Hong Kong, most tax friendly nation in Asia-Pacific

Oct. 14, 2010 - PRLog -- Mention the word Hong Kong and one immediately thinks of low taxes. Hong Kong's tax friendliness is yet again reaffirmed by KPMG's Individual Income Tax and Social Security Rate Survey 2010. While the ballooning budget deficits of most economies have spurred a trend of tax rate increases around the world, jurisdictions such as Hong Kong have demonstrated resilience by maintaining their low rate of taxes. According to KPMG, Hong Kong's tax rates are the most competitive in the Asia-Pacific region, which in turn enhances its position as a regional financial center.

Over the years, Hong Kong has been making the headlines for its low tax system and has set the benchmark for tax reform. The corporate income tax rate is a flat 16.5% on assessable profits.
Individuals are taxed at progressive rates on their net chargeable income starting at 2% and ending at 17%; or at a standard rate of 15% on net income, whichever is lower. In addition to the low rates of tax you are not taxed on foreign sourced income, capital gains, or dividends. There is no sales tax or VAT and no withholding tax on dividends or interest. Unlike most other countries, Hong Kong's fiscal freedom coupled with low government spending has helped it weather the economic downturn. In terms of economic growth too Hong Kong has surpassed most Western economies.

Taxes are a key concern for entrepreneurs, investors and business professionals. High taxes can lead to an exodus of companies and their staff to other tax friendlier jurisdictions. A number of hedge funds and banking professionals have already indicated interest in relocating from UK to Hong Kong. It won't be long before others follow suit. Using a Hong Kong Tax Calculator (http://www.guidemehongkong.com/hongkong-tax-calculator) it is easy to see why Hong Kong is attracting foreign professionals. If your annual personal income is US$150,000 you will pay US$23,954 as taxes in Hong Kong vis-a-vis US$48,151 in the UK or US$35,720 in the US or US$44,601 in Australia. According to the Hong Kong Census and Statistics Department, an increasing number of companies from UK, USA, and Japan are setting up a regional base in Hong Kong by incorporating a Hong Kong company (http://www.guidemehongkong.com/company/c745-hong-kong-com...). The top most reason cited for choosing Hong Kong as their business destination was its simple tax system and low tax rate. When you do the math, its not what you earn that matters, its what you get to keep. With one of the lowest tax rates in the world, Hong Kong is definitely an attractive destination for foreign professionals and business owners.

Commenting on Hong Kong taxes, TIME correspondent Michael Schuman blogged, "Unlike the hefty volume that shows up from the IRS in the United States, the form I use to file my income taxes in Hong Kong is very manageable four pages. I only spend about ten minutes completing it. The tax code itself is straightforward. On your salary, for example, you get taxed at a set rate that increases the more you earn. The revenue department here in Hong Kong then calculates what you owe. No need to even do the math yourself. Compare that to the arduous nightmare of filing U.S. taxes. My wife and I are both financial journalists, but we find doing our U.S. taxes so convoluted and time consuming, and we're so fearful of making a mistake, that we hired an accountant to do it for us. That's an extra expense of $1,000 each year. Completing my Hong Kong taxes costs me zero."

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