Hong Kong follows a territorial tax system, in which non-residents who receive income in Hong Kong are subject to pay withholding tax. This guide will provide more details on withholding tax in Hong Kong.
Let’s jump right in.
What is Hong Kong withholding tax?
Withholding tax is a tax that is withheld from payments that have been paid to a non-resident for services provided in Hong Kong.
Withholding tax in Hong Kong is paid to the Inland Revenue Department.
What income is subject to withholding tax?
Hong Kong withholding tax is imposed on royalties and license fees paid to non-resident sportspeople and entertainers for their services carried out in Hong Kong. The withholding tax is not implied on dividends and interest.
Royalty payments paid to a non-resident for the use of intellectual property inside and outside of Hong Kong are subjected to withholding tax.
Examples of royalties are the following:
- Sound recording
- Exhibition or use of cinematography, television film or tape
- Related advertising material in Hong Kong
- Patent, design, trademark, copyright material, performer’s right or formula
- Knowledge concerning intellectual property inside and outside of Hong Kong
Sportspeople and entertainer payments
According to the Inland Revenue Ordinance, entertainer or sportspeople means a person, other than a corporation, who gives performances (whether alone or with others) in his character as entertainer or sportspeople in any kind of entertainment or sport.
The performances include:
- Activities that are recorded or live
- Activities that can be seen or heard by the public, whether for payment or not
Examples of sportspeople and entertainer payments are:
- Performances at commercial events or occasions in Hong Kong
- Participation in sound recordings, films, videos, radio transmissions and television broadcasts
Who must pay Hong Kong withholding tax?
Non-residents, both individuals and corporations, are liable to withholding tax from any services or work performed in Hong Kong.
An individual or entity is considered a non-resident if:
- The foreign individual has stayed or worked in Hong Kong for less than 180 days in a tax year.
- A company is managed or controlled outside of Hong Kong territory.
What are the withholding tax rates?
The Hong Kong withholding tax rates for non-residents are:
|Payment types||Withholding tax rates|
|Royalties gained from a Hong Kong associate|
|Royalties that are not derived from a Hong Kong associate|
|Payments for performance that is obtained directly from the entertainer or sportspeople||10%|
|Payments for an entertainer or sportspeople performance which is obtained through a non-resident person or partnership||10%|
|Payments for entertainer or sportspeople performance which is obtained through a non-resident corporate agent or corporation||11%|
What entities are considered as associates?
The following entities are considered as associates of a Hong Kong entity
If the Hong Kong entity is a natural person:
- A relative of the person
- A partner of the person and any relative of that person
- A partnership in which the person is a partner
- A corporation controlled by the person
- A director or principal officer of a controlled corporation
If the Hong Kong entity is a corporation:
- An association corporation:
- A corporation which the Hong Kong entity has control
- A corporation that controls the Hong Kong entity
- A corporation under the same control as the Hong Kong entity
- A person who controls the corporation, or a partner of the controller, or a relative of the controller or partner
- A director or principal officer of the corporation (or any associated corporation), or a relative of the director or officer
If the Hong Kong entity is a partnership:
- Any partner in the partnership
- A relative of any partner
- A corporation that is controlled by the partnership, or by a partner or any relative of the partner
- A director or principal of a controlled corporation
- A corporation whose director or principal officer is a partner in the Hong Kong partnership
Withholding tax in Hong Kong is only applied to two types of payments: royalty fees and payments made to sportspeople or entertainers. Hong Kong has concluded over 40 double tax treaties, which can reduce the withholding tax rates. We recommend engaging with Acclime’s services if you need any help with tax in Hong Kong.
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