Under Article 108 of the Basic Law of Hong Kong, the taxation system in Hong Kong is independent of, and different from, the taxation system in mainland China. In addition, under Article 106 of the Hong Kong Basic Law, Hong Kong has independent public finance, and no tax revenue is handed over to the Central Government in China. The taxation system in Hong Kong is generally considered to be one of the simplest, most transparent and straightforward systems in the world. Taxes are collected through the Inland Revenue Department (IRD).

Since the Common Law System is applied in Hong Kong, judgements by the Courts and Boards of Review in tax law cases are used to assist the interpretation of taxation rules and concepts. Furthermore, the Inland Revenue Department issues Departmental Interpretation and Practice Notes (DIPNs) from time to time to clarify and elaborate on the tax rules and to smooth the tax collection process.

Taxes collected in Hong Kong can be generally classified as:

In the fiscal year 2013/14, Profits tax, an income tax on corporations, constituted the largest source of tax collected by the government, followed by Salaries Tax, an income tax on individuals.

Unlike most tax systems which apply both residential jurisdiction and territorial jurisdiction in determining the tax liability of a person, Hong Kong uses only the territorial source jurisdiction and disregards the concept of residence. Thus, only profits sourced in Hong Kong are taxable whereas overseas income is not taxable. (As an exception, certain kinds of worldwide deemed trading receipts are taxable for non-residents.)

The wages and incomes received from employment are subjected to tax. Income tax rate in Hong Kong is 2% when net taxable income is from 1 to 50,000 Hong Kong dollars, 6% when net taxable income is between 50,001 and 100,000 Hong Kong dollars, 10% when net taxable income is between 100,001 and 150,000 Hong Kong dollars and 14% when net taxable income is between 150,001 and 200,000 Hong Kong dollars. Taxable income above 200,000 Hong Kong dollars is subjected to an income tax rate of 17%.

The Hong Kong profits tax is levied on the net profits of businesses. Companies and individuals (sole proprietors) carrying out business in Hong Kong are liable to Profits Tax if the profits arise in Hong Kong. The source of profits is one of the most controversial topics in Hong Kong taxation. Principally, it is guided by an established set of tests and judgments in court cases. The Departmental Interpretation and Practice Notes provides viewpoints from the IRD's perspective but these are subject to revision if major inconsistencies with court judgments are subsequently found. Certain kinds of deemed trading receipts are taxed irrespective of the source rule. Tax on these deemed trading receipts are collected by agents or other persons on withholding basis. Tax liability may be measured by reference to gross income or turnover for deemed trading receipts and in case where profits cannot reliably ascertained. Capital gain is out of the scope of Hong Kong Profits Tax. However, whether a gain is in capital nature is debatable.

Certain tax deductions are granted when expenses are incurred. Capital expenditure is not tax-deductible in general. Nevertheless, several kinds of capital expenditure are tax-deductible in the year of purchase or spreading over years, subject to the requirements in specific provisions. Allowances are granted for the purchase or construction of buildings and plants and machinery.