Low, Simple and Competitive Tax System (2024)

Businesses and individuals in Hong Kong enjoy one of the most tax-friendly systems in the world. Only three direct taxes are imposed and there are generous allowances and deductions which can reduce your taxable amount.

The three taxes are:

  • Profits tax for the first HK$2 million of profits of corporations is 8.25 percent. Profits above that amount will be subject to the tax rate of 16.5 percent. For unincorporated business (i.e. partnerships and sole proprietorships), the two-tiered tax rates will correspondingly be set at 7.5 percent and 15 percent.
  • Salaries tax with standard rate of 15 percent
  • Property tax of 15 percent

Here are the taxes which Hong Kong does not impose:

  • No sales tax or VAT
  • No withholding tax on dividends and interest
  • No capital gains tax
  • No tax on dividends
  • No estate tax

Free Trade Port
Another benefit of setting up business in Hong Kong is its free trade policy. The city’s free port status and easy customs procedures make it easier for businesses and companies to operate.

Low, Simple and Competitive Tax System (2024)


What is a competitive tax system? ›

A competitive tax code is one that keeps marginal tax rates low. In today's globalized world, capital is highly mobile. Businesses can choose to invest in any number of countries throughout the world to find the highest rate of return.

Which tax system is the best and why? ›

In the United States, the historical favorite is the progressive tax. Progressive tax systems have tiered tax rates that charge higher income individuals higher percentages of their income and offer the lowest rates to those with the lowest incomes.

Why were low taxes good for the US economy? ›

Reductions in income tax rates affect the behavior of individuals and businesses through both income and substitution effects. The positive effects of tax rate cuts on the size of the economy arise because lower tax rates raise the after-tax reward to working, saving, and investing.

What is the simplest tax system in the world? ›

By contrast, 95% of taxes are filed online in Estonia, and the process can take as little as three minutes. The rules are simple for individual entrepreneurs and investors based in Estonia, too: individual income is taxed at a flat 20% rate.

What are the 3 types of tax systems? ›

progressive tax—A tax that takes a larger percentage of income from high-income groups than from low-income groups. proportional tax—A tax that takes the same percentage of income from all income groups. regressive tax—A tax that takes a larger percentage of income from low-income groups than from high-income groups.

What are the 3 main types of taxes? ›

All taxes can be divided into three basic types: taxes on what you buy, taxes on what you earn, and taxes on what you own. Every dollar you pay in taxes starts as a dollar earned as income. The main difference is the point of collection.

Which tax system is the best? ›

Stay informed on the tax policies impacting you.
CountryOverall RankOverall Score
New Zealand389.7
34 more rows
Oct 17, 2022

Why lower taxes are better? ›

Lower individual tax rates have increased disposable income throughout the economy, increasing consumer spending on goods and services, including retail purchases. Increased consumer spending has driven demand, leading to higher sales for retailers across the country.

Which tax system is most fair? ›

Progressive taxes take more from those able to pay more. Because this method is based on the ability to pay, it is considered the fairest means of taxation.

Who pays most of the federal income taxes? ›

High-Income Taxpayers Paid the Majority of Federal Income Taxes. In 2021, the bottom half of taxpayers earned 10.4 percent of total AGI and paid 2.3 percent of all federal individual income taxes. The top 1 percent earned 26.3 percent of total AGI and paid 45.8 percent of all federal income taxes.

Are taxes good or bad for the economy? ›

How do taxes affect the economy in the long run? Primarily through the supply side. High marginal tax rates can discourage work, saving, investment, and innovation, while specific tax preferences can affect the allocation of economic resources. But tax cuts can also slow long-run economic growth by increasing deficits.

Why the US tax system is good? ›

Taxes provide revenue for federal, local, and state governments to fund essential services--defense, highways, police, a justice system--that benefit all citizens, who could not provide such services very effectively for themselves.

Which country is best for low tax? ›

Among the countries with the lowest tax rates in the world are Malta, Cyprus, Andorra, Montenegro and Singapore. Aside from zero income tax, in Antigua and Barbuda, individuals are also free from paying taxes on wealth, capital gains, and inheritance.

Who has the worst tax system in the world? ›

Highest Taxed Countries 2024
  • The highest personal income tax rates in 2021-23 were found in Ivory Coast (60%), Finland (56.95%), and Denmark (56.00%).
  • Bhutan has the highest sales tax at 50%, followed by Hungary (27%), with Croatia, Denmark, Norway, and Sweden tied at 25%.

What country has the lowest taxes for the rich? ›

United Arab Emirates

The UAE doesn't tax personal income, capital gains, inheritance, gifts or properties. And it has one of the lowest corporate tax rates in the world, at 9% for companies generating more than 375,000 dirhams ($102,000) in annual profits.

What are the 4 tax systems? ›

State Taxes

Approximately 90 percent of the state's own-source revenue comes from four sources: the personal income tax (PIT), the sales and use tax (SUT), the bank and corporation tax, and major motor vehicle-related levies.

What is the perfect competition tax? ›

A perfectly competitive industry must pass on all of a tax to consumers because, in the long run, the competitive industry earns zero profits. A monopolist might absorb some portion of a tax even in the long run. A tax causes a monopoly to increase its price and reduce its quantity.

What are the benefits of tax competition? ›

Tax Competition Supports Global Foreign Direct Investment and, in Turn, Economic Growth. Lower business tax rates, paired with easier international trade and other economic policy reforms, supported the growth of international investment that has helped sustain corporate tax revenues.

How does the tax system affect US competitiveness? ›

T he U.S. tax code enables the federal government to collect nearly $5 trillion in revenue each year. Its structure creates incentives that influence the financial and economic decisions of individuals and companies from small to large. Those actions in turn shape the country's relative global competitiveness.


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