At the time you receive a director salary or any kind of remunerations, you shall start to consider your tax obligations in Hong Kong under Salaries Tax Assessment. According to Section 8 of Inland Revenue Ordinance, Salaries tax shall be charged on every person that his income is derived from Hong Kong from the sources of any office, employment and pension.
Salaries Tax Rates in Hong Kong
In Hong Kong, the salaries tax for individuals is computed at progressive rates on the net chargeable income starting from 2% and ending at 17%. Or employees can choose to be charged at a standard rate of 15% on their net income.
Net Chargeable Income = Total Income – Deductions – Allowances*
Net Income = Total Income – Deductions
* Every individual has a basic allowance of HK$132,000. In other words, you do not have to pay any tax if your total salary falls below HK$132,000. You can see more details from this guideline. If your income is higher than the basic allowance, your salary tax will be calculated in a sliding scale as follows. You can calculate your own Salaries Tax Payable with this calculator.
Year of Assessment 2022/23 onwards#
Net chargeable Income
Exemption on salary tax for offshore companies
After you receive the salary tax return form from the Hong Kong Inland Revenue Department, you shall complete and file it according to the instruction. If you operate an offshore company and your income is not derived from Hong Kong, you may or may not be subjected to salaries tax in Hong Kong. You can apply for an exemption by stating the appropriate reasons. Following 2 scenarios are for reference.
Scenario A – company’s offshore status
The salaries tax exemption depends on the company’s offshore status. As long as the company applies the offshore status, you can also apply for a personal tax exemption if you don’t work physically in Hong Kong.
Scenario B – 60 days rule
There is a 60 days rule. As per section 8(1A), the exemption applies if the taxpayer has performed his service in connection with an employment outside Hong Kong. In determining whether the service shall be deemed as performed in Hong Kong, the tax department will consider the number of days you spent in Hong Kong. If you visit Hong Kong for less than a total of 60 days in the year of assessment, you are not required to pay salary tax. However, you shall pay attention that ‘visit’ is defined as a short or temporary stay at a place. One must only be temporarily staying in Hong Kong in order to qualify for this exemption. This 60-day exemption is available only for income from employment and does not apply to directors’ fees.
How to pay tax in Hong Kong?
Once you receive your Individuals Tax Return form BIR60, you should complete and file it before the due date. The Inland Revenue Department will calculate the amount of tax payable and you should settle the bill on time. If you do not receive your tax form in a particular year, you have a duty to notify the Inland Revenue Department proactively.
What should I do if I have a new address or I am leaving Hong Kong?
You must notify the Government within one month if your address is changed. If you will be leaving Hong Kong for more than a month, you should also send them a notification.
What are the Chargeable Incomes?
You are required to report the following income in your salaries tax assessment. Here is a list of chargeable incomes for your reference.
- Any salary, wages or director’s fees
- Commissions, Bonuses, Leave Pay, End of Contract Gratuities and Payments In Lieu of Notice accrued on or after 1 April 2012
- Allowances, Perquisites and Fringe Benefits
- Holiday journey benefits
- Tips from Any Person
- Salaries Tax Paid by Your Employer (if any)
- Value of a Place of Residence
- Stock Awards and Share Options
- Back Pay, Gratuities, Deferred Pay and Pay in Arrears
- Termination Payments and Retirement Benefits
You do not need to report your Severance Payments, Long Service Payments and Jury fees in your personal tax assessment since they are not chargeable income in Hong Kong. If this is your first time to open a company in Hong Kong, I’d suggest you to consult with our in-house accounting team at email@example.com so we can tailor make a cost effective package for your company.