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Employment Taxation for Expats in Hong Kong

Submitted: April 2014

Hong Kong Identity Card

If you intend to stay and work for longer than 180 days in Hong Kong, you must apply for a Hong Kong Identity Card within 30 days of arrival. To do this, you can either call to book an appointment on (852) 2598 0888 (24hrs), or do it online, beginning from here. Alternatively, you can just turn up at your nearest Registration of Persons Office, the location of which you can find out from here. When you go for your appointment, you will need your passport, visa and something showing your reason for living in Hong Kong. The form you require to apply is available here.

Provisional Tax System

If you come from a country where tax is deducted from your wages or salary every week or month, Hong Kong’s assessment system can be a little confusing. Twice a year you will be sent a demand for Provisional Tax owed. This is based on what the Inland Revenue Department (IRD) think you are earning, based on the previous year’s earnings. After the end of the tax year (which runs from 1 April to 31 March), you fill in a tax return showing what you actually earned, and you either pay the difference in actual tax due or receive a tax credit for the current year. The process is slightly different in your first year of employment.

Working for an employer

When you start working for an employer you are liable to salaries tax on your earnings “arising in or derived from a Hong Kong employment” only. Your employer must register your employment with the Inland Revenue Department (IRD) within 3 months of your start date. The IRD will then send you an individual tax return form (BIR60C), usually within five months. Generally you must return this within a month. Your Provisional Salaries Tax (PST) will then be calculated, and later you will be sent a demand for the PST due. In subsequent tax years, an individual tax return form (BIR60) will generally be sent to you on 2 May each year. This must be completed and returned within one month from the date of issue. It will be used to calculate your PST for the current year, based on the previous year’s actual earnings. Tax credits will be given for use in the current year if your actual earnings in the previous year were lower than expected. For more details, see here. 75% of the PST assessment is payable in the 3rd quarter, with the final 25% being payable in the final quarter.

Each person has an allowance of a certain amount per year on which they pay no income tax. For 2014/2015 for a single person this amount is HK$120,000 which is HK$10,000 per month or approximately HK$2,300 per week. This amount can vary depending on your circumstances; for instance if you are married. For details of allowances, see here. In addition to the allowances, there are also various deductions available for such things as legitimate costs associated with your work and retirement schemes. For details of these, see here. After these allowances and deductions, salaries tax is calculated at either a progressive rate of between 2% and 17%, or a flat rate of 15%, whichever is the lower. It is all quite complicated; there is a calculator available in a link on this page here.

The tax treatment of employee fringe benefits or perks depends on the nature of the benefit. The key measure of whether a benefit is taxable is whether it can be converted into cash in some way.

Working as self-employed

If you are self-employed you will be liable for profits tax rather than salaries tax. The tax rate is a flat 15% on the excess of taxable income after deduction of allowable expenses. You can opt for personal assessment if this will reduce your tax bill. Tax is collected via the provisional assessment method as outlined above.



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