Salaries tax is charged on emoluments arising in or derived from Hong Kong. The basis of assessment and method of payment (including provisional payments) are similar to the system for profits tax.
Taxpayers receive their salary gross ie the tax is not deducted. Salaries tax is demanded on a yearly basis, and is normally paid in two instalments between January and April. Employees must remember to save their tax in preparation for this bill!
Foreign nationals who spend not exceeding 60 days in Hong Kongin any year of assessment are exempt from salaries tax.
Employers will notify new employees with the authorities so that the tax authorities should automatically be notified when a new tax subject is around.
Taxable income includes:
commissions
bonuses
awards
gratuities
allowances, like housing allowance
Deductions include: allowances prescribed in the Ordinance, charitable donations and certain payments for relevant educational courses.
The earnings of husbands and wives are reported and assessed separately. However they may elect to be assessed jointly if this results in a lower tax bill or if allowances are unused.
Salaries tax is calculated in two ways and the taxpayer pays the lesser amount. The two methods are:
tax calculated at a stepped rate on the net income figure ie after tax allowances. The stepped rates are: 2% on the first HK$30,000; 7% on the next HK$30,000; 13% on the next HK$30,000 and the balance at 19%.
tax calculated at the standard rate (16%) applied to the gross income figure.
Only around 40% of the workforce has to pay salaries tax
