Hong Kong Raises Taxes On High Income Earners For First Time In 20 years

Hong Kong’s government has unveiled budget measures aimed at bolstering wealth management, including a rise in income tax for the top earning cohort – marking the first such increase in two decades.

Starting from April 2024, a two-tier tax system will be implemented. Income up to HK$5 million ($640,000) will be taxed at a maximum rate of 15 percent, while amounts exceeding this threshold will be subject to a 16 percent tax. Presently, the tax rate for all individuals is capped at 15 percent.

Approximately 12,000 taxpayers, constituting 0.6 percent of the total relevant taxpayers, are expected to be affected by these changes, leading to an estimated annual increase in government revenue of around HK$910 million. Despite the introduction of the two-tiered standard tax rate system, Hong Kong’s effective tax rate remains lower than that of other advanced economies.

The move to raise rates on top-tier earners underscores a shift in Hong Kong’s tax landscape, even as it becomes more integrated with mainland China. In the competitive landscape against destinations like Singapore and Dubai, Hong Kong aims to attract High Net Worth individuals, family offices, and capital owners.

Facing a deficit, Hong Kong, like many other regions worldwide, seeks to address its fiscal challenges. The deficit for the financial year ending 31 March is projected to be HK$101.6 billion, nearly double the estimate from a year ago.