Salaries tax - AbsoluteAstronomy.com

Salaries tax in the Hong Kong

Hong Kong

Hong Kong is one of two Special Administrative Regions of the People's Republic of China , the other being Macau. A city-state situated on China's south coast and enclosed by the Pearl River Delta and South China Sea, it is renowned for its expansive skyline and deep natural harbour...

taxation system is direct tax

Direct tax

The term direct tax generally means a tax paid directly to the government by the persons on whom it is imposed.-General meaning:In the general sense, a direct tax is one paid directly to the government by the persons on whom it is imposed...

and also classified as income tax

Income tax

An income tax is a tax levied on the income of individuals or businesses . Various income tax systems exist, with varying degrees of tax incidence. Income taxation can be progressive, proportional, or regressive. When the tax is levied on the income of companies, it is often called a corporate...

.

According to Cap.112 Hong Kong Ordinance, Inland Revenue Ordinance (abbreviated to IRO) IRO Section 8, unless otherwise provided, salaries tax is chargeable on income

Income

Income is the consumption and savings opportunity gained by an entity within a specified time frame, which is generally expressed in monetary terms. However, for households and individuals, "income is the sum of all the wages, salaries, profits, interests payments, rents and other forms of earnings...

from any office, employment

Employment

Employment is a contract between two parties, one being the employer and the other being the employee. An employee may be defined as:- Employee :...

and pension

Pension

In general, a pension is an arrangement to provide people with an income when they are no longer earning a regular income from employment. Pensions should not be confused with severance pay; the former is paid in regular installments, while the latter is paid in one lump sum.The terms retirement...

s for a year of assessment arising in or derived from Hong Kong

Hong Kong

.

Salaries tax is also charged on the unrealized capital gain of shares or options granted as part of an employee share scheme that are subject to a vesting period. The taxing events in this case are when the vesting period ends or when the employee leaves Hong Kong. Because Hong Kong does not have double tax agreements, this can lead to double taxation

Double taxation

Double taxation is the systematic imposition of two or more taxes on the same income , asset , or financial transaction . It refers to taxation by two or more countries of the same income, asset or transaction, for example income paid by an entity of one country to a resident of a different country...

on employees arriving and leaving Hong Kong.

Income from office

An office holder is a position is independent form any person and be refilled (like a company director.) The source of income from an office is determined by the location of the office. The key factor is the place of management and control of the office. For example, if the directors hold at least one of their board meetings in Hong Kong, the income will be subject to salaries tax fully without time apportionment.

Section 8

(1A) Specify the coverage.

(a) Include Income related to Service render in Hong Kong.

(b) Exclude Income related to Air / Sea Crew and income from all service that is not render in Hong Kong

(c) Exclude income related to those already taxed and paid. And the tax nature is substantially similar to Hong Kong.

(1B) Specify the 60 Days rules of visitors whom income was derived from service render in Hong Kong

(2) Specify an exclude list of salary tax accessment
(c) Income from pension.
(i) Alimony payment from spouse
(j) Income of Air / Ship Crew

To see if one's salary income be taxable:

1) Is the employment source from Hong Kong
Check against the DIPN10 where it states employment will be considered as non HK Source if
Is the employment contract was negotiated, entered into and be enforced in HK
Is the employer is resident outside HK
Is the remuneration is paid outside HK
2) If Employment was source from HK then
No time apportionment can be apply, but one can still
Check if the two major exempt rules
Section 8 (1A) (b) - Is all service was render outside HK
Section 8 (1B) - Where Non HK resident (visitors) can apply the 60 days exempt rules.
Section 8 (1A) (c) has relief for double tax.

3) If Employment was not source from HK then according Section 8 (1A)
Income that was derived from service render in Hong Kong will be taxed (i.e. time based)

Section 9

Section 9 provides a list of income chargeable to HK Salary Tax.
The list will not be exclusive and How to computed.

Here is an example
1) Payment discharging the employee's monetary liability
2) All benefit to the employee that can be converted into money
3) Payment for the education of a child of an employee
4) Payment to retirement scheme that is not a recognized occupational retirement scheme
5) Payment under a recognized occupational retirement scheme but not related to termination of service or retirement.
6) Payment in excess of a recognized occupational retirement scheme (under retire or termination)
7) Rental value as computed as one tenth of the taxable income.
8) Gain received by employee under the share option.

Income from office

Section 8

Section 9

See also

Sources