Umbrella Company in Hong Kong
Independent contracting in Hong Kong isn’t always straightforward. You’ve got immigration issues, tax difficulties, and mountains of complex admin work. Even worse, missteps can cost you serious money, or even land you in legal trouble.
Before you consider taking a contract in Hong Kong, you should be aware of what you’re getting into – and how you can make it simpler.
Difficulties of Contracting in Hong Kong
Generally, you need to have an employer sponsor in order to secure the appropriate work permit and work visa for Hong Kong.
If you’re working independently, it can be difficult to find clients willing to sponsor you. Moreover, even if your client can do this, you’ll need a new sponsor each time you decide to take on a new contract. Of course, every new sponsor will mean more paperwork.
Also, are you familiar with the intricacies of the tax system in Hong Kong, as well as your own country’s laws on overseas earnings? If so, good on you!
However, if you’re like the rest of us, figuring out (much less reducing) your tax liability in Hong Kong and your home country can seem like full-time work in itself.
How Umbrella Companies Work
Most freelance workers aren’t superheroes who successfully tackle these issues all on their own. There are companies who specialise in helping workers make the most out of their contracts.
They’re called Umbrella Companies (or, contractor management companies).
Basically, an Umbrella Company acts as your full-time employer, even though you maintain your independence as a contractor. They collect and filter payments from your clients, filtering out the necessary social security and fees. You send them your timesheets, and they send you payments.
Because they act as your “employer,’ they can sponsor you and provide a single work permit for multiple contracts in Hong Kong. Even better, most are experts in Hong Kong and expat tax law, meaning they’ll also help you optimise your earnings in Hong Kong.
Although the Umbrella Company is technically your “employer,” you’re essentially freeing yourself to work even more independently. You still dictate your contracts, your hours, your schedule. The Umbrella Company simply filters out the time-consuming admin and immigration issues, allowing you to focus on your new contract.
Why Use an Umbrella Company in Hong Kong
Most people want to do their work, earn their money and enjoy their spare time without taking on loads of admin in a new country. That is why an umbrella company can help.
When you’re working through an Umbrella Company, you’ll essentially be outsourcing the admin and tax issues to specialists.
While the umbrella company will charge a fee, you’ll likely end up saving more money in the long run: you’ll be able to focus on your work, expertly reduce your tax liability, and comply with all laws and regulations in Hong Kong (which means avoiding fees, fines, or even worse penalties).
How We Can Help You
There’s a huge variety of Umbrella Companies with different specialities and advantages in Hong Kong. How do you find the right one for your circumstances?
We work closely with Umbrella Companies all throughout Hong Kong and match contractors with the right company for them. If you’ve already secured a contract in Hong Kong, we can help you find your best match (for free). Or, we can simply give you feedback on your situation (for free).
A Contractor’s Guide to Taxes in Hong Kong
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.
How do I calculate my taxable income in Hong Kong
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.
Tax Filing in Hong Kong
|When Do You Need to Lodge Your Tax Return?||Within 1 month of the date of issue by the Inland Revenue Department|
|Tax Filing Deadline||June|
|Can you file it online?||No|
How to File Taxes 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(link is external) 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(link is external). 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.
Tax Figures in Hong Kong
|Tax-free Threshold in Hong Kong||None|
|Income Tax Rates||
|Notes||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