Tax-free distribution income from Hong Kong REITs.
Annual distribution (tax-free)
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Tax on distribution
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Distribution then
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Yield-on-cost then
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Your breakdown
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Why the distribution lands in your account untouched
Hong Kong does not tax dividends or unit-trust distributions in the hands of the recipient. There is no dividend withholding tax and no separate investment-income tax to file. A distribution from a Hong Kong-listed real estate investment trust therefore reaches you in full, which is the single most important fact this calculator builds on. Where a US or UK investor would mentally haircut a yield for tax, a Hong Kong resident holding a local REIT does not. The headline figure the tool shows is what you actually keep.
That is a structural feature of the territory's tax system rather than a special REIT rule, and it is stable enough to plan around. The Inland Revenue Department confirms that dividends are not chargeable income for salaries tax purposes. The tool keeps a tax line in the results panel only so the zero is explicit, never hidden.
Yield-on-cost, and why it climbs
The number that matters to a long-term income investor is not today's yield but yield-on-cost: the distribution expressed as a percentage of what you originally paid. If the REIT raises its distribution over time, your yield-on-cost rises even though the price you paid is fixed. This tool grows the distribution at a rate you choose and then divides it by your original outlay, so you can watch a respectable starting yield turn into a high one over a decade.
$500,000 at a 6 percent yield, grown for a decade
Suppose you invest $500,000 in a REIT yielding 6 percent, and the distribution grows 2 percent a year for 10 years. The first-year income is straightforward; the future figures follow the compounding the tool applies.
Over ten years a 6 percent starting yield becomes a 7.3 percent yield on your original money, and you paid no tax on a single dollar of it along the way.
Where the model simplifies, and who should use it
The projection assumes a steady growth rate, which real REITs rarely deliver. Distributions can fall in a downturn, and a rising interest-rate environment can pressure unit prices even while income holds. The tool also takes your invested amount as fixed, so it does not model topping up over time or reinvesting distributions. Read the future figure as a smooth illustration, not a forecast. A useful habit is to run the calculator twice, once at the trust's current yield and once at a more cautious growth rate, to see the range.
It suits an income-focused investor comparing a REIT against a savings deposit or a rental property, where the tax-free distribution is a genuine edge worth quantifying. If you hold overseas REITs, remember that foreign jurisdictions may withhold tax at source even though Hong Kong does not tax you again, so this clean picture applies most cleanly to locally listed trusts.
Are foreign REIT distributions also tax-free in Hong Kong?
Hong Kong still does not tax the distribution in your hands, but the country where the REIT is based may withhold tax before it reaches you. A US REIT, for example, can apply withholding at source. So the income arrives net of foreign tax even though Hong Kong adds nothing further, and this tool's zero-tax assumption fits local trusts best.
Is a REIT distribution the same as a bond coupon for tax?
For a Hong Kong resident the practical result is similar, since interest and dividends are generally not taxed here either. The difference is in the risk and the cash flow: a REIT distribution can grow or be cut with the property market, while a bond coupon is usually fixed until maturity.