Do you need assistance with Hong Kong salaries tax? Here is an overview of the general individual taxation system in Hong Kong.
In Hong Kong,
- Hong Kong adopts a territorial source principle of taxation. Individuals are taxed only on income that has been “earned in Hong Kong”.
- There is no capital gains tax, no interest/dividend tax and no inheritance tax in Hong Kong.
Who needs to file?
If your source of employment is Hong Kong, your full income is chargeable to salaries tax.
What is Hong Kong’s tax year?
Hong Kong’s tax year is over a fiscal period running from April 1 to the following March 31, known as a year of assessment.
When to file?
- In general, individual tax returns (Form BIR60) are issued by the Inland Revenue Department (IRD) in the beginning of May each year. Taxpayers normally are required to complete and send the original tax return back to the IRD within 1 month from the date of issue of the return.
- If you receive BIR60 from IRD, you must complete and submit it in time even if you do not have any income to report.
- IRD may impose penalties or issue an estimated assessment if there is a delay in filing the return.
What allowable deduction and personal allowances can I claim?
- Donations to Hong Kong registered charities (limited to 35% of total assessable income)
- Professional subscriptions
- Self-education expenses (paid to a recognised institution and not reimbursed by your company)
- Contributions to recognised retirement schemes
- Others (if applicable)
- Basic allowance
- Married person’s allowance
- Child allowance (children under 18 or between 18 & 25 if in full-time education)
- Others (if applicable)
What are the tax rates in Hong Kong?
Tax is charged at the lower of:
- standard rate on net income (currently 15%); or
- progressive rates on net chargeable income after deductions and allowances starting at 2% up to 17%.
When will I receive my Notice of Assessment?
- In general, the notice of assessment will usually be issued during September to December by the IRD once the tax return is submitted.
- A provisional tax for the following fiscal year which is based on the current year of assessment’s income will also be included in the assessment.
- Tax is normally demanded in 2 instalments, usually in January and April of the following year.
What if I disagree with the Assessment?
You must lodge a notice of objection in writing to the IRD within the prescribed time limit.
Can I holdover my provisional tax?
- Yes, if you expect your net chargeable income in the current tax year to be less than 90% of the prior year amount, or there is an entitlement to an allowance not given on the assessment.
- Holdover application must be received by the IRD in writing at least 28 days before the tax payment due date or 14 days after the date of issue of the assessment, whichever is later.
Can I claim my Hong Kong tax on my U.S. tax return?
You may qualify for the foreign tax credit by filing the Form 1116.
Please contact us today if you have additional questions or need assistance with your Hong Kong salaries tax returns.