax-free items and 5 types of deductions
[Tax-free items]
1. Basic allowance: 132000
2. Married persons allowance: 264000
3. Children's tax allowance (No. 1-9, calculated by name): 120000
4. Support brothers and sisters allowance: 37500
5. Support for seniors aged 60 and above (calculated by name): 50000
Support for seniors aged 55 and above (by name): 25000
6. Single parent allowance: 132000
7. Disability allowance: 75000
8. Allowance for disabled dependants (calculated by name): 75000
[Deduction Items]
1. Personal education expenses: 100,000 (upper limit)
2. Elderly residential care expenses: 100,000 (upper limit)
3. Home loan interest: 100000 (upper limit)
4. MPF contributions: 18000 (upper limit)
5. Charitable donations: 35%
In addition, Hong Kong’s salaries tax mentioned above adopts two taxation methods, both of which are calculatedjust choose the lower one to file tax returns That's it.
It is worth mentioning that in Hong Kong’s calculation formula, the mention of "tax concessions".
Hong Kong’s "tax deduction" is a sum of money that can be deducted after calculating the tax payable. The maximum per case can be A further reduction of HK$20,000.
In this way, I also understand the huge difference in taxation between Mr. A and Mr. B. You can save 10w+ a year. As a taxpayer, saving is equal to Earned.
Dear high-net-worth individuals, quickly follow the formulas and information provided above to calculate how much tax you need to pay for your income in Hong Kong and the Mainland!
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