A Simple Hong Kong Income Tax Guide and Low Tax Places for Expats
It’s just about that time of that year – and we know what you’re all thinking. Hong Kong might not have the lowest income tax rate in the world, but the city ranks pretty high for tax affordability when we compare it to other expatriate destinations of choice.
While Hong Kong’s rent to income ratio might sound scary, and might freak out the most avid savers who haven’t yet ventured to the city, the individual salaries tax rate might actually make it easier for you to save more money while you’re here.
In case you didn’t hear, Income earned in Hong Kong is taxed progressively. That just means the amount you pay depends on the amount you earn.
So let us walk you through how it’s all broken down:
First, you start with your yearly salary – which probably has won a couple of digits since you moved from home, and traded that good old EUR or USD, for the local HKD.
Then you start with deducting what is called a “Basic allowance” – which is a fixed allowance everyone is entitled to (yes, you heard right, everyone, including expats). That bit you can just forget about, as it isn’t going to be counted in the base amount for tax. The amounts of the basic allowance vary.
For single individuals, the basic allowance is HKD132,000, while married people have an allowance of HKD264,000. There are also a bunch of additional allowances for dependents: children, brothers, sisters, parents, grandparents, single parents and people with disabilities depending on each individual’s circumstances. Pretty thoughtful – that’s just Hong Kong’s tax hospitality at its best.
After the allowance is out of the way, you take that remaining balance and find out which tier you belong to. Those tax tiers go as follows:
On the first HKD50,000 = 2% (HK1,000)
On the next HKD50,000 = 6% (HK3,000)
On the next HKD50,000 = 10% (HK5,000)
On the next HKD50,000 = 14% (HK7,000)
On anything above those HKD200,000, congrats, you’re getting taxed the maximum of 17% – which by the way you can basically request to be capped to 15%.
Having said that, you might want to keep a close tab on Inland Revenue Department’s website for income tax efiling, tax deduction details, tax calculator for foreigners and updates – as it’s all subject to change.
But what’s the big deal after all? How does that compare to other top cities to live for expats?
If you’re considering relocating to another country, here are the current income tax rates for the most popular destinations, updated from Trading Economics as of January 2019. We’ve compared them to 30 of Business Insider’s list of the best cities for expats in 2018 (Hong Kong comes in at #49).
Best cities for expats in 2018 and their income tax rates
- Taipei, Taiwan: 45%
- Singapore: 22%
- Manama, Bahrain: 0%
- Ho Chi Minh City, Vietnam: 35%
- Bangkok, Thailand: 35%
- Kuala Lumpur, Malaysia: 28%
- Aachen, Germany: 47.5%
- Prague, Czech Republic: 22%
- Madrid, Spain: 45%
- Muscat, Oman: 0%
- The Hague, Netherlands: 52%
- Montreal, Canada: 33%
- Amsterdam, Netherlands: 52%
- Abu Dhabi, United Arab Emirates: 0%
- Tallinn, Estonia: 20%
- Melbourne, Australia: 45%
- Rotterdam, Netherlands: 52%
- Lisbon, Portugal: 48%
- Mexico City, Mexico: 35%
- Cape Town, South Africa: 45%
- Sydney, Australia: 45%
- Basel, Switzerland: 40%
- Zug, Switzerland: 40%
- Dusseldorf, Germany: 47.5%
- Vancouver, Canada: 33%
- Helsinki, Finland: 51.6%
- Barcelona, Spain: 45%
- Dubai, United Arab Emirates: 0%
- Toronto, Canada: 33%
- Kampala, Uganda: 40%
Business Insider’s ranking is based on scores given on different aspects of urban life, including quality of living, getting settled, work life and finance and housing. While Hong Kong ranks much lower than most of these cities for income tax rates, less money-minded expats may want to consider trading up their monthly take-home salary for better quality living and housing. Working in Hong Kong comes with great opportunities to make decisions on how you want to spend your disposable income so if you’re here for the foreseeable future, take control of your finances today.
You may also want to use the Hong Kong’s favorite spending-tracker: gini (available on App Store and Google Play) – the first global smart spending tracker allowing you to have all your account and credit cards worldwide, all currencies included, in one spot – and using bank level security secured by Saltedge, the guardian of banking data trusted by the likes of Societe Generale, ING, or BBVA. When do you stop counting, and when do you start living?