INFORMATION PAMPHLET
TAXATION IN HONG KONG
Tax is levied under the Inland Revenue Ordinance [Chapter 112, 1965 Reprint]. Tax is charged only on income or profits arising in or deriving from Hong Kong; no taxes apply to income or profits arising from abroad, even if remitted to the Colony. Every trade, profession and business is treated in the same manner for tax purposes.
The Inland Revenue Ordinance defines the phrase "arising in or deriving from" as including all profits from business transacted in the Colony directly or through an agent. Locality of profits [i.e. where the operations take place from which the profits in substance arose] will usually be determined by the dominant factors surrounding the service provided or the transaction concerned. In connexion with the sale of goods this is usually the place where the contract of sale was concluded [by notification of acceptance]. Where the business consists of the manufacture of goods outside Hong Kong and sale of those goods in Hong Kong, then only a merchanting profit on the sale is charged to tax in Hong Kong; it is recognized that part of the ultimate profit on sale is attributable to the manufacturing operations. Conversely where a local manufacture also merchandises outside the Colony the Department will seek to tax the manufacturing profit as arising in the Colony.
As from the year of assessment 1966/67 taxes are based on a Standard Rate of 15 per cent. Previous rates were 10 per cent for the years 1947/48 to 1949/50 and 12 per cent for the years 1950/51 to 1965/66. Rates of tax are not fixed annually, but are prescribed by the basic Ordinance, as amended. Incomes and profits are broken down into four categories, each of which is subject to a separate tax calculated on the full Standard Rate or a percentage of it, as explained below. The categories are Profits Tax, Salaries Tax, Property Tax, and Interest Tax.
As an alternative to the separate taxes, a permanent or temporary resident may elect to be assessed personally on his total Hong Kong income. A single assessment is then effected by making similar allow- ances and charging similar rates of tax as in the Salaries Tax, and a
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