【Tax Tips】Why is buying a car in Hong Kong so expensive? Learn more about the First Registration Tax
One of the main reasons why buying a car in Hong Kong is so expensive is the heavy tax burden, especially the First Registration Tax (FRT) . The following will explain in detail the various taxes and fees involved in buying a car in Hong Kong, and focus on explaining the calculation method and impact of the First Registration Tax:
1. Main taxes and fees for buying a car in Hong Kong
1.1 First Registration Tax (FRT)
- The most important tax , which must be paid when buying a new car or importing a car for the first time.
- The tax rate is high and is calculated at progressive rates based on the "taxable value" of the vehicle.
1.2 Vehicle Licence Fee
- It is paid every year when the license is renewed, and is calculated based on the vehicle type and engine displacement.
1.3 Motor Insurance
- It is necessary to purchase third party liability insurance, and the premium depends on the type of vehicle, driver and insurance company.
1.4 Vehicle Examination Fee
- Certain vehicles (such as second-hand cars, trucks, etc.) need to be inspected before registration.
1.5 Other administrative expenses
- Including registration procedures, license plate production, etc.
2. Details of First Registration Tax (FRT)
2.1 Taxable Value
- Including: vehicle price (including freight, insurance), agency commission, additional equipment, etc.
- New car: mainly based on the invoice price.
- Second-hand imported cars: the price shall be subject to the assessment of the Transport Department.
2.2 Tax rate (2024 private car standard)
| Taxable value (HKD) | tax rate |
|---|---|
| First $150,000 | 40% |
| $150,001 – $300,000 | 75% |
| $300,001 – $600,000 | 100% |
| Over $600,000 | 115% |
( Note: Hybrid and electric vehicles will have some tax concessions or exemptions. Please refer to the Transport Department’s update for details.)
2.3 Example calculation (assuming the taxable value is $500,000)
- First $150,000: $150,000 x 40% = $60,000
- $150,001–$300,000: $150,000 x 75% = $112,500
- $300,001–$500,000: $200,000 x 100% = $200,000
Total FRT = $60,000 + $112,500 + $200,000 = $372,500
2.4 Notes
- FRT is a "one-time" tax that must be paid in full upon landing.
- The FRT amount can be higher than the car price itself, making cars in Hong Kong particularly expensive.
- Imported used cars are also subject to FRT, which operates in the same way as new cars.
3. Other factors that increase the price
- High land and operating costs : Car rental is expensive.
- High parking fees : The cost of parking after buying a car is also very considerable.
- Repair and maintenance costs : Due to the high labor and parts costs, repair costs are also expensive.
- Market supply and demand : Some imported car models will have an additional premium due to their rarity, tax incentives, etc.
4. Related references
- Hong Kong Transport Department: Introduction to First Registration Tax
- Transport Department: First Registration Tax Rates for Different Vehicles
Summarize
The biggest reason why buying a car in Hong Kong is so expensive is the extremely high First Registration Tax (FRT) rate, especially for mid- to high-priced cars, where the tax amount can be as much as the car price or even higher. Add to that daily operating costs, parking spaces, insurance, etc., and the overall cost of owning a car is high.
Source: Partly reproduced from Transport Department
