Withholding Tax in Hong Kong Explained: A Complete Guide
- Modified: 29 April 2026
- 8 min read
- Tax, Bookkeeping
Rodney Wong
Author
Rodney helps customers in Hong Kong navigate the details and benefits of our products and services, showing how technology can be a game changer for their business. A strong advocate for the power of the written word, he makes tech topics accessible, relevant, and, above all, practical—empowering entrepreneurs to pursue their big ideas.
Sherman Ieong
Reviewer
Sherman Ieong is our Accounting & Tax Manager based in Hong Kong. She is on hand to help our writers level-up our blog posts and guides by making sure the information is accurate, informative and inspiring. Osome’s all-in-one accounting services make managing tax effortless - and that’s exactly what Sherman ensures we do with our Hong Kong-focused blog content, applying her knowledge of day-to-day bookkeeping, monthly financial reporting, Profits Tax Returns and much more.
The Hong Kong withholding tax is a tax obligation that requires the payer to deduct amounts at the source of income to pay to the tax authorities. If your SME works with non-residents, you may be required to withhold a portion of the payment. This article will explain what Hong Kong withholding tax is, how it works and how to deal with them.
Key Takeaways
- Hong Kong withholding tax is deducted at the source from specific income types such as royalties and payments to non-residents, ensuring timely tax compliance. Both Hong Kong and foreign entities are subject to WHT.
- There are different withholding tax rates based on the income source and recipient relationship, with rates varying from 2.475% to 16.5% depending on the circumstances.
- A person's final income tax owed is determined by the withholding amount, tax deductions and tax credits.
- Osome provides support for corporations to manage withholding tax complexities, ensuring compliance and accuracy in tax reporting.
What Is Withholding Tax?
Hong Kong withholding tax, often abbreviated as WHT, refers to an amount deducted on certain payments made to non-residents. This means that before you pay certain amounts, your business would need to withhold a portion of the payment and be liable to remit to the Inland Revenue Department (IRD).
Unlike many countries that operate under a “Pay As You Earn” system, Hong Kong does not impose withholding tax on employee salaries or most domestic transactions. Instead, WHT is limited to payments such as royalties, licence fees, and fees paid to non-resident entertainers or sportspeople. Importantly, dividends and most interest payments are exempt from withholding tax in Hong Kong.
If your business pays royalties, licence fees, or makes payments to non-resident entertainers or sportspeople, you’ll be liable to withhold tax and remit it to the IRD.
While Hong Kong uses a two-tiered profit’s tax system for corporations, withholding tax follows a separate set of rules and applies specific rates depending on various factors.
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Withholding Tax Meaning with Example
At its core, Hong Kong withholding tax refers to the income tax deducted directly from a payment to a non-resident, which is then paid to the government.
Example
A non-resident sportsman competes in a table tennis tournament in Hong Kong and receives a sum of HK$ 20,000. The Hong Kong entity (payer) making the payment is obligated to withhold the tax chargeable on this income and remit it to the Inland Revenue Department (IRD) on the athlete's behalf.
Hong Kong companies are obliged to notify the Inland Revenue Department (IRD) in writing using the Form IR623 immediately when the non-resident entertainment or sportsmen arrive in Hong Kong. The Hong Kong payer, out of the gross amount payable to the entertainer or sportsman or his/her agent, retains a percentage of the gross sum payable to ensure that there will be sufficient funds for tax payment.
Withholding Tax Rates
In Hong Kong, withholding tax (WHT) rates vary based on the nature of the payment and the relationship between the payer and recipient. The most common payments subject to WHT are royalties, licence fees, and fees paid to non-resident entertainers or sportspeople.
Below is a breakdown of the relevant withholding tax rates by payment type and recipient category:
| Types of Payment | Recipient | WHT Rate |
| Royalties (associated) | Non-resident company | 16.5% (8.25% on the first 2 million) |
| Non-resident individual | 15% | |
| Royalties (non-associated) | Non-resident company | 2.475% - 4.95% |
| Non-resident individual | 4.5% | |
| Entertainer / Sportsperson | Non-resident individual (directly) | 10% |
| Non-resident individual (via non-resident agent) | 11% | |
| Service fee (general) | Non-resident providing offshore service | Exempted unless deemed Hong Kong sourced |
| Dividend | Non-resident shareholders | Exempted |
If the recipient is based in a jurisdiction that has a tax treaty with Hong Kong, the applicable WHT rates on royalties may be reduced, often between 2.475% and 4.95%. To date, Hong Kong has signed such treaties with over 50 jurisdictions, allowing companies to lower their tax obligations when eligible.
Osome helps businesses identify and apply treaty benefits and available exemptions under trade and tax laws. We ensure your company stays compliant while only paying what’s necessary.
Example
Let’s say a Hong Kong company pays HK$ 100,000 in royalties to a non-associated foreign licensor. The withholding tax is calculated as follows:
WHT = 100,000 × 30% × 16.5% = HK$ 4,950
The licensor would then receive HK$ 95,050 after tax is withheld.
Withholding Tax Treatment
Hong Kong withholding tax is generally classified as a direct tax, and the tax withheld is not passed on to consumers. Unlike indirect taxes, which can be shifted to another party, WHT is deducted at the source of income, making it non-transferable.
In accounting, it is recorded as a liability until it is remitted to the tax authority. This means that businesses must carefully track these amounts to ensure compliance and accurate financial reporting.
Whether Hong Kong WHT is classified as an expense depends on the accounting policies adopted by a business. Some jurisdictions may allow the tax to be treated as a deductible expense, which can reduce the effective tax burden on firms.
Accounting for Withholding Tax
Withholding tax (WHT) applies to certain payments made to third parties, such as non-resident service providers. The amount withheld should be recorded as a liability in the company’s accounts until it is remitted to the relevant tax authority. At the same time, WHT is treated as an expense in the profit and loss statement.
Accurate tracking of withheld amounts is essential to ensure compliance and avoid discrepancies in financial reporting. Businesses should maintain clear records within their accounting system, including the amounts withheld and the corresponding remittances.
Keeping accurate financial records is vital, and all WHT transactions should be properly documented to support transparency, accountability, and compliance with local tax regulations.
The goal of Hong Kong’s withholding tax regime isn’t about timing or deferring tax — it’s about ensuring non-residents meet their tax obligations on Hong Kong-sourced income. By placing the withholding duty on the resident payor for certain types of payments, the system ensures compliance in the most practical and enforceable way.
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Is Withholding Tax an Expense?
In Hong Kong, withholding tax is not a tax on the payer, but a tax on the non-resident recipient. While withholding tax itself is not an additional expense for the payer, it creates a compliance obligation.
Beyond mere compliance, for businesses, this affects cash flow and financial planning too. You must ensure funds are liquid and available for payment by the deadline issued by the IRD.
Depending on the company's accounting policies and structure, WHT is sometimes classified as an expense. Applying payments against obligations requires a journal entry that either debits an expense account or reduces a liability account, which in turn affects taxable income calculations and overall tax liabilities.
Failure to properly track and remit these funds can lead to penalties, which would then be classified as a non-deductible expense.
How Osome Can Help with Withholding Tax?
Managing your Hong Kong withholding tax can be complex and time-consuming for corporations. By utilising professional guidance, companies can reduce errors and ensure accurate management.
Osome’s accounting services help you stay on top of tax requirements, including accurate withholding tax reporting. Our experts ensure compliance and streamline your finances so you can focus on growing your business.
Summary
Hong Kong charges WHT on most income sources, such as wages, service charges and royalties, but excludes dividends and interests paid to shareholders. Understanding and managing Hong Kong withholding tax is crucial for Hong Kong entities, corporations and persons alike. It ensures that tax obligations are met promptly, reducing the burden of large tax payments at the end of the year. By grasping the various WHT types, rates, and treatments, corporations can better navigate their financial responsibilities. Osome can simplify the process with valuable support in tax management, allowing corporations to focus on growth and success.
Rodney helps customers in Hong Kong navigate the details and benefits of our products and services, showing how technology can be a game changer for their business. A strong advocate for the power of the written word, he makes tech topics accessible, relevant, and, above all, practical—empowering entrepreneurs to pursue their big ideas.
