Salaries, Property, and Profits taxes constitute the direct tax you or your employer will have to file at the end of the fiscal year. Stamp, Betting, and Estate duties are indirect taxes of Hong Kong. The tax year starts on 1 April and continues until 31 March next year.
Salaries Tax
Salaries tax will probably be the biggest tax burden for you when living in Hong Kong. All wages, salaries, and director’s fees are subject to this tax. Additionally, the large majority of all other benefits you might receive from your company are also taxable. Such taxable benefits include bonuses, commission and rebates, leave pay, end-of-contract gratuities, and others. Any shares or options that are part of your remuneration are also taxed, as is accommodation provided by your employer. Furthermore, it does not matter when these payments are made or whether they exceed your terms of employment.
If you travel to Hong Kong for work irregularly, and spend less than 60 days there doing so, you should be exempt from these taxes.
How to Calculate Salaries Tax
Salaries Tax can be calculated either at progressive rates on your net chargeable income or standard rates on your net income—whichever one is lower. Follow the formulas to calculate them both:
1.Total Income – Deductions = Net Income
2.Total Income – Deductions – Allowances = Net Chargeable Income
The deductions constitute:
1.Self-education expenses
2.Charitable donations
3.Mandatory retirement scheme and provident fund contributions
4.Depreciation
5.Loss
6.Home loan interest
7.Elderly care
You are not required to provide evidence about your deductions. However, you will be required to provide proof of the deductions if your tax files are being reviewed. That is why it is advisable to keep payment receipts and other documents for six years after you file the forms.
Claimable allowances include:
1.Basic allowance (every tax payer’s allowance)
2.Spouse allowance (doubles the basic allowance for the household)
3.Child allowance
4.Single parent allowance
5.Dependent allowance (sibling, parent, grandparent, or a disabled person)
6.Personal disability allowance
You can claim your allowances when filing your tax return either online or by mail. Just like with deductions, you are not required to provide evidence for your allowances; however, you should keep the appropriate receipts.
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