Is there VAT or GST in Hong Kong

Is There VAT or GST in Hong Kong?

Hong Kong does not operate a value added tax (VAT) or goods and services tax (GST) system. The answer to whether there is VAT or GST in Hong Kong is no. Businesses do not charge, collect or remit any broad-based consumption tax on the sale of goods or services. This feature of the tax system is one of the reasons Hong Kong is regarded as a low-tax jurisdiction with a relatively simple compliance burden for business owners.

Hong Kong VAT

There is no value added tax in Hong Kong. The Inland Revenue Department does not administer any VAT regime, and businesses are not required to register for, charge or file returns in respect of VAT. An invoice issued by a Hong Kong company should not show a separate VAT line. The absence of VAT means that input tax recovery is not a consideration for Hong Kong businesses.

Hong Kong GST

There is no goods and services tax in Hong Kong. Unlike jurisdictions that impose a federal GST on most transactions, Hong Kong leaves the consumption of goods and services untaxed at the point of sale. This simplifies pricing for both sellers and buyers, as the stated price is the full price with no additional tax to calculate.

Sales Tax Hong Kong

Hong Kong does not impose a general sales tax on the sale of goods or services. There is no mechanism for a retailer to add a sales tax at the point of sale or for a wholesaler to account for one. The territory has no equivalent to the sales taxes found in many other common law jurisdictions.

Hong Kong Indirect Tax

While there is no VAT, GST or general sales tax, Hong Kong does collect indirect tax in other forms. The principal indirect taxes are:

• Stamp duty on the transfer of Hong Kong stock, charged at 0.1 per cent from the buyer and 0.1 per cent from the seller, plus a fixed fee of HK$5 on the instrument of transfer.
• Duties on dutiable commodities including liquor, tobacco, hydrocarbon oil and methyl alcohol.
• Motor vehicle first registration tax on the first registration of a vehicle in Hong Kong.

These are specific, transactional charges rather than broad consumption taxes.

The Hong Kong Tax System and Its Simpler Structure

The direct taxes that do exist are profits tax, salaries tax and property tax. The Inland Revenue Department assesses each on a territorial source principle: only income arising in or derived from Hong Kong is chargeable. This principle, combined with the absence of VAT and GST, means that a business owner in Hong Kong deals with fewer tax types than in most comparable economies. The business registration certificate issued under the Business Registration Ordinance (Cap. 310) covers the business for its trade, but it is not a trade licence and does not replace the need for any specialised licence.

A new company incorporated under the Companies Ordinance (Cap. 622) will file a profits tax return (Form BIR51) annually and may also encounter stamp duty on share transfers, but it will never need to prepare a VAT or GST filing. This simple tax regime is a frequent reason given by foreign investors for choosing Hong Kong as their trading or holding company location.