Sign up for tax alert emails    GTNU homepage    Tax newsroom    Email document    Print document    Download document

June 22, 2021

Hong Kong enacts legislation to allow a tax deduction for foreign taxes charged on gross income basis

Hong Kong enacted the Inland Revenue (Amendment) (Miscellaneous Provisions) Bill 2021 (the New Law) on 11 June 2021.1 The New Law allows a tax deduction for foreign taxes charged on a gross income basis and applies to tax years beginning on or after 1 April 2021.

Many stakeholders had lobbied the Hong Kong Government to reinstate the Inland Revenue Department’s previous assessing practice of allowing a tax deduction for foreign taxes charged and paid on a gross income basis in respect of all types of income. Stakeholders noted that the reinstatement of this practice, which had applied up until June 2019, would benefit taxpayers. The New Law was passed to address some of these concerns.

The New Law allows:

  • A tax deduction for foreign taxes on non-interest income (e.g., royalties) that were charged on a gross income basis and were either paid: (i) by a Hong Kong resident person in a non-Hong Kong tax treaty partner jurisdiction; or (ii) by a non-Hong Kong resident person in both a Hong Kong tax treaty and a non-Hong Kong’s tax treaty partner jurisdiction.
  • A non-Hong Kong resident to claim a deduction for foreign taxes paid in respect of certain interest income from a Hong Kong tax treaty partner jurisdiction.2

The New Law imposes new restrictions that limit a non-Hong Kong resident person from claiming a tax deduction in Hong Kong for foreign taxes paid as summarized above only to the extent that such foreign taxes are not relieved from double taxation (by deduction or other method) in the jurisdiction of residence of the non-Hong Kong resident person.


For additional information with respect to this Alert, please contact the following:

Ernst & Young Tax Services Limited, Hong Kong

Ernst & Young LLP (United States), Hong Kong Tax Desk, New York

Ernst & Young LLP (United States), Asia Pacific Business Group, New York



  1. The New Law was published in the Hong Kong Official Gazette on 11 June 2021.
  2. The existing rule allowing Hong Kong resident and non-Hong Kong resident persons to claim a deduction for tax paid in respect of interest income from a non-treaty partner jurisdiction will remain unchanged.

The information contained herein is general in nature and is not intended, and should not be construed, as legal, accounting or tax advice or opinion provided by Ernst & Young LLP to the reader. The reader also is cautioned that this material may not be applicable to, or suitable for, the reader's specific circumstances or needs, and may require consideration of non-tax and other tax factors if any action is to be contemplated. The reader should contact his or her Ernst & Young LLP or other tax professional prior to taking any action based upon this information. Ernst & Young LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein.


Copyright © 2024, Ernst & Young LLP.


All rights reserved. No part of this document may be reproduced, retransmitted or otherwise redistributed in any form or by any means, electronic or mechanical, including by photocopying, facsimile transmission, recording, rekeying, or using any information storage and retrieval system, without written permission from Ernst & Young LLP.


Any U.S. tax advice contained herein was not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions.


"EY" refers to the global organisation, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients.


Privacy  |  Cookies  |  BCR  |  Legal  |  Global Code of Conduct Opt out of all email from EY Global Limited.


Cookie Settings

This site uses cookies to provide you with a personalized browsing experience and allows us to understand more about you. More information on the cookies we use can be found here. By clicking 'Yes, I accept' you agree and consent to our use of cookies. More information on what these cookies are and how we use them, including how you can manage them, is outlined in our Privacy Notice. Please note that your decision to decline the use of cookies is limited to this site only, and not in relation to other EY sites or Please refer to the privacy notice/policy on these sites for more information.

Yes, I accept         Find out more