Taxes in Hong Kong: full guide for US expats
Hong Kong's low-tax environment is a major draw for expats worldwide – but for US citizens and green card holders, the 2025/2026 tax season brings a unique set of obligations in both countries. Hong Kong taxes for US expats involve navigating a territorial tax system, two-tiered salaries tax rates, and full US filing obligations – all without a bilateral tax treaty to fall back on.
This article is brought to you by Taxes for Expats (TFX) – a top-rated tax firm serving US citizens, residents, and anyone with US tax obligations, both at home and abroad. Planning to move to Hong Kong and need help with your US return or tax planning? Schedule your free discovery call, and we'll review your case and walk you through the next steps.
Hong Kong taxation
The Hong Kong Special Administrative Region (HKSAR) operates a territorial tax system – only income sourced within Hong Kong is taxable. It is one of the few jurisdictions in the world with no VAT, no GST, no capital gains tax, and no withholding tax on dividends or interest for individuals.
Three main taxes apply: salaries tax on employment income, profits tax on business earnings, and property tax on rental income.
Hong Kong's tax rates are among the lowest globally – but US expats remain liable to the IRS on worldwide income regardless of what Hong Kong taxes or doesn't.
| Item | Detail |
|---|---|
| Tax year | April 1 – March 31 |
| Tax deadline | Usually one month after the IRD issues the return; voluntary e-filing gets an automatic one-month extension |
| Maximum salaries tax rate | 17% (progressive); 15%–16% (standard, two-tiered) |
| Profits tax (corporate) | 8.25% (first HKD 2M); 16.5% above |
| Profits tax (unincorporated) | 7.5% / 15% |
| Property tax | 15% on net assessable value |
| Capital gains tax | None |
| Dividends/interest tax | None (for individuals) |
| Social security (MPF) | Mandatory for employees and employers |
| Tax treaty with the US | None |
Who qualifies as a tax resident in Hong Kong?
Hong Kong salaries tax is source-based – it applies to income arising in or derived from Hong Kong, regardless of residency status. For AEOI and Certificate of Resident Status purposes, Hong Kong treats an individual as resident if they ordinarily reside in Hong Kong, spend more than 180 days in a year of assessment, or more than 300 days across two consecutive years (one being the relevant year).
Some employees can claim a salary tax exemption if their visits to Hong Kong total no more than 60 days in the basis period and all other statutory conditions are met. If visits exceed 60 days, the exemption may not apply.
Residency does, however, open access to additional reliefs. One key benefit available only to residents is the election for personal assessment, which allows you to aggregate income and losses from all sources – employment, business, and rental – into a single calculation, potentially reducing your total tax liability.
For US expats, residency status in Hong Kong is a separate question from your US alien tax status for IRS purposes – the two systems use different rules, and the classifications don't always align.
Hong Kong income (salaries) tax rates
Income tax in Hong Kong works differently from most countries – there is no general personal income tax. Employment income is subject to salaries tax, calculated using either progressive rates or a two-tiered standard rate – applied specifically to salaries, wages, and employment-related (not self-employment) earnings.
The IRD automatically applies whichever method results in the lower tax bill.
The break-even point between the two methods depends on your allowances and filing status. For 2025/26, a single taxpayer approaches the standard-rate zone at around HK$2.022 million of annual income; for married taxpayers, that figure is around HK$3.144 million.
1. Progressive rates (alternative calculation)
| Net chargeable income (HK$) | Tax rate |
|---|---|
| First 50,000 | 2% |
| Next 50,000 | 6% |
| Next 50,000 | 10% |
| Next 50,000 | 14% |
| Remainder | 17% |
2. Standard rates (two-tiered system)
| Net income after deductions, before personal allowances (HK$) | Tax rate |
|---|---|
| First 5,000,000 | 15% |
| Above 5,000,000 | 16% |
Tax tip: After applying personal allowances and deductions, compare both calculations – the IRD charges you the lower amount. The two-tiered standard rate of 15%–16% applies to net income before personal allowances, so the progressive method is almost always more favorable – for 2025/26, most single expats approach the standard-rate zone only at around HK$2.022 million of annual income.
Personal allowances for 2025/26
Personal allowances reduce your net chargeable income before the Hong Kong tax rate is applied. The 4 main allowances for the 2025/26 tax year are:
- Basic Allowance: HK$132,000
- Married Person's Allowance: HK$264,000
- Child Allowance: HK$130,000 per child
- One-off tax reduction: a proposed 100% reduction of final salaries tax and tax under personal assessment for 2025/26, capped at HK$3,000 per case, subject to enactment
For the 2026/27 tax year, the government has proposed increasing the Basic Allowance to HK$145,000, Married Person's Allowance to HK$290,000, and Child Allowance to HK$140,000 per child – but these changes are subject to legislative approval and are not yet in effect.
Which income types are taxable in Hong Kong?
The following 5 income types are subject to Hong Kong salaries or profits tax:
- Employment income: Salaries, bonuses, allowances, and benefits from Hong Kong employment or services performed in Hong Kong.
- Self-employment and business income: Profits from businesses operating in Hong Kong are subject to profits tax.
- Directors' fees and stock options: Directors' fees are generally taxable if the company's central management and control is in Hong Kong. Share-option gains are subject to separate rules and may remain taxable after departure if tied to Hong Kong employment.
- Rental income: Taxed at 15% on net assessable value from Hong Kong properties.
- Pensions: Taxed if arising from Hong Kong employment.
Foreign-sourced income is generally outside Hong Kong tax for individuals, but specified foreign-sourced passive income received in Hong Kong by in-scope multinational entities can be taxable under the FSIE regime.
One strategy particularly relevant for expats in a high-rent city: if your employer provides a flat or serviced apartment directly, the notional rental value is generally 10% of your net income after allowable deductions – not 10% of gross pay, and not the actual market rent. In a city where a flat can cost HK$30,000–50,000 per month, this cap significantly reduces the taxable benefit compared to receiving the same amount as a cash allowance.
Other types of tax in Hong Kong
Beyond salaries tax, Hong Kong levies property tax, stamp duty, betting duty, and hotel accommodation tax. There is no capital gains tax, and estate duty was abolished in 2006.
Property tax is charged at 15% on the net assessable rental value of Hong Kong properties. Hong Kong imposes no sales tax, VAT, or withholding tax on dividends and interest, making it one of the most tax-efficient jurisdictions globally for individual income.
For businesses, the FSIE regime changes the picture. While foreign-sourced income remains exempt for individuals, multinational enterprises receiving foreign-sourced passive income – dividends, interest, and disposal gains – may now be taxable in Hong Kong if they don't meet local economic substance requirements. This applies to companies, not individual employees. Expats running businesses through Hong Kong entities should review their structure with a tax advisor.
US expats face an additional layer regardless of Hong Kong's exemptions. The IRS taxes worldwide income, which means dividends, interest, and rental income from foreign property must still be reported on your US return – even if Hong Kong doesn't tax them.
Taxes for businesses in Hong Kong
Hong Kong offers a favorable tax environment for business, trading, and investment operations. The two-tiered profits tax rates remain in effect for the 2025 tax year and carry through into 2026 without change.
The two-tiered system is designed to benefit smaller businesses – only one entity per corporate group can claim the lower 8.25% rate.
| Entity type | First HK$2M | Above HK$2M |
|---|---|---|
| Corporation | 8.25% | 16.5% |
| Unincorporated business | 7.5% | 15% |
Significant deductions and concessions apply for R&D, IP acquisition, and capital investment. Sector-specific incentives exist for financial services, shipping, and e-commerce.
As a free port, Hong Kong imposes no tariffs on imports or exports and maintains minimal customs formalities – a meaningful advantage for expats running cross-border trade operations.
Hong Kong social security & MPF
The Mandatory Provident Fund (MPF) requires both employer and employee to each contribute 5% of monthly relevant income, capped at HK$1,500 per month per party based on the HK$30,000 monthly relevant-income cap.
MPF contributions are tax-deductible up to HK$18,000 per year. Contributions are mandatory for most employees, with exemptions available for short-term expats on contracts of less than 13 months or those covered by an overseas retirement scheme.
How to file and pay taxes in Hong Kong
Filing Hong Kong salaries tax follows a straightforward process – but one step catches many expats off guard. Here are the 4 steps to complete:
- Register with the IRD: Notify the Inland Revenue Department within one month of starting work or a business in Hong Kong.
- File tax return (BIR60): Returns are issued annually, usually in May, and are due within one month. Voluntary e-filing via eTAX grants an automatic one-month extension.
- Pay via eTAX: Register at the IRD's eTAX portal to file returns, check status, and pay by bank transfer, ATM, or credit card. Payment deadlines are specified in your assessment notice.
- Account for Provisional Tax: The IRD bases provisional salaries tax on the preceding year's income, so a later assessment can include both the final tax for one year and provisional tax for the next – simultaneously. This "double bill" is part of the normal assessment cycle and surprises many expats. Budget for it in advance.
NOTE! Always check the IRD website for the latest deadlines and digital filing requirements.
Deadlines and penalties for late filing
The Hong Kong tax return deadline is typically one month after the IRD issues the return. Voluntary e-filing via eTAX grants an automatic one-month extension.
Missing both Hong Kong and US deadlines in the same year can result in penalties from two tax authorities – plan your filing calendar well in advance.
The 2 main penalty categories are:
- Late filing: Failure to file on time can lead to prosecution, a fine of up to HK$10,000, and a further fine equal to the tax undercharged.
- Late payment: 5% surcharge on unpaid tax after the due date; an additional 10% if still unpaid after six months.
For the 2025 tax year, the automatic 2-month expat extension moves the US federal filing deadline to June 15, 2026. Any taxes owed to the IRS, however, remain due by April 15 – the extension covers filing, not payment.
If you are leaving Hong Kong permanently, you must notify the IRD at least one month before departure and settle any outstanding tax liabilities before leaving.
Most popular US tax forms for expats in Hong Kong
US tax in Hong Kong involves several IRS forms beyond the standard return. The following 4 are most commonly required for US expats in Hong Kong:
- Form 1040: The standard income tax return required for all US citizens, regardless of location.
- Form 8938 (FATCA): Required if foreign financial assets exceed $200,000 on the last day of the tax year, or $300,000 at any point during the year ($400,000/$600,000 for married filing jointly).
- FBAR (FinCEN 114): Required if the combined value of foreign bank accounts exceeds $10,000 on any single day during the tax year. Filed separately from your tax return.
- Form 8621: Required if you hold interests in foreign mutual funds or certain Hong Kong investment schemes classified as PFICs (Passive Foreign Investment Companies). PFIC reporting is complex and carries steep penalties for non-compliance – flag any foreign fund holdings with your tax advisor before year-end.
Double tax relief and US-Hong Kong tax treaty
Hong Kong and the US do not have a tax treaty. Despite this, most US expats can legally reduce or eliminate double taxation through two IRS mechanisms.
Foreign Earned Income Exclusion (FEIE) excludes up to $130,000 of foreign-earned income from US taxable income for the 2025 tax year. For readers planning ahead, the 2026 FEIE rises to $132,900. To qualify, you must meet either the Bona Fide Residence Test or the Physical Presence Test and have a tax home outside the US.
Foreign Tax Credit (FTC) can reduce your US tax on qualifying foreign-source income, but only up to the US tax attributable to that income – not dollar-for-dollar against your total liability. You cannot claim the FTC on income you have already excluded under the FEIE. Because Hong Kong rates are generally lower than US rates, the FTC alone may not eliminate your entire US liability – but used strategically alongside the FEIE, most expats end up with minimal or zero US tax owed.
Choosing between the two isn't always straightforward – it depends on your income level, income type, and tax residency. They cannot always be used together.
Need help with US taxes in Hong Kong? Get expert advice
If you are living in Hong Kong, starting a business there, or just planning a move, staying on top of your US tax obligations is essential. Managing foreign income, credits, and deadlines can be complex, but you don't have to handle it alone.
At Taxes for Expats, we bring over 20 years of experience helping Americans in Hong Kong stay compliant with tax laws and avoid costly mistakes. Whether you are filing for the 2025 tax year or planning ahead for 2026, we will guide you through every step with advice tailored to your situation.
FAQ
Any foreigner earning income sourced in Hong Kong is subject to salaries or profits tax – regardless of residency status. One narrow exemption exists: if your visits to Hong Kong total no more than 60 days in the basis period and all statutory conditions are met, you may qualify for a salaries tax exclusion – but physical presence alone is not enough to trigger it.
No. The US and Hong Kong do not have a tax treaty. US expats must rely on the Foreign Tax Credit and the Foreign Earned Income Exclusion to avoid double taxation.
It is more accurately described as a low-tax jurisdiction. Rates are low and the territorial system is favorable – but Hong Kong has introduced FSIE rules that tax certain foreign-sourced passive income for multinational businesses, moving it further from classic tax haven status.
It depends on your income type and residency situation. Hong Kong consistently ranks among the most favorable due to its low rates, territorial system, and absence of capital gains and dividend taxes. For a broader comparison, see our guide on prime low-tax countries for expats.
Yes – Hong Kong remains one of the most popular expat destinations in Asia. Low income tax rates, a strong financial sector, world-class infrastructure, and a well-established expat community make it attractive despite the higher cost of living.
Yes. US citizens can live and work in Hong Kong with the appropriate visa. From a tax perspective, they remain subject to US worldwide income taxation and must continue filing US returns annually, in addition to any Hong Kong salaries tax obligations.
Legally, yes – the US taxes worldwide income and Hong Kong taxes HK-sourced income. In practice, the Foreign Tax Credit and FEIE (capped at $130,000 for 2025, rising to $132,900 in 2026) allow most US expats to reduce their US liability to near-zero.
Under the 1997 Sino-British Joint Declaration, Hong Kong operates under a "one country, two systems" framework until 2047. This preserves Hong Kong's legal and economic system – including its independent tax authority and territorial tax structure – separately from mainland China's tax system.
