The moment you receive a director salary or any type of compensation, you will need to start considering your tax obligations in Hong Kong under the Salary Tax Assessment. According to Section 8 of the Internal Revenue Ordinance, the wage tax will be charged to each person whose income is derived from Hong Kong from the sources of any office, employment and pension.
What are the Salaries Tax Rates in Hong Kong?
In Hong Kong, the tax on personal wages is calculated at progressive rates on net taxable income starting at 2% and ending at 17%. Or employees can choose to be charged at a standard rate of 15% on their net income.
Net attributable income = Total income - Deductions - Allowances *
Net income = Total income - Deductions
* Each individual has a basic allowance of HK $ 132,000. In other words, he does not have to pay any taxes if his total salary is less than HK $ 132,000. You can see more details in this guide. If your income is more than the basic allowance, your salary tax will be calculated on a sliding scale as follows. You can calculate your own payroll tax with this calculator.
Are there any tax exemptions?
After receiving the wage tax return form from the Hong Kong Internal Revenue Department, you will need to complete and submit it according to the instructions. If you operate an offshore company and your income is not derived from Hong Kong, you may or may not be subject to Hong Kong wage tax. In this case, you can request a waiver by stating the appropriate reasons.
For example, there is a 60-day rule for exemption from wage tax. Under section 8 (1A), the exemption applies if the taxpayer has performed his service in connection with employment more here outside Hong Kong. In determining whether the service will be considered performed in Hong Kong, the tax department will consider the number of days you spent in Hong Kong. If you visit Hong Kong for less than a total of 60 days in the evaluation year, you are not required to pay salary taxes to the HKSAR government. However, the client must pay attention that "visit" is defined as a short or temporary stay in a place. One only has to stay temporarily in Hong Kong to qualify for this exemption.
How to pay taxes in Hong Kong?
Once you receive your BIR60 form personal tax return form, it must be completed and submitted before the expiration date. The Internal Revenue Department will calculate the amount of taxes to be paid and you must settle the invoice on time. If you do not receive your tax form in a particular year, you have an obligation to proactively notify the Internal Revenue Department.
What should I do if I have a new address or I am leaving Hong Kong?
You must notify the Internal Revenue Department within one month if your address changes. If you are leaving Hong Kong for more than a month, you must also notify them.
What are the Chargeable Incomes?
You must report the following income on your wage tax assessment. Here is a list of attributable income for your reference.
-Any salary, salary, or director's fees
-Commissions, bonuses, license fees, contract termination bonuses and payments in lieu of notice accrued as of April 1, 2012
-Subsidies, gratuities and fringe benefits
-Vacation travel benefits
-Advice from anyone
-Wage tax paid by your employer (if applicable)
-Value of a place of residence
-Stock Awards and Stock Options
-Late payments, tips, deferred payments and late payments
-Termination payments and retirement benefits
-Pensions
You do not need to report your termination payments, long service payments, and jury fees in your personal tax assessment, as they are not chargeable income in Hong Kong.