HKMPDB - Competitive Tax Regime

Low and simple tax Regime
Shipping incentives
Double taxation relief

Low and simple tax Regime

Hong Kong upholds a simple tax system. Its low, predictable and one-for- all tax regime provides certainty for commercial undertakings and makes conditional concessions and rebates unnecessary. Hong Kong has no other tax streams. Most government administration fees for commercial operations are charged on a cost- recovery basis. Hong Kong’s independent tax system and its low tax policy are enshrined in the Basic Law. Companies are subject to profits tax of no more than 16.5%, while salaries tax on individuals does not exceed 15%.

Hong Kong does not levy global tax. For shipping, profits derived from international shipping operations are not subject to profits tax in Hong Kong.

Shipping incentives

The Inland Revenue Ordinance (Cap. 112) (IRO) provides for certain preferential tax regimes relating to the shipping industry. Details of the regimes are as follows:

	Regime	IRO provisions	Tax concessions provided
(a)	Ship operator	Section 23B	Income derived by ship operators from international operation of Hong Kong registered ships (including carriage and chartering) are exempt from profits tax.
(b)	Ship leasing	Sections 14O to 14ZB	Profits derived by qualifying ship lessors from carrying out qualifying ship leasing activities in relation to operating lease and finance lease are assessed at a tax rate of 0%; whilst profits derived by qualifying ship leasing managers from carrying out qualifying ship leasing management activities are generally assessed at a half-rate of 8.25%.
(c)	Insurance-related businesses	Section 14B(1)	Profits derived by direct insurers from selected general insurance businesses including those relevant to the underwriting of marine-related risks are assessed at a half-rate of 8.25%.
(d)	Shipping commercial principals	Sections 14ZC to 14ZZC	Profits derived by qualifying ship agents, ship managers or ship brokers from carrying out qualifying ship agency, ship management or ship broking activities are generally assessed at a half-rate of 8.25%.

Double taxation relief

Due to the international nature of shipping operations, shipping operators are more susceptible to double taxation than other taxpayers. It is therefore the Hong Kong Special Administrative Region Government's (HKSARG) objective to make arrangements with its trading partners for the avoidance of double taxation on income derived from international shipping operation. Such arrangements reduce the overall tax burden of ship operators of Hong Kong and the trading partners, thereby improving their international competitiveness. This will also help enhance Hong Kong's position as an international maritime centre.

Hong Kong has signed bilateral double taxation relief agreements covering shipping income with 61 trading partners.

Double taxation relief arrangements may take one of the following forms: