Hong Kong Tax

hong-kong-taxIncome that arises in or is derived from Hong Kong via employment, office or pension are subject to Hong Kong Salaries Tax.

Services rendered in Hong Kong for visits longer than 60 days in any fiscal year are subject to salaries tax, even if the individual is not ordinarily resident in Hong Kong.

A specific statutory Hong Kong tax exemption applies if the employee (not including a director) renders all services outside Hong Kong or if the visits to Hong Kong do not exceed 60 days in the year of assessment.

Hong Kong Tax

If you receive a Hong Kong tax return from the Inland Revenue Department (IRD), you must complete and submit it by the due date for filing even if you have no income that can be charged to Hong Kong Salaries Tax.

If you are leaving Hong Kong you will need to clear your salary tax liabilities and your employer will withold monies from you until that is done.

If you work for yourself and are not an employee, you are considered to be self-employed and can be charged Hong Kong tax on profits instead.

Hong Kong Salaries Tax

Hong Kong Salaries Tax payable is calculated at progressive rates on your net chargeable income or at standard rate on your net income, whichever is lower.

Progressive Hong Kong Tax Rates: Net Chargeable Income = Total Income – Deductions – Allowances*
OR Standard Hong Kong Tax Rate: Net Income = Total Income – Deductions

 Progressive Tax Rates 2013/14 Net chargeable Income HK$ per year
Rate Tax HK$
On the First $40,000 2% $800
On the Next $40,000 7% $2,800
$80,000 $3,600
On the Next $40,000 12% $4,800
$120,000 $8,400
Remainder 17%

 

A year of assessment runs from 1 April to 31 March.

*Note that if you have can negotiate the appropriate provision in your contract, your apartment rent may be used to offset some of your salaries tax, subject to certain conditions. Your employer’s HR department should be able to advise further.

Paying Hong Kong Salaries Tax

When you receive your Tax Return BIR60 it should be submitted to the IRD by the due date, usually at the beginning of May. BIR60 arrives from the IRD in April. Your Tax Return should be accompanied by the Employer’s Return of Remuneration and Pensions IR56B, which you will receive from your employer(s) for the tax year, also in April.

In August you receive a Hong Kong Salaries Tax Return for the previous year and a Notice for Payment of Hong Kong Provisional Salaries Tax for the current year. The calculations show:

  1. Final Hong Kong Salaries Tax for previous year based on actual earnings
  2. Less Hong Kong provisional salaries tax paid for previous year
  3. Plus Hong Kong provisional salaries tax for current year, based on estimated earnings
  4. The total is then paid in two installments. The largest installment is due 2nd January and the second one on 1st April.

Hong Kong Provisional Salaries Tax

As you can see, Hong Kong provisional salaries tax is paid in advance and any over/under payment is adjusted at the end of the year. If your circumstances change (address, earnings, place of residence, if you leave Hong Kong for more than 1 month) you are required to notify the IRD. If you intend to leave Hong Kong permanently your employer will file Form IR56G not later than 1 month before the expected date of departure. They will withhold all moneys payable to you for a period of one month from the date of filing the notification or until the IRD issues a “letter of release” confirming your Hong Kong tax is fully paid, whichever is earlier. The IRD is pretty reasonable, so if your earnings fall or you lose your job you should be able to negotiate a reduction on any installment due to reflect your changed circumstances.

If you are new to Hong Kong, you will pay your first year’s Hong Kong Salaries Tax in arrears (with no provisional tax having been paid to offset) PLUS Hong Kong provisional salaries tax for the forthcoming year. Effectively this means you will be paying 1-2 years tax, so be financially prepared!

Hong Kong Salaries Tax calculator

The Hong Kong Salaries Tax Calculator will assist you in assessing your liabilities under Hong Kong Salaries Tax. Go to the Inland Revenue Department website and click the relevant year in the section ‘Calculating Your Tax under Salaries Tax’ to find the Hong Kong Salaries Tax Calculator.

Home Country Tax Considerations

When coming to Hong Kong to work, it is important to take note of the Hong Kong tax rules of the country the expatriate comes from. Questions that one should consider:

hong-kong-salaries-tax

US citizens pay worldwide tax

  • Is the expatriate still considered a tax resident of the home country? For example, those coming from the UK will only be non-resident for tax purposes after they have been out of the UK for a full tax year.
  • Is the expatriate still required to file tax returns on worldwide income?
  • Is there double taxation relief?
  • Must social security contributions cease in the home country or is there a voluntary contribution that can be made.
  • Will rental income of the property in the home country that is rented out be subject to tax or is there an exemption that can be applied for?

Please note that no liability is accepted for inaccuracies or omissions with regards to Hong Kong Tax, pursuant to our terms.

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2 Responses to “Hong Kong Tax”

  1. Comment made by Admin on Sep 30th 2014 at 2:52 pm:

    It’s per year. I have changed the text on the page to make it clearer. Thanks.

  2. Comment made by mbbelac on Sep 27th 2014 at 3:51 pm:

    the amount listed on the table, is it monthly income or annual?

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