As a major business hub in Asia, Hong Kong can offer opportunities for international contractors with skills in finance, IT and e-commerce. Many global brands have Hong Kong as their headquarters, so you will have multiple potential clients to select from.
If you find the right role or project inside of Hong Kong, you will still need to know how to contract with and get paid by clients to maximize your earnings. There will also be visa requirements to meet before you begin living and contracting in Hong Kong. This guide will cover those items as well as how to handle taxes and remain compliant.
What visas do I need to be a contractor in Hong Kong?
Anyone working in Hong Kong beyond the length of a business visa will need a work permit. There is no ‘self-employment visa’ in Hong Kong, and there are two choices for work visas: as an entrepreneur or an employee.
Under Hong Kong’s General Employment Policy (GEP) professionals may apply for a work permit as an employee or entrepreneurs. Contractors that want to start a limited company will find the visa requirements for an entrepreneur are quite strict, including employing several people besides yourself. That leaves the other choice of becoming your client’s employee or using a third party for visa sponsorship.
How do I get paid as a contractor in Hong Kong?
The limitations on just entering Hong Kong and working as a contractor will mean that you will need some type of entity to contract through. There are a few options available:
Work as a self-employed freelancer
If you are used to working as a self-employed for one or more clients, this won’t be easy in Hong Kong. The most likely way to get hired is as an employee of your client, and that won’t allow you to work for other companies.
Set up your own limited company
Limited companies are fairly easy to set up in business-friendly Hong Kong, but as mentioned the visa criteria remain difficult for entrepreneurs. But you might qualify, and if so, would contract directly with Hong Kong clients through the limited company while you provide the services.
Work with an umbrella company in Hong Kong
If you want to preserve some independence but also have the support of a third party, you could engage an umbrella company in Hong Kong. The umbrella company would act as an intermediary with your client(s), facilitating payment and confirming performance. They can also sponsor your work visa, saving you the need to be employed by your client.
How do taxes work for contractors in Hong Kong?
Hong Kong has a favourable tax system due to its focus on supporting business activity, and the rates will depend on how you are being hired and paid.
There is no ‘income tax’ per se in Hong Kong, and instead, they use a Salaries Tax and Profits Tax. The Salaries Tax for employment income is a progressive 0-17%. The Profits Tax for self-employed or limited companies is 15% on net earnings.
Tax residency rule in Hong Kong
Hong Kong operates a system known as ‘territorial tax’. This means that tax liability stems from income earned within Hong Kong. There is no minimum stay test for tax residency or liability.
How to file taxes in Hong Kong
Step 1: Firstly, make Contact With The Inland Revenue Department
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. This requires you to give an estimate of your income for the period from the commencement of employment to the following 31 March.
Step 2: Secondly, fill out all the necessary forms
Your employer will be issued with a notice requiring them to submit an employer’s return to the Inland Revenue Department. It should indicate 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 based on 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. 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: Finally, pay the Taxes
In January, pay the final tax balance 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, and 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.
What are the social security contributions in Hong Kong?
There are no social security contributions in Hong Kong, and the only statutory requirement is to contribute to the Mandatory Provident Fund (MPF) for retirement. The contributions are 5% for both employees and employers (maximum HKD 1500 a month each). Foreign nationals that enter Hong Kong to work as employees or self-employed are exempt from contributions for up to 13 months. To receive the MPF exemption, you must show you are covered by an overseas retirement plan.
Can I work remotely for a company in Hong Kong from my home country?
If you have found a client in Hong Kong but prefer not to live there, you might be able to work remotely for your client from your home country. This will depend on the role and your client’s willingness, but remote work is becoming a more common method to work for clients abroad.
You would invoice your client as any business, arrange for a payment method and take care of your own taxes. You also have the option of using an umbrella company in your country to facilitate the cross-border relationship.
How do I stay compliant while contracting in Hong Kong?
As a foreign contractor, you will be concerned about compliance with Hong Kong law and regulations, as you are working and living within its borders. Your primary compliance risks are:
- Meeting tax and social contribution requirements
- Business registration for limited companies
- Work permit validity and sponsorship
That is a lot to overcome, especially for new contractors, and you might need the help of an umbrella company to take over many of these tasks. Contractor Taxation has licensed, verified umbrella companies in Hong Kong who are ready to assist you with setting up your contract and making sure that your payments are secure. Additionally, here are some of the benefits of using an umbrella company:
- Handles all client payments, tax withholding and any social contributions
- Issues you a payslip each month, to a local or foreign account
- Can sponsor work permits
- Helps set up the contract with the client
- Moderates any disputes with your client
- Advises on access to totalization and double taxation treaties
Unless you are prepared to handle all of this on your own, you may find that an umbrella company is a valuable partner in Hong Kong as you embark on your contracting journey in a new country. Please contact Contractor Taxation with your questions about how an umbrella company can work for you.