HK Salaries Tax

Conservative Defaults

| Ambiguity | Default | |---|---| | Unknown marital status | Apply basic allowance (HK$132,000) only | | Unknown whether children qualify | Do not claim child allowance | | Unknown dependent parent arrangement | Do not claim additional allowance for living together | | MPF deduction cap | Apply HK$18,000 cap per employee | | Unknown whether progressive or standard rate lower | Calculate both; apply lower | | Tax reduction year | Apply 2024/25 reduction: 100%, ceiling HK$1,500 |

Charge to salaries tax

Salaries tax is charged on every person in respect of income arising in or derived from Hong Kong from: Office or employment; Pension; Lump sum payments in connection with services rendered in Hong KongIRO Sec. 8

Assessable Income

| Component | Treatment | |---|---| | Salary, wages, commission | Fully assessable | | Bonus (discretionary or contractual) | Fully assessable | | Leave pay, end-of-contract gratuity | Fully assessable (time-apportioned if partly HK service) | | Housing benefit (provided by employer) | Add rental value: 10% of net income (4% if hotel, 8% if hostel) | | Share options/awards | Assessable at exercise/vesting (gain = market value - cost) | | Employer MPF contributions | NOT assessable (exempt under IRO Sec. 8(1A)) | | Reimbursed expenses (wholly business) | NOT assessable if solely for business | | Education benefit for children | Assessable as perquisite | | Severance / long service payment | Exempt up to statutory entitlement |

Deductions (IRO Sec. 12)

| Deduction | Limit (2024/25) | |---|---| | Self-education expenses | HK$100,000 | | MPF mandatory contributions (employee) | HK$18,000 | | Approved charitable donations | 35% of assessable income | | Elderly residential care expenses | HK$100,000 | | Home loan interest | HK$100,000 (max 20 years of assessment) | | Qualifying premiums (VHIS) | HK$8,000 per insured person | | Qualifying annuity premiums (QDAP) | HK$60,000 | | MPF voluntary contributions (TVC) | HK$60,000 | | Domestic rent deduction | HK$100,000 |IRO Sec. 12

QDAP + TVC combined cap

QDAP + TVC deduction combined cap = HK$60,000.IRO Sec. 12

Rental value of quarters

If employer provides housing: Rental value = 10% of net income (after other deductions) for a house/flat; 8% for a service occupancy (hostel); 4% for hotel/boarding house; If employer pays rent (not provides quarters): assessable as Place of Residence benefit, but capped at rent paid or 10% rental value, whichever lowerIRO Sec. 9

Progressive rate calculation worksheet

A. ASSESSABLE INCOME A1. Salary / wages / commission ___________ A2. Bonus / allowances ___________ A3. Rental value of quarters (10% of net) ___________ A4. Share option gains ___________ A5. Other perquisites ___________ A6. Total Assessable Income ___________ B. DEDUCTIONS (Section 12) B1. MPF mandatory contributions (max $18,000) ___________ B2. Self-education expenses (max $100,000) ___________ B3. Charitable donations (max 35% of A6) ___________ B4. Home loan interest (max $100,000) ___________ B5. QDAP + TVC (combined max $60,000) ___________ B6. VHIS premiums (max $8,000 per person) ___________ B7. Domestic rent (max $100,000) ___________ B8. Total Deductions ___________ C. NET INCOME (A6 - B8) ___________ [Used for standard rate calculation] D. ALLOWANCES D1. Basic / Married ___________ D2. Child allowances ___________ D3. Dependent parent/grandparent ___________ D4. Other allowances ___________ D5. Total Allowances ___________ E. NET CHARGEABLE INCOME (C - D5) ___________ [Used for progressive rate calculation] F. TAX COMPUTATION F1. Progressive tax on E ___________ F2. Standard rate tax on C (15% on first $5M, 16% excess) ___________ F3. Tax payable = LOWER of F1 and F2 ___________ G. TAX REDUCTION (2024/25) G1. 100% reduction, capped at $1,500 ___________ H. FINAL TAX (F3 - G1) ___________ I. PROVISIONAL TAX I1. Less: provisional tax already paid for 2024/25 ___________ I2. Plus: provisional tax for 2025/26 ___________ I3. NET AMOUNT PAYABLE ___________

Worked Example -- Single Employee

| Item | Amount (HK$) | |---|---| | Annual salary | 600,000 | | Bonus | 50,000 | | Total assessable income | 650,000 | | Less: MPF mandatory (capped) | (18,000) | | Net income | 632,000 | | Less: Basic allowance | (132,000) | | Net chargeable income | 500,000 |

Worked Example -- Married with Children

| Item | Amount (HK$) | |---|---| | Annual salary | 1,200,000 | | Total assessable income | 1,200,000 | | Less: MPF mandatory (capped) | (18,000) | | Net income | 1,182,000 | | Less: Married allowance | (264,000) | | Less: 2 children | (260,000) | | Net chargeable income | 658,000 |

BIR60 (Tax Return -- Individuals)

| Item | Detail | |---|---| | Form | BIR60 (個別人士報稅表) | | Issue date | Usually first working day of May | | Filing deadline (paper) | 1 month from date of issue (usually early June) | | Filing deadline (eTAX) | 1 additional month (usually early July) | | Extension | Automatic if filed via eTAX; further extension with tax representative | | Singed by | Taxpayer (paper) or digital certificate/eTAX password (online) |

Provisional Salaries Tax (IRO Sec. 63E)

| Rule | Detail | |---|---| | Basis | Estimated at 100% of current year final tax | | Payment | In two instalments (75% + 25%) | | First instalment | Usually January | | Second instalment | Usually April | | Holdover | Can apply if income expected to drop >10% or allowances increase | | Holdover deadline | 28 days before first instalment due or 14 days before second |IRO Sec. 63E

Objection and Appeal

| Step | Deadline | |---|---| | Objection to assessment | Within 1 month of Notice of Assessment | | Form | Written notice to Assessor stating grounds | | Appeal to Board of Review | Within 1 month of Commissioner's determination | | Appeal to Court | Within 1 month of Board's determination |

Non-Hong Kong employment

If employment is exercised partly outside Hong Kong: Income is time-apportioned (HK days / total days); Only HK-sourced portion is assessable; "60-day rule": visits totalling ≤60 days in a year = exemptIRO Sec. 8(1A)(b)

Lump sum payments

Gratuity, severance: assessable if connected to HK employment; Retirement scheme lump sum: exempt if from recognised scheme and meets conditions; Golden handshake: fully assessableIRO Sec. 11D

Personal Assessment

Individuals may elect Personal Assessment to: Set off business losses against salaries income; Claim home loan interest deduction; Pool married couple's income for progressive rates. Requirements: Hong Kong permanent resident OR temporary resident for full year; Married couple must both elect if one does; May be beneficial when one spouse has losses/low incomeIRO Sec. 41

Joint Assessment vs Separate Taxation (Married Couples)

| Method | When Beneficial | |---|---| | Joint assessment | One spouse has low/no income; unused allowances transfer | | Separate taxation | Both spouses have high income; standard rate applies separately | | Personal assessment (joint) | Business losses to offset; mortgage interest claim |

Domestic Rent Deduction (from 2022/23)

| Rule | Detail | |---|---| | Cap | HK$100,000 per year | | Condition | Taxpayer not provided with quarters by employer | | Condition | Property not owned by taxpayer or connected person | | Condition | Tenancy agreement registered with Rating and Valuation Department | | Married | Each spouse claims up to $100,000 if separate tenancies; or total $200,000 if joint assessment |

Tax Reduction History (Recent Years)

| Year of Assessment | Reduction | Ceiling | |---|---|---| | 2022/23 | 100% | HK$6,000 | | 2023/24 | 100% | HK$3,000 | | 2024/25 | 100% | HK$1,500 | | 2025/26 (proposed) | 100% | HK$3,000 |

Penalties and Surcharges

| Offence | Penalty | |---|---| | Late filing without reasonable excuse | Up to HK$10,000 + 3× tax undercharged (IRO Sec. 80(2)) | | Failure to notify chargeability | Fine up to HK$10,000 + 3× tax undercharged | | Incorrect return | Fine up to HK$10,000 + 3× tax undercharged; or on conviction HK$50,000 + imprisonment | | Late payment surcharge | 5% immediately on overdue amount; additional 10% after 6 months | | Fraud or wilful evasion | Fine up to HK$50,000 + 3× tax + imprisonment up to 3 years |IRO Sec. 80(2)

Key Dates Calendar

| Date | Event | |---|---| | 1 April | Start of Year of Assessment | | Early May | BIR60 issued by IRD | | Early June | Filing deadline (paper) | | Early July | Filing deadline (eTAX) | | Oct--Nov | Notice of Assessment issued | | January | First instalment of provisional tax due | | 31 March | End of Year of Assessment | | April | Second instalment of provisional tax due |

Reference Material

| Topic | Reference | |---|---| | Charge to salaries tax | IRO Sec. 8 | | Assessable income | IRO Sec. 9 | | Deductions | IRO Sec. 12, 12AA, 12B, 12BA, 16AA, 26I, 26J | | Allowances | IRO Sec. 28--33 | | Progressive rates | IRO Schedule 2 | | Standard rate | IRO Sec. 12B / Schedule 2 | | Provisional tax | IRO Sec. 63--63J | | Personal assessment | IRO Sec. 41--43 | | Domestic rent deduction | IRO Sec. 26J | | Two-tiered standard rate | Inland Revenue (Amendment) (Taxation Proposals Relating to 2024-25 Budget) Ordinance | | IRD official site | ird.gov.hk | | eTAX portal | etax.ird.gov.hk | | Salaries Tax computation guide | DIPN No. 9 (Rev. 2024) |