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Under Hong Kong’s territorial system of taxation, resident and non-resident enterprises are treated alike and are liable for tax on profits arising in or derived from Hong Kong.

When a Hong Kong entity makes payments to a non-resident enterprise or individual for services rendered in Hong Kong, part of the amount must be withheld and paid to Hong Kong’s Inland Revenue Department. The percentage of amount withheld is the withholding tax.  

Who is charged withholding tax in Hong Kong?

Non-resident enterprises and individuals that derive income from a Hong Kong source for services rendered in Hong Kong are charged withholding tax.

  • Non-resident enterprises are defined as companies of which central management and control is exercised from outside Hong Kong.
  • Non-resident individuals are defined as foreigners who have stayed or worked in Hong Kong for less than 180 days in the tax year.

Which payments are subject to withholding tax in Hong Kong?

Not all payments are subject to withholding tax in Hong Kong. There is no withholding tax on interest and dividends from investment, deposits, and shareholding. Royalties and certain performance service fees are subject to withholding tax in Hong Kong. 

Withholding tax for royalties

Royalties include fees for the use, distribution, or exhibition of copyrighted materials (recorded music, books, films, marketing materials, etc.), patents and trademarks, and intellectual property (IP). 

[tips title="Important Tip"]The rate of withholding tax on royalties varies depending on whether the non-resident recipient is associated/affiliated or not with the Hong Kong resident payer.[/tips]

Withholding tax for royalties paid to non-resident enterprises

  • Royalty payments to associate non-resident enterprises face a withholding tax rate of 16.5 percent, or a reduced rate of 4.95 percent if the IP has never been owned by any other business interests in Hong Kong.
  • Royalty payments to unassociated non-resident enterprises are subject to a withholding tax rate of 4.95 percent.
  • Where a Hong Kong entity has previously held ownership over the IP belonging to a non-resident company, the full amount of royalty payment could be considered part of the Hong Kong company’s taxable income.

Withholding tax for royalties paid to non-resident individuals

  • Royalty payments to affiliate non-resident individuals face a withholding tax rate of 15 percent. 
  • Royalty payments to unaffiliated non-resident individuals are subject to a withholding tax rate of 4.5 percent.

Definition of “associate”

The following entities are regarded as ‘associates’ of a Hong Kong entity:

  • If the Hong Kong entity is a natural person:
  • Relatives of the person;
  • Partners of the person, or the partners’ relatives;
  • Partnerships in which the person is a partner; or
  • Corporations controlled by the person, or directors of the controlled corporation.
  • If the Hong Kong entity is a corporation:
  • Associated corporations which control the Hong Kong entity, under the Hong Kong entity’s control, or under the same control as the Hong Kong entity;
  • Individuals who control the Hong Kong entity, partners of the controller, or relatives of the controller or partner;
  • Directors of the Hong Kong entity (or any associated corporations), or relatives of the director; or
  • Partners of the corporation, or relatives of the partner.
  • If the Hong Kong entity is a partnership:
  • All partners in the partnership, or the partners’ relatives;
  • Corporations that are controlled by the partnership, or by a partner or any relative of a partner;
  • Directors of a controlled corporation; or
  • Corporations whose director is a partner in the Hong Kong partnership.

Withholding tax for service fees

Service charges paid to non-residents that provide performances (such as entertainers and sportsman) are subject to withholding tax in Hong Kong. The taxable performance service fees include:

  • A performance at a commercial event or occasion in Hong Kong, or
  • Any participation in sound recordings, films, videos, radio transmissions, and television broadcasts (whether live or recorded).

The rate is determined by the nature of the contracts signed:

  • For contracts that are made directly between a non-resident performer and the organizer, the rate is set at 10 percent.
  • For contracts that are made between a non-resident third-party agent and the organize, a withholding tax rate of 10 percent applies if the agent is an individual, and a withholding tax rate of 11 percent applies if the agent is a corporation.

Double tax treaties

Taxes withheld may be offset by double tax treaties if the jurisdiction has a one with Hong Kong. Hong Kong has so far entered into 45 treaties with different jurisdictions. Withholding tax rates vary by treaty and jurisdiction. In most situations, the rate is between 2.475 percent and 4.95 percent.

Withholding Tax Rate (%)

Recipient

Royalties

Non-treaty

2.475 to 4.95

Austria

2.475 to 3

Belarus

2.475 to 3/2.475 to 4.95

Belgium

2.475 to 4.95

Brunei

2.475 to 4.95

Cambodia

2.475 to 4.95

Canada

2.475 to 4.95

China, the People's Republic of

2.475 to 4.95

Czech Republic

2.475 to 4.95

Estonia

2.475 to 4.95

Finland

2.475 to 3

France

2.475 to 4.95

Georgia (9)

2.475 to 4.95

Guernsey

2.475 to 4

Hungary

2.475 to 4.95

India

2.475 to 4.95

Indonesia

2.475 to 4.95

Ireland

2.475 to 3

Italy

2.475 to 4.95

Japan

2.475 to 4.95

Jersey

2.475 to 4

Korea

2.475 to 4.95

Kuwait

2.475 to 4.95

Latvia

0/2.475 to 3

Liechtenstein

2.475 to 3

Luxembourg

2.475 to 3

Macau (8)

2.475 to 3

Malaysia

2.475 to 4.95

Malta

2.475 to 3

Mexico

2.475 to 4.95

The Netherlands

2.475 to 3

New Zealand

2.475 to 4.95

Pakistan

2.475 to 4.95

Portugal

2.475 to 4.95

Qatar

2.475 to 4.95

Romania

2.475 to 3

Russia

2.475 to 3

Saudi Arabia

2.475 to 4.95

Serbia (8)

2.475 to 4.95

South Africa

2.475 to 4.95

Spain

2.475 to 4.95

Switzerland

2.475 to 3

Thailand

2.475 to 4.95

United Arab Emirates

2.475 to 4.95

United Kingdom

2.475 to 3

Vietnam

2.475 to 4.95

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