One of the most consistently challenging aspects of contracting in Hong Kong is complying with the country’s tax system. As well as paying tax in Hong Kong, you might also still be eligible to pay some tax in your home country, and understanding the legislation behind this can be a challenge.
There is no PAYE (pay-as-you-earn) system in Hong Kong. This means that you are likely to be left with the prospect doing everything yourself.
Do you know much about Hong Kong Tax Law? Does Hong Kong have a tax treaty with your home country? You will need to find out or find someone who can help! Income tax in Hong Kong can range from 2 to 17 percent, and you need to be sure you are placed in the correct tax brackets.
If you are a contractor and want a calculation on your tax and net retention in Hong Kong, we can supply it to you free of charge.
Contractors in Hong Kong are faced with masses of paperwork and numerous wasted hours filing a tax return unless they find an alternative option. A Hong Kong umbrella company can act as your employer during your stay in the country whilst still allowing you the freedom of a contractor. The only difference is that you submit your timesheets to them; they’ll calculate and pay your taxes as you earn, and then you receive a net wage (as well as documentation for your records).
The companies are experts in Hong Kong taxation, and they’ll ensure that you keep the largest proportion of your earnings whilst complying with local laws. They can deal with any issues with the Hong Kong tax office or tax department directly including processing your tax refund if you are eligible.
We work with numerous umbrella companies in Hong Kong, many of whom are experts in tax and immigration laws. If you have any questions about tax in Hong Kong, we’ll get the answers from them directly so you can rest assured you’ll be getting accurate information. We have comprehensive knowledge of the different services they provide, and can help you find the right company to handle your income tax. We help oil and gas workers, software developers, IT project managers, testers, business analysts and telecommunications contractors get tax efficient payments and sponsorship for their Hong Kong work permit.
Our advice is 100 percent free, and comes with no obligations. You will be paying taxes in Hong Kong but without the overhead of directly dealing with the Hong Kong tax authorities. Get in touch with us today for some reliable advice on tax in Hong Kong!
Notify the Commissioner of Inland Revenue that you are a taxpayer, no later than 4 months after the end of the year for which you must pay income tax. If you have been issued an Individual Tax Return (Form BIR60) for the relevant year of assessment, you are not required to complete this step.
Upon receiving your notification, the Inland Revenue Department (IRD) may issue you a provisional tax return form, requiring you to give an estimate of your income for the period from commencement of employment to the following 31 March.
Your employer will be issued with a notice requiring them to submit an employer's return to the Inland Revenue Department, indicating the remuneration accruing to each employee in the year to the preceding 31 March. As an employee, you are required to complete an individual tax return covering that period (which will be issued to you in May). Your final liability is calculated on the basis of these returns.
Click here for a comprehensive guide to the form.
After completion, send it back to the Department within the time limit specified in the return so that the Department can assess whether or not you are liable to tax for that year of assessment. The postal address is:
G.P.O. Box 132, Hong Kong
Alternatively, you can submit it in person during office hours to Revenue Tower, 5 Gloucester Road, Wanchai.
Step 3: Pay Taxes
In Janurary, pay the balance of the final tax for the preceding year of assessment and 75% of the provisional tax for the current year of assessment. In April, pay the remaining 25% of the provisional tax.
You can pay taxes by phone, online, and via ATMs. To pay online, use the ‘Pay e-Cheque’ portal. To obtain an e-Cheque, log on to your Internet banking account, select the e-Cheque issuance service, input the payee name (The Government of the HKSAR), cheque date, and cheque amount. Confirm the details using a digital signature, and download the issued e-Cheque. On the e-Cheque portal, select the Department or General Demand Notes, select the ‘Bill Type’ and key in the ‘Bill Account Number’, key in the bill payment amount, select to upload the e-Cheque, note the Acknowledgement Reference Number, and keep the payment record.
Credit is given for additional provisional tax already paid when the actual income for the tax year is determined. The remainder is payable at the same time as the 75% instalment of provisional tax for the following year.
Salaries tax amounts to the lower of:
- Net income, less charitable donations and allowable deductions at 15%
- Net income less charitable donations, allowable deductions and personal allowances, charged at the above rates
You become a tax resident in Hong Kong when you:
(i) ordinarily live in Hong Kong or
(ii) stay in Hong Kong for more than 180 days during a year of assessment or for more tha 300 days in 2 consecutive years of assessment.
However, residency is irrelevant in determining whether you are liable to pay tax. If your employment is located in Hong Kong, all income from the employment will be taken into account in determining your salaries tax liability.