Salaries Tax in Hong Kong

Hongkong has a low tax regime for personal tax

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Salaries Tax in Hong Kong

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!

  • Individuals are taxed on their net chargeable income (income after deductions and allowances) at progressive rates of 2%, 7%, 12%, and 17%, or a mean rate of 15%, whichever is lower.
  • An individual’s income also adheres to the territory principle in Hong Kong, with income only arising in or derived from Hong Kong being taxed.
  • There is no capital gains tax, no estate and estate tax, no withholding and no sales/VAT tax.
  • Personal taxes are collected at the top of the financial year, in any case, allowances and deductions are calculated into assessable profits.
  • The year of assessment for private salary tax is from April 1st to March 31st of the subsequent year.
  • The personal tax forms are normally issued in April or May of every year, and due 1 month after the issuance date of the form.

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:

Year Of Assessment – 2011/12 To 2016/17

  • 0 to 40,000 HKD – Rate is 2%
  • 40,001 to 80,000 HKD – Rate is 7%
  • 80,001 to 120,000 HKD – Rate is 12%
  • Above 120,001 HKD – Rate is 17%

Year Of Assessment – 2017/18

  • 0 to 45,000 HKD – Rate is 2%
  • 45,001 to 90,000 HKD – Rate is 7%
  • 90,001 to 135,000 HKD – Rate is 12%
  • Above 135,001 HKD – Rate is 17%

Year Of Assessment – 2018/19 Onwards

  • 0 to 50,000 HKD – Rate is 2%
  • 50,001 to 100,000 HKD – Rate is 6%
  • 100,001 to 150,000 HKD – Rate is 10%
  • 150,001 to 200,000 HKD – Rate is 14%
  • Above 200,001 HKD – Rate us 17%

Here is a list of the allowances you can take during the year:

Year of Assessment 2015/16
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.

Here Are A Number Of The Categories For Income Under The Private Tax In Hong Kong

  • Salary, employment wages and director’s remunerations
  • Bonuses, commission income and leave paid from the company
  • Employment termination payments and retirement benefits like MPF
  • Pensions
  • Company stock awards or stock options from the corporate
  • Rental compensation from property provided by the employer

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:

  • Education benefits
  • Meal allowance
  • Share awards and share options
  • Accommodation and housing allowance
  • Company gifts

These are some allowable deductions that you simply may claim as expenses throughout the year:

  • Self-education expenses
  • Payments to a Compulsory Provident Fund Scheme (MPF) or recognized retirement scheme.
  • Charitable donations to approved organizations
  • Expenses as qualified to your employment as in certain business travel expenses, entertainment expenses or other fees to professional organizations and associations.
  • Elderly residential care expenses.
  • Home loan interest

Here are the maximum limits you can take for these deductions during the year:

Year of Assessment 2015/16
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.

Worried about who would look out of all this? If you opt to rent us, you would like not to worry about any of those things. Everything would be notified to you way before the time and therefore the right advice would tend to you in the least points.

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.