Job Discussion Forums

[Ladybug]

I was just wondering, so if I have a job where I make $12,000 HK a month, just how much of that am I going to see? Does HK have a huge tax rate?

[mcNug]

I doubt you'll have to pay any tax if it is that amount; HK has a much lower tax rate than say, USA, Canada, Australia etc...

There is an online tax calculator somewhere, and yes, I know it's rather shocking that someone who is living and working in HK should know so little but given the fact that I'm married, my wife is not working and that I'm paying off an apartment I bought gives me quite a lot of exemptions

Please note that I am a HK resident so the exemptions probably aren't going to be for people here on work visas.

Anyway... *ahem*

Salaries Tax

In Hong Kong personal income tax is known as salaries tax. Individuals are only assessed on annual employment income. Non-employment source income such as share dividends and capital gains realized on the sale of shares are not taxable in the territory. Salaries tax is governed by the provisions of the Inland Revenue Ordinance. Income received by an employee is subject to salaries tax whilst income received by a self employed person is subject to profits tax. Salary tax rates are among the lowest in the world and remain one of the major attractions of locating to the territory.

The territorial principle governs salaries tax with the consequence that salaries tax is only levied on income "arising in or derived from a Hong Kong employment". The definition of income includes wages, salaries, bonuses, commissions, payments by the employer into a pension fund for the employee and gratuities. It does not include either a pension from a source outside Hong Kong or compensation for loss of employment.

The assessment to salaries tax is provisional and is based on the previous year's income with a tax credit being given in the subsequent year in the event of the assessment exceeding the actual income. 75% of the provisional assessment is payable in the 3rd quarter with the final 25% being payable in the final quarter.

The salaries tax rate is the lower of either:

15% of "assessable income" after the deduction of allowances (raised to 16% in the 2003/2004 budget); or
A progressive rate levied on "assessable income" after the deduction of allowances. These progressive rates are:
Nil to HK$35,000 - 2%
HK$35,000 to HK$70,000 � 7% (8% from 2004)
HK$70,000 to HK$105,000 � 12% (14% from 2004)
HK$105,000 upwards � 17% (20% from 2004)
The territorial principle of only taxing income arising or derived from a trade within Hong Kong has resulted in reduced or nil tax being levied in a variety of situations. Thus:

Income paid in Hong Kong but which relates to services rendered outside the islands is exempt from salaries tax if the fiscal authorities are satisfied that tax has already been paid on that income in a foreign jurisdiction.
An individual with Hong Kong source employment who works abroad but renders services in Hong Kong for less than 60 days in any tax year is exempt from salaries tax in the jurisdiction.
An individual with Hong Kong source employment who works abroad but renders services in Hong Kong for more than 60 days in any tax year is assessed to tax on that proportion of his income as is represented by the number of days he worked in Hong Kong as a proportion of 365.
Tax is not payable on that proportion of income earned in relation to work done outside Hong Kong by the Hong Kong based employee of a non resident corporation on a contract governed by the laws of a foreign jurisdiction, where the employees are paid outside Hong Kong and where the employee's activities are not limited to working within the territory.
The following benefits in kind provided by an employer are deemed taxable emoluments:

Where the employer provides housing this is assessed as an emolument which has a value of 10% of the employee's wage for salary tax purposes;
Capital gains on realised share options;
Payments in connection with an employee's children;
'Benefits capable of being turned into money by the recipient'. Thus a medical insurance policy or an air ticket would not be taxable under this heading since they are not assignable at a price.

[hkgirlo]

Are you planning to work for Deborah English Kindergarten by any chance? You won't pay tax your first year in Hong Kong, and the second year you will need to pay about 5000 HKD tax (which is a total joke compared to everyone else!) Thats whats good about making that much money, (says the optimist...)

[hkgirlo]

Are you planning to work for Deborah English Kindergarten by any chance? You won't pay tax your first year in Hong Kong, and the second year you will need to pay about 5000 HKD tax (which is a total joke compared to everyone else!) Thats whats good about making that much money, (says the optimist...)

[delian]

I was earning 16,500/month last year as a research assistant in Hong Kong at one of the universities and I just got a HUGE tax bill (in relation to my salary). I was NOT billed at 2% of my salary, it was definitely more like 10% or higher. And I was billed for my first and second years at once, even though I've been here just over a year - I think it's common practice to charge you tax for 2 years at once.
Yes, I am paying less tax than in Canada, but getting such a big tax bill and being expected to pay it in less than a month is not fun. I will be putting aside 10% of my salary per month from now on - I should have been doing it earlier. Keep this in mind. I don't know where this figure of 2% of your salary only being taxed if you earn less than 35,000 HKD/month comes from, but it's certainly not my experience. Maybe someone in the tax department doesn't like me?

[hkgirlo]

The 5000 that I paid for tax was for 2 years... im not sure why its so low... we get housing provided, maybe that has something to do with it??

[once again]

According to the IRD tax calculator, the tax payment on 16,500 a month is around 7,000 total. That is per year. The first time you pay tax you are charged for the second year as well. You are actually paying tax in advance, so the payment next year should be half of what you have just paid, as you have already paid it for the following year, and need only pay the third year. If you get my drift!

The 35,000 figure quoted above is an annual figure after allowances. Hence if you earned 35,000 above the yearly allowance then you would pay 2% tax only. As it is you earn about 80,000 above the allowance, and are taxed accordingly on that amount about the allowance.

[jandc112003]

How do they count the $105,000 upwards? From the gross salary or from the salary after the deduction of MPF ???