Hong Kong not only offers a beautiful tax regime for companies and corporations but also features a low taxation scheme for private tax on Hong Kong salaries tax. income tax, mentioned as Salary Tax in Hong Kong, follows a tax rate system with a number of rock bottom rates within the world.
The personal taxation rate in Hong Kong is 15% on the average for private tax, but people also are given an allowance on non-taxable income and taxes paid behind. Only your total income above the salary allowances and deductions are going to be subject to the taxation rates in Hong Kong. Therefore, if you earn a private income of but the allotted allowance fewer deductions, you'll find yourself paying little or no or no tax in Hong Kong!
The personal income for people is employed to calculate internet chargeable taxation (income after deductions and allowances) over the financial year. Only the income over this allowance and fewer deductions would be used to calculate the taxable income using the progressive rates.
For example, if you qualified for the essential allowance within the YA of 2016/17(April 1st, 2016 to March 31st, 2017), then all income over the essential allowance of HKD 132,000 would be subject to the progressive rates of the salary tax. Any income under this is able to not be taxed.
For reference, generally, the rate of exchange for Hong Kong dollars is 1 USD = 7.8 HKD. Below is a guide for the progressive rate on taxable income for salary tax:
Here is a list of the allowances you can take during the year:
| Year of Assessment | 2015/16 $ |
2016/17 $ |
2017/18 $ |
2018/19 $ |
2019/20 $ |
2020/21 onwards $ |
|---|---|---|---|---|---|---|
| Basic Allowance | 120,000 | 132,000 | 132,000 | 132,000 | 132,000 | 132,000 |
| Married Person Allowance | 240,000 | 264,000 | 264,000 | 264,000 | 264,000 | 264,000 |
| Child Allowance | 100,000 | 100,000 | 100,000 | 120,000 | 120,000 | 120,000 |
| Child born during the year | 100,000 | 100,000 | 100,000 | 120,000 | 120,000 | 120,000 |
| Dependent Brother/Sister | 33,000 | 33,000 | 37,500 | 37,500 | 37,500 | 37,500 |
| Dependent Parent and Grandparent 60 or above | 40,000 | 46,000 | 46,000 | 50,000 | 50,000 | 50,000 |
| Dependent Parent and Grandparent between 55 to 60 | 20,000 | 23,000 | 23,000 | 25,000 | 25,000 | 25,000 |
| Additional Dependent Parent and Grandparent 60 or above | 40,000 | 46,000 | 46,000 | 50,000 | 50,000 | 50,000 |
| Additional Dependent Parent and Grandparent between 55 to 60 | 20,000 | 23,000 | 23,000 | 25,000 | 25,000 | 25,000 |
| Single Parent | 120,000 | 132,000 | 132,000 | 132,000 | 132,000 | 132,000 |
| Personal Disability Allowance | - | - | - | 75,000 | 75,000 | 75,000 |
| Diabled Dependent Allowance | 66,000 | 66,000 | 75,000 | 75,000 | 75,000 | 75,000 |
These amounts would be the entire income over the allowance fewer deductions, not the entire income remodeled the year. Thus if you made HKD 132,000 up to HKD 172,000 (The first 0 to 40,000 HKD bracket) you'd only be taxed for two of your income over the allowance, or 2% on the HKD 40,000. Thus if you made the utmost for the primary tax brackets for HKD 172,000, your total tax payable would be HKD 800 (HKD 40,000 * 2%) for the year 2016/17, that’s it. In other words, you'd only be paying a 0.47% tax on the entire income you made during the year. you'll also claim further deductions, like self-education and donations, to lower the taxable income during the year. due to this attractive tax scheme and easy tax regulations, many of us have the interest to measure and add this financial business hub in Asia.
You may also refer to the IRD online tax calculator to better estimate your taxes in Hong Kong.
Income and salaries tax is assessed on the utilization of income arising in or derived from Hong Kong. Therefore if your employment is from a Hong Kong company to figure in Hong Kong, then your full income would be chargeable to any salary tax over the year. You'll, however, claim exemptions to the present tax under the subsequent circumstances:
If all the services rendered during the year are outside of Hong Kong (except in certain occupations like civil servants or crew members of an airline) you'd be exempt from salaries tax thereunder year of assessment. Further, income from services but 60 days in Hong Kong would even be exempt from Hong Kong taxes. the character of your trip, being for “visit” or business, would be assessed by the IRD supported the documentation provided.
If you've got been already taxed for parts of your income in another territory during the year of assessment, you'll claim partial exemption from Hong Kong’s salary tax. during this case, the IRD would request documentation of taxation payments during this territory with other information provided.
There could also be other sorts of income added to the present which can apply for people if receiving a sort of compensation or payment. inspect the IRD website for further information regarding all sorts of income.
For most individuals, the salary payments from their employers will constitute the bulk of the entire income generated over the year. Like all countries around the world, the companies in Hong Kong would need to file the entire annual salary for every individual and retirement payments as MPF for every employee. This income is recorded within the Employer’s Return (ER) for every company, as must be filed for every company shortly after the financial year-end in April or May.
Once the Employer’s Return has been submitted by the corporate to the IRD, a replica would even be provided to the employer, during which the figures would be used to file their own personal form. it's important for people working in Hong Kong to ask their Employer’s Return when filing their personal salary tax figure because the IRD also will ask this submitted form when reviewing the entire taxes payable for every individual.
Most employer benefits and gains are taxable under Hong Kong regulations. This includes your benefits which were paid to you or granted to you in reference to your employment.
Below are some samples of benefits:
These are some allowable deductions that you simply may claim as expenses throughout the year:
Here are the maximum limits you can take for these deductions during the year:
| Year of Assessment | 2015/16 $ |
2016/17 $ |
2017/18 $ |
2018/19 $ |
2019/20 $ |
2020/21 onwards $ |
|---|---|---|---|---|---|---|
| Self education expenses | 80,000 | 80,000 | 100,000 | 100,000 | 100,000 | 100,000 |
| Elderly Residential Care expenses | 80,000 | 92,000 | 92,000 | 100,000 | 100,000 | 100,000 |
| Home Loan interest | 100,000 | 100,000 | 100,000 | 100,000 | 100,000 | 100,000 |
| MPF contributions | 18,000 | 18,000 | 18,000 | 18,000 | 18,000 | 18,000 |
| Qualifying premiums under VHIS policy | - | - | - | - | 8,000 | 8,000 |
| Qualifying annuity premium for tax deductible MPF contributions | - | - | - | - | 60,000 | 60,000 |
| Approved charitable donations | 35% | 35% | 35% | 35% | 35% | 35% |
These expenses would scale back your overall taxable income and would wish to be included if applicable when filing your personal tax returns.
Taxpayers in Hong Kong must file an annual income tax return to the Inland Revenue Department (IRD). In Hong Kong, the year of assessment is from April 1st until the proceeding March 31st of the near year. The IRD will normally issue the individual tax returns by May 1st for taxpayers, which must be filed and submitted within one month from the date of issuance. albeit there was no income earned during the year, the form still got to be declared as zero income for the taxpayer.
After the form is completed and submitted to the IRD, the IRD will assess if there are any taxes to be paid, and send a tax note to the taxpayer. If the taxpayer disagrees with the calculation of taxes payable, they'll send an objection letter within 30 days to the IRD, stating the explanations for the objection. In cases where taxes payable are settled after the maturity, the IRD may impose penalties for the individual.
A marriage may elect to file their income tax return under joint assessment, which can be beneficial under the upper joint tax allowance and will lower tax liabilities. For sole-proprietors of a business, any assessable profits must be filed within the individual return, and filing is often extended up to three months from the issuance date.
Contact us if you've got any questions regarding your Hong Kong salary tax or personal tax forms. we provide assistance and consultation for taxation matters and other information with regard to corporate taxation, personal taxation, and company formation. be happy to urge in-tuned with us for further information.
The first financial period of the business will normally begin from the incorporation date until up to 18 months from incorporation. the company should also select a fiscal year-end. As an example, if the company selects a year endways March 31st, every subsequent year after the primary day of the New Year is going to be on April 1st and ending on the proceeding March 31st. All financial statements will need to be prepared during this fiscal year time.
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Contact Future Perfact Global if you have any questions regarding your Hong Kong salary tax or personal tax forms. We offer assistance and consultation for taxation matters and other information in regards to corporate taxation, personal taxation and company formation. Feel free to get in touch with us for further information.