Hong Kong has been one of the world's most attractive financial centers for decades, and its tax system plays a major role. With territorial taxation, no VAT, zero capital gains tax, and some of the lowest rates in the world, China's Special Administrative Region (SAR) continues to attract entrepreneurs and expats worldwide.
In this guide, we break down all of Hong Kong's tax advantages and explain how to benefit from them. Also check our Hong Kong country page for a quick overview of rates.
1. The Territorial Taxation Principle
Hong Kong's tax system is based on a fundamental principle: only income generated in Hong Kong is taxable. This is known as territorial or "source-based" taxation.
Territorial taxation: foreign-sourced income is not taxed in Hong Kong, even if remitted to a Hong Kong bank account.
In practice, this means:
- Foreign-sourced income is not taxed, even if remitted to Hong Kong
- There is no worldwide income tax
- Dividends received from foreign companies are exempt
- Foreign-sourced interest is exempt
This principle makes Hong Kong particularly attractive for entrepreneurs with international clients or passive income from abroad.
2. Zero Capital Gains Tax
Hong Kong imposes no capital gains tax whatsoever, whether on:
- Gains from stocks and bonds
- Real estate gains (excluding stamp duty)
- Gains from the sale of company shares
- Cryptocurrency gains
0% capital gains tax: compare with France's 30% flat tax on securities gains.
For investors and wealth holders, this is a considerable advantage. Compare with France where capital gains on securities are taxed at 30% (flat tax) or up to 34% with social levies.
Discover other jurisdictions with no capital gains tax in our tax ranking.
3. Zero VAT
Hong Kong is one of the few developed territories that levies no VAT or consumption tax. There is no GST (Goods and Services Tax) or sales tax.
This represents a significant advantage for:
- Consumers (lower everyday prices)
- Service businesses (no VAT to collect or remit)
- Importers (no import VAT, except for specific customs duties)
Compared to France's 20% VAT or the 19% in most European countries, this is a significant advantage for purchasing power. To understand the implications of moving, check our guide on tax mistakes to avoid when expatriating.
4. Profits Tax: Corporate Income Tax
The main tax for businesses in Hong Kong is the Profits Tax. Since 2018, a two-tier system has been in place:
- 8.25% on the first HKD 2 million in profits (approximately EUR 230,000)
- 16.5% beyond that
Profits Tax at 8.25% on the first HKD 2M: an extremely competitive rate for SMEs and startups.
This system is particularly advantageous for SMEs and startups, which benefit from the reduced rate on a significant portion of their profits.
International Comparison
- Hong Kong: 8.25% / 16.5%
- Singapore: 17% (with partial exemptions)
- UAE: 9% (above AED 375,000)
- Ireland: 12.5%
- France: 25%
5. Salaries Tax: Personal Income Tax
Income tax on salaries in Hong Kong is progressive but capped. Rates range from 2% to 17%, with a maximum effective rate of 15% thanks to the "standard rate" mechanism.
Progressive Scale 2024/2025
- First HKD 50,000: 2%
- HKD 50,001 to 100,000: 6%
- HKD 100,001 to 150,000: 10%
- HKD 150,001 to 200,000: 14%
- Above: 17%
However, the total tax will never exceed 15% of net income (after deductions). This cap makes Hong Kong particularly attractive for high earners.
6. No Withholding Tax
Hong Kong applies no withholding tax on:
- Dividends paid to non-residents
- Interest paid abroad
- Royalties (except specific cases at 4.95% or 16.5%)
This is a major advantage for holding companies and international structures wishing to distribute profits without tax friction.
7. No Inheritance or Wealth Tax
Hong Kong abolished inheritance tax in 2006. There is also no:
- Wealth tax
- Gift tax
- Estate tax
For wealth planning, it's an ideal environment that allows you to transfer assets without any tax burden. Compare with other low-tax destinations like Romania.
8. Starting a Business in Hong Kong
Company incorporation is fast and accessible:
- Company type: Private Limited Company (most common)
- Minimum share capital: HKD 1 (no effective minimum capital)
- Incorporation time: 1 to 3 business days
- Annual cost: EUR 2,000 to 5,000 (company secretary, registered address, annual audit)
- Mandatory audit: yes, every company must have its accounts audited annually
The Role of the Company Secretary
Every Hong Kong company must appoint a resident Company Secretary. This role can be filled by a professional service provider (often the same one handling accounting). The cost is modest: between EUR 500 and 1,500/year.
9. Social Contributions: The MPF
Hong Kong's social contribution system is light compared to Europe. The Mandatory Provident Fund (MPF) is the mandatory retirement scheme:
- Employer contribution: 5% of salary (capped at HKD 1,500/month)
- Employee contribution: 5% of salary (same cap)
- Maximum contribution: approximately EUR 175/month per person
There is no mandatory public health insurance, but Hong Kong's public healthcare system is high-quality and very affordable.
10. Who Should Move to Hong Kong?
Hong Kong is particularly suited for:
- Traders and investors: zero capital gains, zero foreign dividends
- International entrepreneurs: territorial taxation, no VAT
- Holding companies: no withholding tax, no dividend tax
- High-income professionals: 15% tax cap
Limitations to Consider
- High cost of living: Hong Kong is one of the world's most expensive cities, especially for housing
- Limited space: apartments are small and expensive
- Visa required: European nationals need a work visa
- Geopolitical context: tensions with mainland China are a factor to consider
- Mandatory annual audit: additional cost for small businesses (EUR 2,000-5,000/year)
To compare Hong Kong with other Asian destinations, check our Singapore page or our Hong Kong vs Singapore comparator.
Hong Kong remains in 2025 one of the world's most attractive jurisdictions for entrepreneurs and investors. Territorial taxation, no VAT, zero capital gains, and low Profits Tax rates make it a top choice for those seeking to legally optimize their taxation.
However, the high cost of living and administrative complexities (audit, visa) must be factored into the overall calculation. For freelancers and small entrepreneurs, destinations like Romania or the UAE may be more suitable.
Explore all options on our country comparator and find the ideal destination for your project.
FAQ
Do you need to pay taxes on foreign income in Hong Kong?
No. Hong Kong applies territorial taxation: only income generated in Hong Kong is taxable. Foreign-sourced income is exempt, even if remitted.
What is the corporate tax rate?
The Profits Tax is 8.25% on the first HKD 2 million in profits (approximately EUR 230,000), then 16.5% beyond. It's one of the lowest rates in the world.
Is there a VAT in Hong Kong?
No. Hong Kong is one of the few developed territories that levies no VAT, GST, or consumption tax.
Can a French citizen start a business in Hong Kong?
Yes. Any nationality can incorporate a Private Limited Company in Hong Kong. Incorporation takes 1 to 3 days and the minimum capital is HKD 1. A work visa is required to reside there.
What is the cost of living in Hong Kong?
Hong Kong is one of the world's most expensive cities, mainly due to housing. A small apartment in the city center costs EUR 1,500-3,000/month. The total monthly budget is approximately EUR 3,000-5,000 for a single person.
