Hong Kong sits 28th out of 217 in our world ranking, with a FiScore of 7.5 out of 10. It has been the reference point for doing business in Asia for fifty years, and the last decade has raised questions about it that a tax article has to address honestly.
The tax system, meanwhile, has barely moved, and it remains one of the cleanest anywhere.
The headline numbers
| Tax | Rate |
|---|---|
| Salaries tax | 2 to 17% |
| Profits tax, first HKD 2 million | 8.25% |
| Profits tax, above | 16.5% |
| Capital gains | none |
| VAT or sales tax | none |
Two things stand out immediately. There is no capital gains tax and no VAT at all, which is rare even among low-tax jurisdictions.
The two-tiered profits tax is the other distinctive feature: the first 2 million Hong Kong dollars of assessable profit are taxed at 8.25%, and everything above at 16.5%. For a small or mid-sized company, the effective rate sits well below the headline.
Territorial, and genuinely so
Hong Kong taxes profits arising in or derived from Hong Kong. Profits sourced offshore can fall outside the net entirely, and a company that establishes offshore status can pay 0% profits tax on that income.
This is not a loophole, it is the basic architecture of the system. But it is scrutinised carefully: claiming offshore status means demonstrating where contracts were negotiated, where decisions were taken and where the operations actually happened. The Inland Revenue Department asks precise questions and expects precise answers.
Salaries tax follows a similar logic, applying to income from employment where the services are performed in Hong Kong.
The elephant in the room
Any honest article has to say it: Hong Kong is not what it was in 2019.
The National Security Law of 2020 changed the political environment, several countries revised their assessments of the territory's autonomy, and a significant number of professionals and businesses relocated, many of them to Singapore.
What has not changed: the common law legal system for commercial matters, the currency peg to the US dollar, the free flow of capital, the tax code, and the depth of the financial market. Contracts are still enforced, and money still moves freely.
Whether the first paragraph outweighs the second is a judgement each person has to make, and it depends far more on your business than on your tax rate. We are not going to pretend it is a settled question.
Hong Kong against Singapore
The comparison is unavoidable, and the answer has shifted.
Singapore charges 17% flat with no capital gains tax, and has absorbed a great deal of the regional headquarters activity since 2020. It is more expensive and politically calmer.
Hong Kong is cheaper on the first slice of profit, has no VAT, and remains the natural door to mainland China. If your business is China-facing, the case is still strong. If it is pan-Asian, Singapore has become the default.
The drawbacks
Housing is among the most expensive in the world, with very small units at very high prices.
Air quality and density are real daily factors.
The political trajectory is the central uncertainty, and it is not a tax question.
Offshore claims attract scrutiny, and getting them wrong is expensive.
So, who is Hong Kong for?
- A China-facing business: still the natural base, and nothing else comes close on that axis.
- A small or mid-sized company: the 8.25% first tier and the absence of VAT are genuinely competitive.
- An investor whose wealth compounds through appreciation: no capital gains tax.
- Someone weighing long-term political risk above all: look at Singapore or the UAE.
The full table of Hong Kong rates is on our Hong Kong page, and the comparison tool puts it next to anywhere else.
Sources
Figures verified in August 2026 against the Hong Kong Inland Revenue Department, PwC Tax Summaries and firms established in Hong Kong. An error reported to us gets fixed.
This page informs, it does not advise. Before deciding anything, talk to a professional who will look at your situation, as our terms of use set out.