TAXATION

2. If I received monthly rental of $40,000 from letting a property under mortgage (interest of $42,000 was paid during the year), can I pay less tax under Personal Assessment? When will the selection of Personal Assessment not be advantageous?

(Note: The following calculation is based on the tax rates for the year of assessment 2022/23.)

There is a saving of $45,900 (i.e. $57,600 – $11,700) if you elect for Personal Assessment which enables you to claim deductions for mortgage interest and personal allowance.

(Note) For 2022/23, 100% of the final tax payable under Profits Tax, Salaries Tax and tax under Personal Assessment would be waived, subject to a ceiling of $6,000 per case.

When will the selection of Personal Assessment not be advantageous?

Under Personal Assessment, tax is calculated at progressive tax rates on the aggregated income from all sources. As the marginal scale of the progressive rates (17%) is higher than the standard rate (15%), it may not be advantageous for larger income taxpayers to elect Personal Assessment.

Suppose you also earned a salary of $500,000 in addition to your rental income during the year:

As your income is chargeable to Salaries Tax at the marginal rate of 17%, any property income required to be aggregated under Personal Assessment will also be charged at 17%. Hence, it is not advantageous for you to elect for Personal Assessment.

If you have elected for Personal Assessment, the Inland Revenue Department will issue a Salaries Tax assessment and Property Tax assessment separately and will, by way of an Assessor’s note in the respective notices of assessment, advise that it is not advantageous for you to elect Personal Assessment for the relevant year of assessment.

(Note) For 2022/23, 100% of the final tax payable under Profits Tax, Salaries Tax and tax under Personal Assessment would be waived, subject to a ceiling of $6,000 per case.

3. If I suffered a business loss of $100,000 but received salaries income of $400,000 from a separate employment, can I pay less tax under Personal Assessment?

(Note: The following calculation is based on the tax rates for the year of assessment 2022/23.)

By electing Personal Assessment, your tax liability reduced by $16,040 (i.e. $21,560 – $5,520) because you business loss can be utilised to set off against your other assessable income in the year.

(Note) For 2022/23, 100% of the final tax payable under Profits Tax, Salaries Tax and tax under Personal Assessment would be waived, subject to a ceiling of $6,000 per case.

4. The profit of my sole-proprietorship business was assessed at $460,000. My wife received a monthly rent of $10,000 from a property under mortgage. She paid mortgage interest of $56,000 during the year. How is Personal Assessment applied to a married couple?

(Note: The following calculation is based on the tax rates for the year of assessment 2022/23.)

(Note) For 2022/23, 100% of the final tax payable under Profits Tax, Salaries Tax and tax under Personal Assessment would be waived, subject to a ceiling of $6,000 per case.

For the year of assessment up to 2017/18, where a taxpayer is married and is not living apart from his/her spouse, and both of them have income assessable to tax, election for Personal Assessment must be made by the couple jointly. Separate taxation for husband and wife is alternatively applicable under Personal Assessment from the year of assessment 2018/19 onwards.

If Joint Personal Assessment is selected, the total income of an individual, as appropriately reduced, will be aggregated with that of his/her spouse to arrive at the joint total income of the couple for assessment purposes. Normally, the tax payable on the Joint Assessment is proportionally allocated to the husband and the wife on the basis of their respective reduced total income, and a notice of assessment and a demand for payment will be issued to each of them.

5. Is there a time limit for selecting Personal Assessment?

Personal Assessment must be elected: 

• not later than 2 years after the end of the year of assessment in respect of which the election is to be made (e.g. election of Personal Assessment for the year of assessment 2022/23 has to be made not later than 31 March 2025), OR
• 2 months after the issue of a notice of assessment, or a notice of additional assessment to tax, for the year of assessment in respect of which the election is made, whichever is the later.

V. Taxation Arrangement between the Mainland China and Hong Kong (to avoid double taxation)

Information in this part aims to highlight some tax issues affecting Hong Kong residents who are employed both in Hong Kong and in the Mainland.

Double Taxation Agreements entered into between Hong Kong and the Mainland China

On 11 February 1998, Hong Kong and the Mainland China signed the "Arrangement between the Mainland of China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation on Income" (“Limited Arrangement” ) to allocate the right to tax between the two jurisdictions on a reasonable basis to avoid double taxation of income.

On 21 August 2006, both parties have signed a more comprehensive arrangement titled "Arrangement between the Mainland of China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income" (“Comprehensive Arrangement”) superseding the Limited Arrangement. The Comprehensive Arrangement has broadened the coverage of income by adding income from immovable property, associated enterprises, dividends, interest, royalties, capital gains, pensions and government services, etc.

Over the years, Hong Kong and the Mainland China have signed various protocols to the Comprehensive Arrangement in order to broaden the scope of tax benefits and give effect to international standards on tax avoidance. 

Tax liabilities in Hong Kong 

For Salaries Tax liability of a Hong Kong resident who provides services both in the Mainland and in Hong Kong, please refer to here.  

Tax liabilities in Mainland China 

If a Hong Kong resident under his/her employment renders services on the Mainland only (i.e. services are not rendered whilst in Hong Kong), all the income from that employment (including capacity as a director) will be regarded as attributable to services rendered on the Mainland. Such income is wholly chargeable to Mainland tax, irrespective of whether it is paid by a Mainland enterprise or an overseas employer (including a Hong Kong employer) UNLESS that person satisfies the all three conditions as follows:

1. the Hong Kong resident is present in the Mainland for a period or periods not exceeding in the aggregate 183 days in the calendar year concerned;
2. the income is paid by, or on behalf of, an employer who is not a resident of the Mainland; and
3. the income is not borne by a permanent establishment or a fixed base, which the employer has in the Mainland.

If the remuneration is also subject to taxation in Hong Kong, a tax credit will be allowed for the tax paid in the Mainland under the Comprehensive Arrangement.

If a Hong Kong resident under an employment renders services both in the Mainland and in Hong Kong, his/her Mainland tax liabilities will be determined as follows:

1. Aggregated periods of stay in the Mainland not exceeding 183 days

   Income paid or borne by the Mainland entity will be chargeable to Mainland Individual Income Tax. Tax will be calculated on the chargeable income and then apportioned on time basis. Income paid by an overseas employer (including a Hong Kong employer) is not chargeable.

2. Aggregated periods of stay in the Mainland exceeding 183 days

   The total income received from the Mainland entity and the overseas employer (including Hong Kong employer) will be chargeable to Mainland Individual Income Tax. Tax will be calculated on the total income and then apportioned on time basis.

Days of “presence” is counted using the “days of physical presence” method. For example, the day when one is in one side, the day of arrival or departure will be counted as one day. For example, if a person arrives in the Mainland on 1 November and departs on 2 November, he is present in the Mainland for 2 days.

VI. Stamp Duty

The Stamp Duty Ordinance (Cap. 117 of the Laws of Hong Kong) imposes duty/tax on certain types of documents. Although stamp duty bears the word “stamp”, it is totally irrelevant to postage stamps. In general, the payment of stamp duty enables some specified documents to be recognized and enforceable by the Hong Kong courts. Those specified documents include:

1. Conveyance on sale/transfer of immovable property (i.e. a legal document (Assignment) which formally transferred the property ownership from one party to another);
2. Agreement for sale/transfer of residential property (including provisional agreement for sale and purchase);
3. Lease of immovable property (i.e. Tenancy Agreement/Lease); and
4. Share transfer documents for transfer of Hong Kong stock.

In other words, you will be liable to pay stamp duty in, for instance, the following scenarios (not an exhaustive list):

• sell (or purchase) a flat/building/land;
• let out (or lease) a flat/building/land; or
• sell (or purchase) shares of listed or unlisted limited company.

Generally, the buyer, the seller, and any person who uses the instrument will be equally responsible to pay the stamp duty, regardless of any agreement to the contrary made between them.

Rates of Stamp Duty

Stamp duty on document for the sale, transfer and lease of immovable property and transfer of Hong Kong stock are charged at different rates.

• On Sale or Transfer of Immovable Property in Hong Kong

(a) Ad Valorem Stamp Duty (“AVD”)

Depending on your type of property: (i) residential or (ii) non-residential, their relevant dates of execution and other circumstances, the AVD payable will differ, the applicable AVD rates are generally set out in the table below:

Note that Part 1 of Scale 1 AVD rates do not apply to an agreement /conveyance for a residential property where the purchaser is a Hong Kong permanent resident acting on his own behalf and does not own any other residential property in Hong Kong at the time of purchasing the subject property regardless of whether the purchaser is acquiring a residential property for the first time. Instead, in such circumstances, the lower rates (Scale 2) will apply.

For the prevailing applicable stamp duty rates, please click   and for illustration on applying the rates, please click .

Note that with effect from 28 February 2024, all demand-side management measures, including Special Stamp Duty and Buyer’s Stamp Duty, have been cancelled.

• On Lease of Immovable Property in Hong Kong

In Hong Kong, stamp duty is determined at rates depending on the length of the lease. Deposits indicated in the lease are not included when determining the stamp duty.

*The yearly rent/average yearly rent/total rent has to be rounded-up to the nearest $100

• On Transfer of Hong Kong Stock

Stamp duty on sale or purchase of any Hong Kong stock is charged at rates which vary with the amount or value of the consideration.

Please note that the above rates are the prevailing rates as at the date of updating this page and these rates may be subject to change.  You are encouraged to consult the Stamp Office of the Inland Revenue Department for the latest applicable rates if and as needed.

Profits Tax Liabilities on Property Dealing

Duty payers are reminded that despite the payment of stamp duty, there are also profits tax liabilities in respect of assessable profits from the buying and selling of landed properties in the course of a business in Hong Kong. For more information on Profits Tax, please go to another section - Profit Tax.

1. In what ways can I have a document stamped?

a) E-Stamping of documents via the internet

You may use the 24 hours E-Stamping service to submit electronically stamping applications for: 

1. the Initial stamping of an Agreement for Sale, or an Assignment (including deferring the application) with not more than 4 Purchasers;
2. payment of deferred stamp duty;
3. a Subsequent Agreement or Assignment (after the signing of a preliminary or formal Agreement for Sale and Purchase);
4. a Tenancy Agreement (or Lease) with not more than 4 landlords and 4 tenants; and
5. contract notes and/or instrument of transfer for share transfer with not more than 4 joint transferors and/or 4 joint transferees.

b) Application for stamping property documents on paper

You may submit an application on paper for stamping, without presenting the original Agreements, Assignments and Tenancy Agreements/Leases (other than cases presented for adjudication or accompanied by an exemption, relief, remission or refund claim), at the Stamp Office Counter.

You may also submit an application on paper for stamping of tenancy agreement by post.

c) Conventional stamping

For all types of legal documents chargeable with stamp duty including property documents and those relating to stock transactions, you may present the original document, together with a request for stamping and any other supporting documents required, at the Stamp Office Counter or by post.

Upon receipt of a stamping request with the required document(s) and payment of the required fee, the Stamp Office will either issue a stamp certificate in respect of the document or impress a stamp on the document itself.

To obtain a sample of a computer-issued Stamp Certificate, please go to the Inland Revenue Department's webpage. You may also go to the relevant webpage to get a sample of a manually issued Stamp Certificate.

2. Can I submit a license agreement for a property for stamping electronically?

If the license agreement is in the nature of a tenancy agreement with monthly rents, you may submit the stamping application electronically online which is the same as other tenancy agreements. However, if it contains special terms (e.g. a premium or the document has to be adjudicated), please present the original document to the Stamp Office for assessment or adjudication.

3. What is the time limit for stamping a document? Will penalties be imposed if I stamp the document late?

Regarding the time limit for stamping different kinds of documents, please visit here.

For matters on late stamping and the relevant penalties, please click here.

4. Other than the penalties imposed for late stamping, what are the consequences if I fail to stamp a document on which stamp duty is charged?

No document chargeable with stamp duty shall be received in evidence in any legal proceedings except: 

1. criminal proceedings,
2. civil proceedings by the Collector to recover stamp duty or any penalty payable under the Stamp Duty Ordinance,

or be available for any other purpose whatsoever, unless such instrument is duly stamped.

For example, if you entered into a Tenancy Agreement with somebody and you want to sue your tenant for rental arrears (or to enforce other obligations under the Agreement), the court may not accept such agreement as valid evidence if it is not duly stamped. The only situation under which an unstamped document will be accepted by the court is that the court orders the solicitor to personally undertake to cause: 

1. such document to be stamped in respect of the stamp duty chargeable thereon, and
2. any penalty payable under section 9 of the Stamp Duty Ordinance (refer to the above Question 3) in respect thereof to be paid.