Employment taxation in Hong Kong – Part 2russonxiao
We explained in our previous article the different types of taxes depending on personal situation in Hong Kong. In this article, we will further develop the tax obligations of employers and employee.
Tax obligations of employers
Hong Kong does not operate a pay as you earn (PAYE) system – each employee is required to report his employment income by filing an individual tax return for Hong Kong salaries tax purposes. Therefore, an employer is not obliged to withhold salaries tax from the remuneration paid to employees, with the exception of those departing Hong Kong employees as mentioned below.
All employers in Hong Kong are required to file an Employer’s Return of Remuneration and Pensions with the IRD within one month from the date of issue of the Return to report details of the remuneration paid to their employees (including directors) during a tax year which runs from 1 April to 31 March.
Employers are also required by law to notify the IRD in the following situations:
|Employment Status of Employee||Time Limit for Filing|
|Commencement of employment||Within 3 months from the date of commencement of employment|
|Continuous employment to 31 March||Within 1 month from the issue date of Employer’s Return|
|Cessation of employment||At least 1 month before the date of cessation of employment|
|Cessation of employment & leaving Hong Kong||At least 1 month before the expected date of departure from Hong Kong|
Tax obligations of employees
Hong Kong employers are not required by law to withhold salaries tax for their employees (except for employees who are departing from Hong Kong under certain circumstances). It is the employees’ obligation to report to the IRD and pay the required tax. Below are the obligations of an employee in connection with his employment in Hong Kong:
|Employee obligation||Time Limit|
|Complete Individual Tax Return issued by the IRD||Within 3 months from the date of commencement of employment|
|Notify the IRD in writing of the chargeability to Salaries Tax for a year of assessment unless Individual Tax Return has been issued||Within 4 months after the end of the basis period for that year of assessment (i.e. on or before 31 July)|
|Notify the IRD in writing of departure from Hong Kong for more than 1 month (other than business trip)||At least 1 month before the expected date of departure from Hong Kong.|
In general, the IRD will issue Individual Tax Returns to all individual taxpayers on the first working day of May each year for tax reporting purposes. After receiving the Returns filed by taxpayers, the IRD will issue the Notices of Salaries Tax Assessment to taxpayers to demand tax payments.
The IRD usually issues the Notices of Salaries Tax Assessment to individual taxpayers in around October each year. The assessment notice demands not only salaries tax payment on the final salaries tax assessed for the preceding year, but also advance payment of the following year’s salaries tax (i.e. provisional tax), which is calculated by reference to the net chargeable income for the preceding year. An individual taxpayer is usually required to settle his/ her salaries tax liability by two instalments. The due date for the first instalment is normally in January of the following year, at which time, all outstanding final tax plus 75% of the provisional tax are payable. The second instalment representing the remaining 25% of the provisional tax will usually be due for payment in around April.
If you have any further questions about Hong Kong fiscal declarations and obligations, please feel free to contact us.