Key Facts
- Hong Kong's salaries tax for 2024/25 uses progressive rates from 2% to 17%, or a two-tiered standard rate of 15% (first HK$5 million) and 16% (excess)
- The basic personal allowance for 2024/25 is HK$132,000, with a 100% tax reduction capped at HK$1,500 per taxpayer
- Expatriates working in Hong Kong for 60 days or less in a tax year may qualify for full exemption under the "60-day rule"
- Non-Hong Kong employment income is taxed on a time apportionment basis, with only Hong Kong-rendered services being taxable
- Mandatory Provident Fund (MPF) contributions are deductible up to HK$18,000 per year
Understanding Hong Kong's Salaries Tax System
Hong Kong operates one of the world's most straightforward and competitive tax systems, based on a territorial principle. For the 2024/25 year of assessment (covering the period from 1 April 2024 to 31 March 2025), the Hong Kong Inland Revenue Department (IRD) has maintained its low-tax approach while introducing key refinements that particularly affect expatriate employees.
All individuals, whether residents or non-residents of Hong Kong, are subject to salaries tax on Hong Kong-sourced employment income, income from an office held in Hong Kong, and income from a Hong Kong pension. Importantly, a person's residence, domicile, or citizenship is not relevant in determining liability to Hong Kong salaries tax under domestic law.
Tax Rates for 2024/25
Progressive Tax Rates
Hong Kong's salaries tax is calculated using progressive rates applied to net chargeable income (after deducting allowances and approved expenses). The progressive tax bands for 2024/25 remain as follows:
| Net Chargeable Income | Tax Rate | Tax on Band |
|---|---|---|
| First HK$50,000 | 2% | HK$1,000 |
| Next HK$50,000 | 6% | HK$3,000 |
| Next HK$50,000 | 10% | HK$5,000 |
| Next HK$50,000 | 14% | HK$7,000 |
| Remainder over HK$200,000 | 17% | 17% of remaining amount |
Two-Tiered Standard Rate System
From the year of assessment 2024/25 onwards, Hong Kong introduced a two-tiered standard rate system for high-income earners. Under this system:
- The first HK$5,000,000 of net income (before deduction of allowances) is taxed at the standard rate of 15%
- The portion of net income exceeding HK$5,000,000 is taxed at the higher standard rate of 16%
The IRD automatically calculates tax using both the progressive rates and the standard rate(s), with taxpayers paying whichever method produces the lower tax liability.
Tax Reduction for 2024/25
For the 2024/25 tax year, the Hong Kong government provides a 100% reduction in salaries tax, subject to a maximum cap of HK$1,500 per taxpayer. This reduction is automatically applied after the initial tax calculation.
Personal Allowances and Deductions
Basic Personal Allowance
Every taxpayer is entitled to a basic personal allowance of HK$132,000 for the 2024/25 year of assessment. This allowance is automatically deducted from assessable income before calculating net chargeable income. Married persons may claim a married person's allowance of HK$264,000 instead.
Mandatory Provident Fund (MPF) Contributions
Mandatory contributions to the MPF scheme are deductible for salaries tax purposes, subject to an annual cap of HK$18,000. Employers and employees each contribute 5% of salary (capped at HK$1,500 per month), but the maximum tax-deductible amount per year remains HK$18,000, even if total mandatory contributions exceed this amount due to multiple employments.
Additionally, voluntary contributions to tax-deductible voluntary contribution accounts can be deducted up to a maximum of HK$60,000 per year.
Other Key Deductions
- Home Loan Interest: Deductible up to HK$100,000 per year for up to 20 years of assessment (increased to HK$120,000 for taxpayers residing with a child born on or after 25 October 2023, starting from 2024/25)
- Assisted Reproductive Services: New for 2024/25, expenses are deductible up to HK$100,000 per year for qualifying services received for medical reasons
- Elderly Residential Care Expenses: Deductible for qualifying expenses paid for eligible parents or grandparents
Expatriate Taxation: The 60-Day Rule
What is the 60-Day Rule?
The 60-day rule is a critical tax exemption provision for expatriate employees rendering services in Hong Kong on a short-term basis. Under this rule, individuals working in Hong Kong for 60 days or less during a year of assessment may be fully exempt from Hong Kong salaries tax on that employment income.
Specifically, when determining whether all services are rendered outside Hong Kong for a given year of assessment, no account is taken of services rendered in Hong Kong during visits not exceeding 60 days in the basis period (1 April to 31 March).
How Days are Counted
In calculating whether visits exceed 60 days, the IRD counts "days of presence" in Hong Kong. Importantly:
- A day is counted even if you are present in Hong Kong for only part of that day
- The day of departure from Hong Kong and the day of arrival in Hong Kong are counted as two separate days when determining total presence
- This strict counting method means careful tracking of entry and exit dates is essential
Exceptions to the 60-Day Rule
The 60-day rule does not apply to:
- Income from an office: Directors' fees are fully taxable regardless of days spent in Hong Kong
- Pension income: Pensions from funds managed and controlled in Hong Kong are subject to salaries tax without time apportionment benefits
Time Apportionment for Non-Hong Kong Employment
What Constitutes Non-Hong Kong Employment?
The Hong Kong Inland Revenue Department generally accepts that an employment is a "non-Hong Kong employment" if all three of the following conditions are met:
- The contract of employment was negotiated and entered into outside Hong Kong, and it is enforceable outside Hong Kong
- The employer is resident outside Hong Kong
- The employee's remuneration is paid outside Hong Kong
Time Apportionment Basis
For employees under non-Hong Kong employment, only income attributed to services actually rendered in Hong Kong is subject to Hong Kong salaries tax. This is calculated using the time apportionment method:
Assessable Income = Total Annual Income × (Days in Hong Kong ÷ Total Days in Year of Assessment)
Practical Example
Consider an expatriate employee with the following situation:
- Annual employment income: HK$730,000
- Days spent in Hong Kong during the year of assessment: 100 days
- Total days in the year of assessment: 365 days
The assessable income subject to Hong Kong salaries tax would be:
HK$730,000 × (100 ÷ 365) = HK$200,000
The remaining HK$530,000 attributable to services rendered outside Hong Kong would be exempt from Hong Kong salaries tax.
Interaction with the 60-Day Rule
If a non-resident engaged in non-Hong Kong employment renders services in Hong Kong during visits totalling more than 60 days in a year of assessment, they will be taxed on the time apportionment basis as described above. If visits total 60 days or less, the entire employment income may be exempt from Hong Kong salaries tax, subject to meeting all conditions.
Hong Kong Employment vs. Non-Hong Kong Employment
Hong Kong Employment
For individuals under Hong Kong employment (where the employment contract is negotiated and enforceable in Hong Kong, or the employer is Hong Kong-resident, or remuneration is paid in Hong Kong), all employment income is subject to Hong Kong salaries tax, regardless of where services are rendered.
However, these individuals may claim exemption for income attributable to services rendered outside Hong Kong if:
- The services are rendered outside Hong Kong for a period exceeding 60 days in the year of assessment
- The employee has paid foreign tax of substantially the same nature as Hong Kong salaries tax on that income
Filing Requirements
Expatriates must lodge tax exemption or time apportionment claims on a year-by-year basis during annual tax filing. The standard deadline for filing the 2024/25 individual tax return (Form BIR60) is 2 June 2025. Those filing through a tax representative may receive an extended deadline.
Practical Considerations for Expatriate Employees
Record-Keeping
Expatriates claiming time apportionment or the 60-day exemption must maintain detailed records including:
- Travel itineraries and boarding passes showing entry and exit dates
- Work calendars documenting where services were rendered each day
- Employment contracts and amendments
- Payroll records showing payment location and currency
- Evidence of foreign tax paid (if claiming foreign tax credit)
Regional Headquarters and Representative Office Exemptions
Hong Kong offers additional exemptions for qualifying employees of Regional Headquarters (RHQ) and Representative Offices (RO) who spend time outside Hong Kong on qualifying activities. These provisions can provide significant tax relief for expatriates in regional roles.
Double Taxation Agreements
Hong Kong has signed Comprehensive Double Taxation Agreements (DTAs) with over 45 jurisdictions. Expatriates may be able to claim relief under these agreements to avoid being taxed on the same income in both Hong Kong and their home jurisdiction.
Recent Developments and Future Outlook
Two-Tiered Standard Rate Implementation
The introduction of the two-tiered standard rate system from 2024/25 represents Hong Kong's first increase in the standard rate in decades. While affecting only high-income earners with net income exceeding HK$5 million, this change signals Hong Kong's approach to maintaining fiscal balance while preserving competitiveness.
Enhanced Deductions
The government continues to introduce new deductions (such as assisted reproductive services from 2024/25) and enhance existing ones (increased home loan interest for families with newborns) to support taxpayers and encourage specific policy objectives.
Digitalization of Tax Filing
The IRD has progressively enhanced its electronic filing systems, with most individual taxpayers now able to complete their entire tax filing process online through the eTax platform, including submission of supporting documents.
Key Takeaways
- Hong Kong's territorial tax system means only Hong Kong-sourced income is taxable, making it advantageous for expatriates with regional roles
- The 60-day rule provides full exemption for short-term visitors, but requires careful day counting (part days count as full days)
- Time apportionment allows expatriates under non-Hong Kong employment to pay tax only on the portion of income relating to Hong Kong services
- Progressive rates from 2% to 17% or standard rates of 15%/16% ensure most taxpayers benefit from low effective tax rates, especially after the HK$132,000 basic allowance
- Proper documentation and timely filing are essential - exemption and time apportionment claims must be made annually when submitting tax returns
- The MPF deduction cap of HK$18,000 and the 2024/25 tax reduction of up to HK$1,500 provide additional tax relief for all taxpayers
Note: This article provides general information about Hong Kong's salaries tax system for the 2024/25 year of assessment. Tax laws and regulations are subject to change, and individual circumstances vary significantly. Expatriates with complex employment arrangements should seek professional tax advice from qualified Hong Kong tax advisors to ensure compliance and optimize their tax position.
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