How High is Tax in Reality for Construction Locals & Expats in Hong Kong?

How High is Tax in Reality for Construction Locals & Expats in Hong Kong?
(& Is it Everything That Needs to be Considered?!)

In recent months a number of expats in particular have been bemoaning the presence of an active taxation system in Hong Kong, compared to ‘tax free’ places such as Dubai, Abu Dhabi and Qatar etc.
We’d always recommend that you take professional advice before taking any action in relation to your financial situation, however we think there are a number of factors to consider before even accepting that taxation is in fact higher – at least in terms of the cost-benefit factors in relation to living and working in Hong Kong.  There are also a number of quality of life issues to consider too.

The Tax Environment in Hong Kong
According to ‘Invest Hong Kong’, part of the Hong Kong SAR Government:

“The city only imposes three direct taxes – on profits, salaries and property – and has no sales tax, no withholding tax, no capital gains tax, no tax on dividends and no tax on an individual’s estate”

It also claims that Hong Kong has the ‘Worlds 3rd Lowest Tax Misery’, and claims that only UAE and Qatar have lower taxation. Meaning of course that Hong Kong has the lowest overall taxation levels in Asia. Hong Kong is certainly trying to position itself as the ‘friend of business’ as there are no tariffs on goods imported, which is one minor contributory factor for the recent boom in the construction industry here.  In relation to civil engineering infrastructure development, Hong Kong is certainly the location where more and larger scale projects are now under construction such as the expansion of the local Mass Transit Rail (MTR) lines. Due to this growth in Hong Kong, it has been evident that many qualified Engineers, Quantity Surveyors are looking to start a new life out in South East Asia to take advantage of a buoyant economy with a trade and balance of payments surplus (it has even rebated utility & tax money to many permanent residents recently!).

What Actually Are the Tax Rates in Hong Kong?
For a migrant/expat construction engineer or quantity surveyor looking to work in Hong Kong, it is perhaps the personal income tax rate that is the ‘headline figure’ to review. From our experience of interviewing international construction candidates over the last 8 years we have seen this as one of the biggest issues that a potential employee assesses before locating overseas.

At the time of writing, Hong Kong only taxes a maximum of 15% on personal income which is 35% less than the UK’s at 50% top rate; more of the money you make will be yours to keep than in most other locations. Not only does Hong Kong hold a comparable advantage on the UK but it also does over China at 45%, Germany at 47.5%, Japan at 50% and the highest of all Sweden with 61%.

Hong Kong Tax Allowances – A Massive & Often Overlooked Benefit
The key additional matter to consider is that Hong Kong offers some very favourable tax allowances to working residents that can be reviewed on a variety of authoritative websites – in summary, tax at standard rate may in fact be able to be offset to a significant degree against your accommodation costs, children, older family members etc – worth investigation in relation to your individual circumstances.  These are likely to me massively more valuable than UK 'personal allowances' depending on your personal circumstances.

What Social Services & Public Care Do You Get in Hong Kong in Exchange for Your Taxes?
Even with tax in Hong Kong being low, the government is still able to offer top quality public services such as the MTR public transportation system and its well regarded health care system.  These and other 'benefit' factors are also worth detailed investigation when comparing to other ‘zero tax’ locations and the hidden costs behind a lack of satisfactory provision.

Quality of Life in Hong Kong
At the end of the day, one could put up with high tax if quality of life was otherwise perfect – its not perfect in Hong Kong but it has a lot going for it – the number of people you bump into who came for a year and are still here many years later is staggering – as well as the number of engineers & quantity surveyors in the construction industry who are busting a gut to get back here now the construction market is booming again with all the infrastructure development now underway. Compare a choice of dynamic & cosmopolitan urban city living, rural retreat living with mountains and country parks - all connected by massively efficient MTR, rail and ferry services - it really is a world class place to live.  Also, with the possibe exception being the cost of accommodation, the cost of living for food & drink can be as much or as little as you want it to be depending on where you go.

Summary
If you are considering a career in Hong Kong or South East Asia we strongly recommend you to investigate both the tax, cost benefit issues and the quality of life issues before relying on a pure ‘income tax levels’ analysis of whether Hong Kong is your number one target destination for your next construction job.  From Maxim’s point of view, we like it so much we’ve opened an office here, and our senior staff based here can recommend it first hand in every respect!

Good luck with your job hunt & please forward an up to date CV if you would like to discuss with one of our experienced recruitment consultants the possible job vacancies in Hong Kong that may be open to your skills and experience in the construction industry.

Steve Thomas
July 2011