[Personal Income Tax Systems] Hong Kong vs. Singapore vs. Japan: A Comprehensive Comparison of Taxation Methods and Rates

Understanding the framework of international taxation, which influences both business and daily life, is crucial for overseas expansion and relocation.

This article compares personal income tax systems, taxation methods, regulations, and rates in Hong Kong, Singapore, and Japan. Both individuals and businesses should take note of the key differences in tax systems.

Taxation Methods and Definition of Residents for Tax Purposes in Each Region

The personal income tax systems in Hong Kong, Singapore, and Japan vary significantly. Let’s examine their taxation methods and definitions of residents to understand how they differ.

Tax Years
Hong Kong: April 1 to March 31 of the following year
Singapore: January 1 to December 31
Japan: January 1 to December 31

Taxation Methods
Hong Kong: Territorial-based taxation
Singapore: Territorial-based taxation
Japan: Worldwide income taxation (for non-residents and foreign entities, only “domestic source income” is taxed)

Definition of Tax Residents
Although non-residents are not completely exempt from tax obligations, the items taxed, tax rates, and allowable deductions often differ significantly from those for residents. Understanding the distinction is essential.

Hong Kong:
A person is considered a tax resident if they:
・Own a residential address in Hong Kong for themselves or their family, or
・Stay in Hong Kong for more than 180 days in a tax year, or for more than 300 days across the current and preceding/following tax years.
(Source: Inland Revenue Department, “Double Taxation Relief and Exchange of Information Arrangements”)

Singapore:
A person qualifies as a tax resident if they meet any of the following conditions (Source: IRAS, “Individual Income Tax Rates”):
・They are a Singapore citizen (SC) or a Singapore permanent resident (SPR) residing in Singapore;
・A foreigner who has lived or worked in Singapore for at least 183 days in a single year;
・A foreigner who has resided in Singapore for three consecutive years (even if their stay in the first and/or third years is less than 183 days);
A foreigner who works in Singapore across two consecutive years and has a total stay exceeding 183 days (excluding directors, entertainers, and certain professionals).

日本：
日本国内に「住所（個人の生活の本拠）」を有し、または、現在まで引き続き1年以上「居所（その人の生活の本拠ではないが、その人が現実に居住している場所）」を有する個人が所得税法上の居住者となります。（参考：国税庁「No.2875 居住者と非居住者の区分」）
日本国内の会社に勤める者が海外転勤や出向する場合、海外における在留期間が1年以上予定であればその期間中は所得税法上の非居住者となります。その期間中海外勤務における会社からの給与は所得税非課税対象です。（参考：国税庁「No.1920　海外勤務と所得税額の精算」）

Japan:
A person is considered a tax resident if they:
・Have an address in Japan (“address” refers to their principal place of living), or
・Have continuously resided in Japan for more than one year, even if it is not their principal place of living.
(Source: National Tax Agency, “No. 2875: Classification of Residents and Non-Residents”)
For employees of Japanese companies sent abroad, if their stay abroad is expected to exceed one year, they will be classified as non-residents during that period. The salary received for overseas work during this period is not subject to Japanese income tax.
(Source: National Tax Agency, “No. 1920: Overseas Work and Income Tax Settlements”)

Personal Income Tax Rates (As of January 17, 2024)

The personal income tax systems in Hong Kong, Singapore, and Japan feature diverse regulations and structures, presenting both opportunities and challenges for tax residents and non-residents alike. Fully understanding these differences is not merely a matter of compliance but can also serve as a strategic financial approach.

Hong Kong (Reference: GovHK “Tax Rates of Salaries Tax & Personal Assessment”)

Regardless of tax residency status, salaries tax rates offer a choice between a standard rate of 15% or progressive rates ranging from 2% to 17%. The final tax payable is determined by calculating taxable income after deductions and selecting the lower of the two amounts.

Taxable Income (HK$)	Tax Rate
0 – 50,000	2％
50,001 – 100,000	6％
100,001 – 150,000	10％
150,001 – 200,000	14％
2,000,001 –	17％

Profits tax is based on a two-tiered rate system, with the following rates applicable to various categories (Reference: GovHK “Tax Rates of Profits Tax”):

Category	Tax Rate
Profits from corporate businesses	HK$0～HK$2,000,000: 8.25% HK$2,000,001～：16.5%
Profits from non-corporate businesses	HK$0 – HK$2,000,000: 7.5% HK$2,000,001 – : 15%
Taxation on Non-Resident Entertainers and Athletes (If performances are directly contracted with non-resident entertainers or athletes)	HK$0 – HK$2,000,000: 7.5% HK$2,000,001 – : 15% Amount to be Retained: 10% of total payment
Taxation on Non-Resident Entertainers and Athletes (If performances are contracted through non-resident agents who are individuals or partnerships)	HK$0 – HK$2,000,000: 7.5% HK$2,000,001 – : 15% Amount to be Retained: 10% of total payment
Taxation on Non-Resident Entertainers and Athletes (If performances are contracted through corporate non-resident agents)	HK$0 – HK$2,000,000: 8.25% HK$2,000,001 – : 16.5% Amount to be Retained: 11% of total payment

For Property Tax on Rental Income, the standard tax rate for rental income is 15%.

For your convenience, the Hong Kong government provides an online tax calculation tool for salaries tax and personal income tax. By entering the amounts for each category, the system automatically calculates the tax payable for the year:
https://www.gov.hk/en/residents/taxes/etax/services/tax_computation.htm

Singapore (Reference: IRAS “Individual Income Tax Rates“)

In Singapore, personal income tax for tax residents is based on a progressive system, with higher earners paying higher taxes. Notably, the top marginal tax rates have increased starting from 2024. Taxable income exceeding S$500,000 but not exceeding S$1,000,000 is now taxed at 23%, while income exceeding S$1,000,000 is taxed at 24%, both up from the previous rate of 22%.

The latest tax rates for each income bracket are detailed in the table below:

Taxable Income (S$)	Tax Rate
– S$20,000	0％
S$20,001 – S$30,000	2％
S$30,001 – S$40,000	3.5％
S$40,001 – S$80,000	7％
S$80,001 – S$120,000	11.5%
S$120,001 – S$160,000	15%
S$160,001 – S$200,000	18%
S$200,001 – S$240,000	19%
S$240,001 – S$280,000	19.5%
S$280,001 – S$320,000	20%
S$320,001 – S$500,000	22%
S$500,001 – S$1,000,000	23%
S$1,000,001 –	24％

For non-residents, employment income is taxed at a flat rate of 15% or at the progressive tax rates for residents (see the table above), whichever is higher. Director’s fees, consultant fees, and all other forms of income are currently taxed at 24%. This applies to all income, including rental income, pensions, director’s fees, and others, except for specific income subject to reduced withholding tax rates for non-residents (see the table below).

Type of Income	Withholding Tax Rate
Remuneration, including director’s fees, received by non-resident directors	24％
Income received by non-resident professionals (e.g., consultants, trainers, coaches) for services rendered in Singapore	15% of gross income or 24% of net income
Income received by non-resident entertainers for services rendered in Singapore	15％
Withdrawals from SRS (Supplementary Retirement Scheme) accounts*	24％
※For SRS withdrawals, a preferential withholding tax rate applies under the following conditions: i. The total amount withdrawn by the SRS account holder during the year does not exceed S$200,000. ii. The SRS account holder has no other income besides the SRS withdrawal in the relevant year. Eligible SRS account holders must declare using Form IR37B(1). For further details, please consult your SRS operator.	※15％
Interest, fees, or other payments related to loans or debts (Preferential Rate if not derived from a business, trade, profession, or employment by a non-resident)	24% Preferential Rate: 15%
Royalties or lump-sum payments for movable property usage (Preferential Rate if not derived from a business, trade, profession, or employment by a non-resident)	24% Preferential Rate: 10%

Japan (Reference: National Tax Agency, “No.2260: Income Tax Rates” and “No.2884: Withholding Tax Rates for Non-Residents“)

In Japan, personal income tax rates (excluding those for separate taxation, etc.) are divided into seven progressive brackets ranging from 5% to 45%. The tax amount for taxable income is calculated as shown in the table below:

Taxable Income (JPY)	Tax Rate	Tax Deduction (JPY)
1,000 – 1,949,000	5％	0
1,950,000 – 3,299,000	10％	97,500
3,300,000 – 6,949,000	20％	427,500
6,950,000 – 8,999,000	23％	636,000
9,000,000 – 17,999,000	33％	1,536,000
18,000,000 – 39,999,000	40％	2,796,000
40,000,000 –	45％	4,796,000

It should be noted that, for tax filings from 2013 (Heisei 25) to 2037 (Reiwa 19), taxpayers are required to include and pay a special reconstruction income tax alongside income tax. This tax is calculated at 2.1% of the base income tax amount for the relevant year.

For non-residents under Japanese tax law, only income sourced domestically is subject to taxation. The tax rates for each category of domestic-sourced income are detailed in the table below:

Type of Income	Tax Rate
Profits distributed from businesses conducted through permanent establishments under partnership agreements as defined in the Civil Code	20.42％
Proceeds from the transfer of land, etc. (Exception: If the proceeds are less than JPY 100 million and the land is for the personal or family residence of the acquirer)	10.21%
Compensation for personal services rendered	20.42%
Rental Fees for Real Estate, etc. (Exception: Rental fees for real estate paid to an individual for the purpose of the payer’s or their family member’s residence.)	20.42%
Interest income	15.315%
Dividends from Listed Stocks, Including Beneficiary Rights of Publicly Offered Securities Investment Trusts (Excluding Bond Investment Trusts and Specific Equity Investment Trusts) and Investment Units of Specific Investment Corporations (Exception: Payments received by non-residents who hold shares or equity equivalent to 3% or more of the total number or amount of issued shares or capital.)	15.315%
Distributions of income from private bond investment trusts	15.315%
Other dividends	20.42%
Interest on loans	20.42%
Royalties for industrial property, copyrights, etc.	20.42%
Salaries, compensation for personal services, retirement allowances, etc.	20.42%
Public Pensions, etc. (The taxable amount is calculated by subtracting an amount equivalent to ¥50,000 (or ¥95,000 for individuals aged 65 or older) multiplied by the number of months covered by the pension, from the total pension amount, and applying the tax rate to the remainder.)	20.42%
Prizes for business advertising (Taxable amount calculated as prize amount less JPY 500,000, multiplied by the tax rate)	20.42%
Pensions Under Life Insurance Contracts (The taxable amount is calculated by subtracting the portion of the premiums or contributions paid that corresponds to the pension amount received, from the total pension amount, and applying the tax rate to the remainder.)	20.42%
Payments for time deposit maturity	15.315%
Profit distributions from anonymous partnership agreements	20.42%

Summary

The individual income tax systems of Hong Kong, Singapore, and Japan each have their own unique rules, and the most advantageous tax system varies depending on an individual’s circumstances.

Regarding the classification of tax residents, the three systems have different residency duration requirements. In terms of taxation methods, Hong Kong and Singapore adopt a simpler domestic-source income approach, whereas Japan taxes worldwide income.

When it comes to individual income tax rates, Hong Kong, as one of the tax havens, has the lowest rates. Additionally, the Hong Kong government provides an online calculation tool that is consistently updated with the latest calculation methods for pre-determining tax amounts.

For any tax system, it is crucial to thoroughly review detailed categories and regulations. This can also lead to smarter financial management.

In the next article, we will introduce the taxable income items categorized as “income” and the deduction items under these three tax systems.