Salary Tax and Individual Income Tax

If employed in Hong Kong, or to fulfill your duties in Hong Kong and your income is over the allowances that you can enjoy, you are required to pay salaries tax according to the actual income in the year of assessment.

During the period of employment in which the year of assessment, you have been for quite a lot of time, perform duties outside Hong Kong, you can apply,  in respect of all or part of the annual income of salaries tax, for an exemption.

Salaries tax is based on the taxable amount of the income (gross income - allowance) and is subject to progressive tax rates; the net total income is subject to the standard tax rate (15%), whichever is the lower amount of the tax levy.

For deduction for salaries tax allowances and tax rate table, please refer to the following pages:-

You can calculate your 2012/ 13 annual salaries tax payable base on the following pages:-

Year of assessment is from 1 April to the following year 31 March.   For example, the 2011/ 12 year of assessment is the one made between 1 April 2011 and 31 March 2012 ending 12 months.

And every year, it is need to pay advance / provisional salaries tax for the next year, prepaid / provisional proportion is largely based on last year's income minus deductions (and allowances) to assess.

The "Inland Revenue Ordinance" provides that, if you are subject to tax in any year of assessment, unless you have received tax return, otherwise you should be, after end of the year of assessment, within four months ( i.e. 31 July ) to notify the IRD Secretary.

If you have worked during the taxable year of assessment and received income, you have to ensure that the income tax return is returned within the time period carefully.   The IRD will not accept those inadvertently omission.   You could not use "negligence" as a "reasonable excuse".

Salaries Tax - Scope
Directors' remuneration received by directors, salary received by employees, wages, commissions, bonuses and perquisites and retirees received pension are taxable.    Or benefits to employee are taxable, such as: providing accommodation by employers, the residence "rental value", will be included in the employee's assessable income.

The "Inland Revenue Ordinance" provides that for employers and employees, each of them has to submit their relevant returns to the IRD.   Underreporting of income without reasonable reasons, you are subject to penalties.

Difference between Directors and Employees
If you are a company director, you should make sure your directorship under tax purposes is "Hong Kong office" or "non-Hong Kong offices";

If you are an employee, you should make sure employment under tax purposes is "Hong Kong employment" or "non-Hong Kong employment”;

In simple, from the tax point of view, directors are not employed by the company, but rather a statutory office.

"Hong Kong office" and "Non-Hong Kong offices" situation for assessment income
Form tax purposes, directors of a company is a "job".   If you are a director of a Hong Kong company and receive remuneration, your job will usually be regarded as "Hong Kong office", and the received remuneration is subject to salaries tax in a whole.

If you are a non-Hong Kong company director, your job will be regarded as "non-Hong Kong office”.   The general remuneration received are not subject to tax in Hong Kong.

Omission to report income will incur heavy penalties.   If you are unsure whether your remuneration is taxable, you should provide the relevant information to the assessor for consideration.

Some taxpayers may have two positions, he holds positions in the same company but engages in employment simultaneously.   In this way, you are required to return the first detailed description of your situation and provide the relevant documents to facilitate assessment so that the assessor can create the right basis for your first time.

"Hong Kong employment" and "Non-Hong Kong employment", different  situation for assessment income
According to the Hong Kong IRD Interpretation and Practice Notes No. 10, the problem of Hong Kong or non-Hong Kong employment can be determined by the following factors : 

Employment contract, the employer's place of residence, place of payment or compensation. The IRD will consider all the relevant facts, in particular:-
(A) where the employment contract negotiations, entered into and executed in Hong Kong or outside Hong Kong ;
(B) the employers’ place of resident, in Hong Kong or outside Hong Kong ; and
(C) where the employee's remuneration paid in Hong Kong or outside Hong Kong .

The following table summarizes the Hong Kong employment and non-employment in Hong Kong salaries tax situation:-

                                                                          Hong Kong employment                                         non-Hong Kong employment

All work performance in Hong Kong         Hong Kong salaries tax 100%                                Hong Kong salaries tax 100%

Most of the work performed in Hong Kong

and part in the overseas
                                                                          Hong Kong salaries tax 100%                               Hong Kong salaries tax 100%

All the work isrequired to perform overseas    Salaries tax does not apply                            Salaries tax does not apply
Visit to Hong Kong in less than 60 days

To less than 60 days in Hong Kong

Hong Kong to perform work, but stay  
in Hong Kong does not constitute visiting 100%         Hong Kong salaries tax on the proportion of time      Hong Kong salaries tax
Stay in Hong Kong for more than 60 days and
100% of the work performed in Hong Kong                 Hong Kong salaries tax 100%                     Not Applicable

Personal Assessment
According to the "IRO", there are three kinds of direct taxes, namely salaries tax, profits tax and property tax.   Personal income tax is not a tax item but to provide for an application of  tax concession arrangement.   Under normal circumstances, it is for the person to include business proprietors or shareholders, and rental property owners.  Tax payers chargeable to salaries tax is from business or rental income, without regard to personal income tax.

Business which earn profits for owners / shareholders and rental property owners who earns rentals shall be paid at the standard tax rate of profits tax and property tax.   A person can choose personal assessment through an integrated form of salaries tax reporting and / or by progressive tax rate reduces the tax payable amount.

Select the conditions for personal income tax
Any individual, in the relevant year of assessment, who fulfills the following conditions, can select for personal assessment :
( A ) at least at the age of 18 or over, or under the age of 18 and his parents are dead; and
( B ) he is a Hong Kong permanent resident or a temporary resident or, if married, the spouse is a Hong Kong permanent resident or a temporary resident.

For the purpose of Personal Income Tax:-
(A)   "Permanent resident" refers to the applicant or his spouse who usually resident in Hong Kong.
(B)   "Temporary resident" means a person who is subject to the following conditions:  The applicant or the spouse of their choice, within a year of assessment, once in stay in Hong Kong for once or several times, for a period exceeding 180 days, or during two consecutive tax years (one of which is their choice of assessment year, stayed in Hong Kong once or more than 300 days duration).

A person who select the personal income tax must be in writing.   Taxpayers can complete the tax returns for providing information in the relevant selection.