Hong Kong's tax basis is territorial, therefore income derived by a resident from places outside Hong Kongwill generally not face double taxation in Hong Kong.

Many countries which tax their residents on a world-wide basis also provide their residents who operate businesses in Hong Kong with unilateral tax relief for Hong Kong tax paid on income derived from Hong Kong.

Hong Kong also allows a deduction for foreign tax paid in respect of an income which is also subject to tax in Hong Kong. Businesses operating in Hong Kong therefore do not generally have problems with double taxation of income.

Hong Kongdoes however have three comprehensive double tax agreements.

In August 2006, Hong Kong and the Mainland of China replaced the limited scope arrangement for the avoidance of double taxation with a comprehensive double tax arrangement. This is yet another example of the cross border agreements that are being developed to strengthen links between the two economies.

Hong Konghas double tax arrangements for shipping and airline income with a number of countries.

taxes are among the lowest in the world, and our tax regime is simple and predictable.

The Profits tax rate is the same for foreign and local companies - a low 17.5 percent. The actual tax bill is often even less after various deductions and depreciation allowances.

There is no capital gains tax in Hong Kong, withholding tax on dividends and interest or collection of social security benefits.

The salaries tax rate is at a maximum rate of 16 percent, imposed only on all salary income of individuals derived in or from Hong Kong. The salaries tax is demanded on a yearly basis and can be paid in two installments, usually between December and March.

The property tax applies to owners of land or buildings situated in Hong Kong. It is low by international standards: 16 percent (for 2004-5) of the rental income from the land or buildings and an allowance of 20 percent is permitted for repairs and maintenance.

There is no sales tax or VAT in Hong Kong. The limited tax base, combined with exceptionally low tax rates, makes Hong Kong's tax incidence much lower than in virtually all other developed economies.