When you buy a new car in Hong Kong, you may have noticed an additional cost added to the price of the car – the Motor Vehicle First Registration Tax (MVFRT). But do you really understand the details of this tax? As a Hong Kong accounting firm that specializes in providing up-to-date accounting and tax information, we’ll take a closer look at Motor Vehicle First Registration Tax to help you and your business better understand and deal with this tax.
Motor Vehicle First Registration Tax
Motor Vehicles First Registration Tax, or simply known as Motor Vehicles First Registration Tax, is an indirect tax levied under the Motor Vehicles (First Registration Tax) Ordinance, Chapter 330 of the Laws of Hong Kong, when a vehicle is first registered in Hong Kong. This tax is collected by the Transport Department in Hong Kong.
In general, the calculation of this tax is based on the retail price published by the manufacturer of the vehicle or the taxable value assessed by the Customs and Excise Department. Therefore, the First Registration Tax (FRT) of a vehicle is not a fixed amount but depends on the circumstances of the particular vehicle.
What is the rate of Motor Vehicle First Registration Tax?
In Hong Kong, the amount of motor vehicle FRT payable is calculated on the basis of the published retail price of the motor vehicle and the FRT rate. Specifically, according to the regulations of the Transport Department and the Customs and Excise Department of Hong Kong, the tax is calculated as follows:
Type of motor vehicle (private car)
- Initial taxable value of $150,000
- second $150,000
- next $200,000
- remaining taxable value (i.e., balance over $500,000)
132% of the remaining taxable value (i.e., the balance above $500,000)
Please note that the value of the motor vehicle here refers to the manufacturer’s published retail price of the vehicle or the provisional taxable value as assessed by the Customs and Excise Department. The tax rate is effective from February 24, 2021 at 11:00am. Buyers should visit the Transport Department’s website to check the latest tax rates for private cars.
Do I need to pay First Registration Tax (FRT) for imported used cars?
Regardless of whether the vehicle is new or second-hand, as long as it is registered in Hong Kong for the first time, it is required to pay First Registration Tax (FRT). Only after payment of FRT can a vehicle be registered and licensed, i.e. “licensed”.
In addition, under the Motor Vehicles (First Registration Tax) Ordinance, any motor vehicle introduced into Hong Kong with the intention of running on local roads, regardless of its age, is required to pay FRT. This requirement applies even to valuable antique cars, for which there is no exemption clause.
What are the consequences of misrepresenting the transaction price of a car?
If a prospective car owner applies for the first registration of his/her car by misrepresenting the transaction price of his/her car in an attempt to minimize the tax payable, he/she is likely to be prosecuted by the relevant authorities in Hong Kong.
According to the laws of Hong Kong, intentional tax evasion is a serious crime. If you are found to have misrepresented the transaction price, you may not only be required to pay the missing tax and penalties, but you may also be subject to criminal proceedings. The maximum penalty upon conviction is a fine of $500,000 and imprisonment for 12 months.
The above information is for reference only. If you have any questions or information regarding tax return (personal tax return, corporate tax return, accountant tax return), we welcome you to contact our professional consultants and provide you with a free quote and consultation service in due course.