Investment Rating - The report does not provide a specific investment rating for the industry Core Insights - The report outlines the tax structure in Hong Kong, emphasizing the classification tax system which includes salaries tax, profits tax, and property tax, with no inheritance tax, sales tax, or capital gains tax [11][12] - The tax year runs from April 1 to March 31 of the following year, with specific tax rates and exemptions detailed for individual income tax and corporate profits tax [13][38] - Hong Kong's tax system is based on the principle of territoriality, meaning only income sourced from within Hong Kong is taxable [12][39] Income Tax - The income tax system in Hong Kong is a classification tax system, which includes salaries tax, profits tax, and property tax [11] - Salaries tax is calculated based on progressive rates, with the first HKD 50,000 taxed at 2% and the remaining income taxed at higher rates up to 17% [19] - The basic personal allowance for the 2025/26 year is HKD 132,000, with additional allowances for married couples and dependents [21] Profits Tax - Profits tax rates for corporations are set at 8.25% for the first HKD 2 million of assessable profits and 16.5% for the remaining profits [38] - The report highlights that income sourced from outside Hong Kong is generally exempt from profits tax, with specific provisions for foreign income [39][44] - The report also discusses the additional tax deductions available for research and development expenditures, which can significantly reduce taxable profits [49] Property Tax - Property tax is levied on rental income derived from properties located in Hong Kong, with a standard rate applied to the net assessable value [11] - The report does not provide specific rates or exemptions for property tax but indicates that it is part of the overall tax structure [11] Tax Deductions and Allowances - Various deductions are available for individual taxpayers, including education expenses, home loan interest, and charitable donations, which can reduce taxable income [23] - The report specifies that certain capital expenditures may also qualify for tax deductions under specific conditions [48] Double Taxation Agreements - Hong Kong has entered into comprehensive double taxation agreements with multiple jurisdictions to prevent double taxation on income [14] - The report lists various countries with which Hong Kong has such agreements, enhancing its attractiveness as a business hub [14] Retirement Benefits - The Mandatory Provident Fund (MPF) system requires both employers and employees to contribute a percentage of the employee's income, with specific caps on contributions [31] - Contributions to the MPF are tax-deductible, providing further tax relief for individuals [31][32] Employment Contracts - The report outlines the tax implications of employment contracts, including the treatment of termination payments and the obligations of employers under the tax law [34][35] - It emphasizes that employers are not required to withhold salaries tax from employees' wages, but must comply with specific reporting requirements [35][36]