Low taxes, an easy-to-follow tax regime, generous tax allowances and no capital gains tax make Hong Kong one of the most attractive tax regimes in the region. There are no withholding taxes and profits can be remitted anywhere in the world. The Hong Kong dollar is freely convertible.

 

 

Hong Kong operates a territorial basis of taxation under which taxes are imposed only on profits or income with a Hong Kong source.

 

The principal direct taxes are profits tax, salaries tax and property tax. The Inland Revenue Department is responsible for taxation matters in Hong Kong.

From 1 April 1998, the scope for deductions for expenditure on scientific research was expanded to cover capital expenditure incurred on market research, feasibility studies and other research activities related to business and management sciences.

 

 

Property tax is charged at a standard rate of 16% on rentals (for 2004/05, net of rates) received less an allowance of 20% for repairs and maintenance. However, corporations that pay profits tax on their rental income are not subject to property tax