Hong Kong Tax and Social Security Overview | Generated by AI
Taxes in Hong Kong
Hong Kong operates a territorial tax system, meaning only income sourced from Hong Kong is taxable. For individuals, the main tax is Salaries Tax, which applies to employment income, pensions, and certain other earnings. It’s calculated on a progressive scale after deductions and allowances (e.g., basic allowance of HKD 132,000 for 2025/26). Unlike mainland China’s individual income tax, there’s no social insurance contributions deducted from gross income for tax purposes.
For the year of assessment 2025/26 (1 April 2025 to 31 March 2026), the progressive rates are:
| Net Chargeable Income (HKD) | Rate |
|---|---|
| First 50,000 | 2% |
| Next 50,000 | 6% |
| Next 50,000 | 10% |
| Next 50,000 | 14% |
| Remainder | 17% |
The maximum effective rate is capped at the standard rate of 15% (or two-tiered: 15% on the first HKD 5 million of net income, 16% thereafter). Most salaried workers opt for progressive rates, which are generally lower. Tax is filed annually via the Inland Revenue Department, and it’s self-assessed—there’s no withholding at source like PAYE in some countries, though employers may handle provisional payments.
Hong Kong has no capital gains tax, no dividend tax, and no VAT/GST. Property rates and stamp duties exist but are separate.
Insurance and Social Security in Hong Kong
Hong Kong lacks a comprehensive “five insurances and one fund” (五险一金) system like mainland China. Instead, it has a more minimal, market-oriented approach focused on retirement savings and basic welfare, with heavy reliance on public healthcare and voluntary private insurance. Key components:
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Mandatory Provident Fund (MPF): This is the core retirement savings scheme, introduced in 2000. It’s a privately managed, defined-contribution system where both employees and employers contribute 5% of relevant income (capped at HKD 30,000 monthly, so max HKD 1,500 each per month). Applies to employees aged 18-64 earning over HKD 7,100/month. Self-employed also contribute 5%. Funds are invested in approved schemes, and withdrawals are allowed at retirement (age 65) or earlier in specific cases (e.g., emigration). It’s mandatory by law—failure to enroll or contribute can result in fines up to HKD 100,000 and imprisonment.
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Employees’ Compensation Insurance: Employers must provide this for work-related injuries or illnesses, covering medical costs and lost wages. It’s mandatory under the Employees’ Compensation Ordinance, with premiums based on risk (typically 0.5-2% of payroll).
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Healthcare: No mandatory social medical insurance. Public hospitals offer heavily subsidized care (e.g., HKD 75/day for inpatients), funded by general taxes. Many buy private health insurance voluntarily for better access.
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Unemployment and Other Welfare: No unemployment insurance fund. Instead, means-tested Comprehensive Social Security Assistance (CSSA) provides cash aid for low-income/unemployed (e.g., HKD 4,000+ monthly for singles). There’s also Old Age Living Allowance (up to HKD 4,200/month for elderly) and disability allowances. These are government-funded, not contributory.
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Maternity/Paternity: 14 weeks paid maternity leave (employer-funded, 80% salary) and 5 days paternity. No dedicated maternity insurance fund.
Overall, the system emphasizes personal responsibility and low government intervention, with welfare as a safety net rather than universal entitlements.
Mandatory Aspects: Company and Government Enforcement
Yes, certain elements are enforced by law:
- Taxes: Fully mandatory; non-compliance leads to penalties, audits, and potential jail time.
- MPF: Strictly enforced by the Mandatory Provident Fund Schemes Authority (MPFA). Employers must enroll employees within 60 days of starting work; the government monitors via audits and can prosecute violators.
- Employees’ Compensation: Mandatory for all employers; non-provision results in fines up to HKD 100,000 and civil liability.
Other insurances (e.g., medical, life) are voluntary, though many companies offer them as benefits to attract talent. The government doesn’t “force” comprehensive coverage like in mainland China, promoting a lighter regulatory touch to support business.
This setup keeps Hong Kong’s tax burden low (effective rate often under 15%) but shifts more retirement/health planning to individuals.
References
Tax Rates of Salaries Tax & Personal Assessment - GovHK
Hong Kong SAR - Individual - Taxes on personal income - PwC
2025/26 Hong Kong Tax Facts and Figures - PwC
Mandatory Provident Fund Schemes Authority
Mandatory Provident Fund - Wikipedia
Mandatory Provident Fund (MPF) System - GovHK
Social Insurance in Hong Kong - China Briefing
The Social Security System in Hong Kong - IDE