Salary Tax Guide in Hong Kong: Tax Rates & BIR60

The Hong Kong salary tax, also called personal income tax, is one of the lowest rates in the world. Moreover, the filing (BIR60) process is renowned as the simplest system amongst developed cities. This article will help you to get an understanding of Salary Tax, how to file for them, the rates, what your employer is expected to do, and if you can claim tax reliefs in Hong Kong.

What is the Hong Kong Salary Tax?

The salary tax is a tax paid by citizens in Hong Kong who are under employment based on their personal income. It is collected by the Inland Revenue Department (IRD).

Salary Tax is imposed on the assessable income of an individual taxpayer. If you own a business and you are your own boss, you are considered self-employed. If so, you have to pay the profits tax.

Related Article: 2024 Tax Filing Season: Tax Deadline 2024 in Hong Kong You Need To Know About

How Do You Calculate Your Salary Tax?

In Hong Kong, the Salaries Tax is levied on the basis of annual income. The higher your income, the more tax you have to pay (this is the progressive tax rate).

You can calculate your tax liability under salaries tax or personal assessment by using a simple Tax Calculator developed by the Inland Revenue Department. (Left hand image)

Salaries Tax is calculated based on either your net chargeable income or your net income, using the lower of the two rates.

• Net Chargeable Income: This is your total income minus deductions and allowances.
• Net Income: This is your total income minus deductions.

The assessment year runs from April 1 to March 31 of the following year.

Deductions include donations to approved charities, contributions to a Mandatory Provident Fund (MPF) scheme, and allowances such as the basic allowance for self (HKD 132,000 per year of assessment), allowances for spouses, and/or allowances for dependants.

Once the annual chargeable income of a tax payer hits HKD 200,000, they can elect to be taxed at a normal rate of 15%. Their income chargeable, on the other hand, would be determined as follows:

Keep in mind that the Hong Kong Standard Tax Rate stands at 15%.

Salary Tax Example: Single Male, $500,000 Annual Salary, No Deductions

Let’s break down the tax calculation based on the provided information:

1. Total Income: You earned a total income of HK$500,000.
2. Deductions: You have no deductions, so this amount is HK$0.
3. Allowances: You are entitled to certain allowances:
   • Basic Allowance: HK$132,000
   • You do not qualify for any other allowances (Single Parent, Personal Disability, Child(ren), Dependent Brother(s)/Sister(s), or Dependent Parent(s)/Grandparent(s)).
   Therefore, your Total Allowances amount to HK$132,000.
4. Net Chargeable Income: To calculate this, subtract your Total Allowances from your Total Income:
   • Net Chargeable Income = Total Income – Deductions – Total Allowances
   • In this case: HK$500,000 – HK$0 – HK$132,000 = HK$368,000.
5. Tax Payable: Based on the Net Chargeable Income of HK$368,000, the tax calculated is HK$44,560.

In summary, after considering your total income, allowances, and deductions, the amount of tax you need to pay is HK$44,560.

The amount of tax you pay is determined by applying the relevant tax rates to your Net Chargeable Income of HK$368,000. Here’s a simplified explanation of how the tax might be calculated:

1. Tax Rates: In Hong Kong, salaries tax is calculated using progressive tax rates. This means different portions of your income are taxed at different rates.
2. Progressive Tax Calculation: Hong Kong’s salaries tax system uses a progressive tax rate structure, which means that different portions of your income are taxed at increasing rates. The tax brackets for the year of assessment 2023/2024 are: For example, the tax rates might look something like this (note that these rates can change):
   • 2% on the first HK$50,000
   • 6% on the next HK$50,000
   • 10% on the next HK$50,000
   • 14% on the next HK$50,000
   • 17% on any income above that
3. Calculation Steps:
   • First HK$50,000: 2% of HK$50,000 = HK$1,000
   • Next HK$50,000 (from HK$50,001 to HK$100,000): 6% of HK$50,000 = HK$3,000
   • Next HK$50,000 (from HK$100,001 to HK$150,000): 10% of HK$50,000 = HK$5,000
   • Next HK$50,000 (from HK$150,001 to HK$200,000): 14% of HK$50,000 = HK$7,000
   • Remaining HK$168,000 (from HK$200,001 to HK$368,000): 17% of HK$168,000 = HK$28,560
4. Total Tax Payable: Adding these amounts together:
   • HK$1,000 + HK$3,000 + HK$5,000 + HK$7,000 + HK$28,560 = HK$44,560.

This is a simplified version of how your tax might be calculated based on the progressive tax rates. The exact rates and brackets may vary, so it’s always best to check with the latest tax regulations or consult a tax professional for precise calculations.

Tax Return for the Year of Assessment from 2023/2024 Onwards

Profits Tax Reduction

Deductions and Allowances for Salaries Tax

Salaries Tax, just like Profits Tax, allows the deduction of expenses incurred solely, exclusively, and inevitably in the earning of assessable income.

The employer often does not have an idea of what the employee has spent out of his own pocket (or sometimes, even on behalf of the Hong Kong company).

Individual taxpayers should, however, know the deductions and allowances that apply to them (e.g. basic allowance) and make sure that they claim them.

The following deductions may be claimed when filing a Salaries Tax Return:

• Concessionary deductions
• Allowances
• Outgoings and expenses

There is no documentation needed to prove your employment income, but people who want to claim all or a part of their employment income as salary tax-exempt must provide evidence.

Relevant receipts and documentation should be kept for at least 6 years after the relevant year of assessment for the purpose of record-keeping.

Hong Kong taxpayers can also claim relief for supporting dependents:

• Spousal Allowance: If you’re married and your spouse does not have income, you may claim an allowance of HK$132,000.
• Child Allowance: You can claim HK$120,000 per child for the first nine children. An additional allowance of HK$120,000 is available in the year of birth.
• Dependent Parent/Grandparent Allowance: If you support a parent or grandparent aged 60 or above, you can claim HK$100,000 per dependent. For those aged 55-59, the allowance is HK$50,000.

These allowances help reduce your net chargeable income, lowering your overall tax liability.

What is considered chargeable income?

• Compensation, including wages, salaries, and directors’ fees
• Incentive payments, such as commissions, bonuses, leave pay, and end-of-contract gratuities
• Retirement income, such as pensions
• Additional earnings, such as tips
• Retroactive payments
• Payments for contract termination
• Retirement benefits
• Allotted funds for specific purposes
• Unconventional or education-related items

Non-chargeable income refers to income that is not subject to Salaries Tax. This type of income includes:

• Jury fees
• Severance payments
• Long service payments

In Hong Kong, a year of assessment starts on 1 April of the preceding year and ends on 31 March of the next year.

In what ways does the Salary Tax Return impact me as a business owner?

When you employ your first employee as a Hong Kong employer, your tax obligations will begin whether the employee works in Hong Kong or is working from overseas.

Once an employee is employed, you need to maintain records of their personal details, job details, position details, pay contributions to Mandatory Provident Fund (MPF) contributions, employment agreement and other particulars.

As a Hong Kong employer, you should inform the IRD of any changes in the status of your employee as and when they occur.

You should also issue a notice to the IRD if an employee is departing from Hong Kong for some time.

Employer’s Responsibilities Regarding Salary Tax Returns

Employers in Hong Kong are required to submit the Employer’s Return (IR56B) within 1 month of the end of each fiscal year, reporting employee remuneration. Failure to comply with this deadline could result in penalties, including a surcharge or prosecution by the Inland Revenue Department (IRD). In the case of employee termination, the employer must file Form IR56F one month prior to the employee’s departure. For expatriates leaving Hong Kong permanently, employers should submit IR56G to notify the IRD at least one month before the employee’s departure.

As an employer, you are required to submit an Employer’s Return (IR56B) in respect of Salaries Tax Returns for every fiscal year of assessment. You must keep and verify the following information from your employees:

• Personal information (name, residence, identification or passport number with place of issuance, marital status, etc.)
• Nature of occupation
• Position
• Earnings
• Supplementary benefits
• Contributions to the Mandatory Provident Fund by both employer and employee
• Employment agreement
• Duration of employment

Given that a Hong Kong employer has to notify the IRD on any changes to an employee’s personal details or remuneration package, the tax authority should have been aware of how much assessable income is liable for the Salary Tax Return for that year of assessment.

Just ensure that the assessable amount reported by the IRD corresponds with the amount reported in your Hong Kong company’s annual tax return and employer return.

How to pay Salary Tax Return if I am a Sole Proprietor or Partner

If you are the owner of a sole proprietorship business or a partner in a partnership, you will be taxed Profits Tax as a Hong Kong business owner and not Salaries Tax.

The salary you give to yourself as a proprietor should not be included in Part 4 (Salaries Tax) of the BIR60 form, but rather in business profits -Item 7 (Assessable Profit) in Part 5 (Profits Tax).

In a partnership, the salary you pay yourself is declared as business profits and recorded on the Profits Tax Returns (BIR52), and should not be re-reported on the BIR60 tax return form under Part 4 (Salaries Tax).

When either of you or your spouse is drawing a salary from your sole-proprietorship or partnership firm, you are not required to submit the Employer’s Return of Remuneration and Pension form (IR56B).

You, as a sole proprietor, should also think about submitting the NIL profits tax return if such is possible. Ensure that you get informed on this subject from our NIL profits tax return article.

How Do I File Salary Tax? (BIR60 Paper Form)

Step 1: Personal Particulars – Fill in your personal details, including your name, address, HKID number, and marital status.

Step 2: Notification – Tick the relevant boxes if you have any of the listed situations, such as income from a non-Hong Kong company or an authorized representative.

Step 3: Property Tax

This section is for reporting rental income from properties you solely own and let out during the year.

Do not include properties that are jointly owned or co-owned. For each solely-owned property, provide the full address as registered in the Land Registry.

Enter the total gross rental income received for the whole letting period, not the monthly rent. You can deduct any rates paid by you and any irrecoverable rent. A standard allowance for repairs and outgoings will be automatically calculated.

Step 4: Salaries Tax

Report all income from employment in Hong Kong, including salaries, bonuses, commissions, and benefits.

This should be the gross amount before any deductions for MPF or ORSO schemes.

If you have income from more than one employer, list each employer separately and provide details of the income received from each.

Include details of any share options exercised or lump sum payments received, such as contract gratuity or deferred pay.

Step 5: Profits Tax – Report details of any sole proprietorship businesses you own.

Step 6: Deemed Assessable Profits – Tick the box and complete the relevant section if you have deemed assessable profits under specific sections of the Inland Revenue Ordinance.

Step 7: Personal Assessment – Tick the appropriate box to indicate whether you are single, married, or jointly assessed with your spouse.

Step 8: Deductions – Claim deductions for approved charitable donations and mandatory contributions to recognized retirement schemes.

Claim deductions for interest payments on loans for rental properties or your home.

Step 9: Voluntary Health Insurance Scheme (VHIS) – Claim deductions for qualifying premiums paid under a VHIS policy.

Step 10: Qualifying Annuity Premiums and Tax Deductible MPF Voluntary Contributions – Claim deductions for qualifying annuity premiums and tax deductible MPF voluntary contributions.

Step 11: Allowances – Claim allowances for your spouse, children, and other dependents.

Step 12: Declaration – Sign and date the declaration to confirm the accuracy of the information provided.

How Do I File Salary Tax? (BIR60 E-Form)

Benefits of using E-Filing

• Automatic 1-Month Extension: You receive an automatic one-month extension for filing your tax return.
• Pre-Filled Data: Your tax return can include pre-filled information, such as income details and tax deduction records saved under the e-service “Records for Pre-filling Deduction Claims under Tax Return – Individuals,” if applicable. This helps save you time when completing the return.
• Save Progress: You can save a partially completed return and finish it later within four months.

Step 1: Logging into the portal with your TIN or eTax Password.

If your computer remains inactive for a period of time, the system will logout itself automatically to prevent unauthorised access.

Step 2: Fill in your personal particulars.

After filling in your own information, select PARTS of Return.

Step 3: Fill In Your Employer Information

This includes name of employer, employment period, and total amount of salary you received from the employer.

Also fill in your property tax, allowances and supplementary information if applicable.

Step 4: Sign Your E-Form

Below are a few ways to sign your E-form.

․ Simulated Return
․ Compute Estimated Salaries Tax Before Submission
․ Estimated Salaries Tax Computation (Before Submission)
․ Sign by eTAX Password
․ Sign by MyGovHK Password
․ Sign by Digital Certificate
․ Sign by “iAM Smart+”
․ Sign by you and your spouse with eTAX Password / MyGovHK Password / Digital Certificate/ “iAM Smart+”

After clicking ‘Compute estimated Salaries Tax payable’ button, a screen will pop up to display the estimated Salaries Tax payable computed according to your return data.

Initial, fulfill the conditions of creating an eTax Account over the internet. The requirement includes not claiming any exemptions as well as grossing HKD 2,000,000 or more for their sole-proprietorship.

When you have no assessable income to declare, you must declare zero income on your tax return and send it to the IRD.

If you realize that you’ve made an error or omitted information on your filed tax return (BIR60), you can amend it by submitting a revised tax return or a letter to the Inland Revenue Department. Ensure to include all necessary documentation to support your amendments. Amendments must be filed within the statutory period (usually 1 month after filing). Failure to correct an error may result in penalties, so it’s important to review your tax return carefully before submission.

If you’re unable to file your tax return on time, you can apply for an extension by writing to the Inland Revenue Department before the submission deadline. The IRD may grant an extension based on your individual circumstances. Tax payments can be made online, by post, or in person at post offices or convenience stores. The IRD also offers an option to pay in installments if you’re facing financial hardship. This flexibility can help prevent surcharges for late payments and ensure compliance with tax obligations.

Submission Deadlines for Salaries Tax Returns

BIR60 Salaries Tax forms are sent by the Hong Kong Inland Revenue Department on the first working day of May every year, with a deadline for submission stated on each form.

The Salaries Tax Returns usually have to be filed five months after the taxpayer’s employer notifies the IRD of his/her employment (by submitting form IR56E) or when the taxpayer tells the IRD that he/she is employed and would be liable to Salaries Tax.

Employees who work in Hong Kong but have not received their tax return should contact IRD by 31st July of the year following the assessment year.

The individual taxpayers are generally given one month to file and return their BIR60 form Salaries Tax filings. Those who were the sole proprietor of an unincorporated business during the assessment year had three months from the date of the Tax Return issuance to file, with an extra month being available to those who filed an online tax return.

Failure to comply with Hong Kong’s salaries tax obligations can lead to severe consequences. Individuals who do not file their BIR60 tax return on time may face penalties, including:

• Late Filing Penalty: A surcharge may be imposed for late submissions, typically 5% of the tax due.
• Further Surcharge: A further penalty of 10% may be imposed if the return remains outstanding after the imposition of the initial surcharge.
• Prosecution: Persistent failure to comply may lead to prosecution, resulting in additional fines or imprisonment.

To avoid penalties, it’s essential to file your salaries tax return on time and ensure that all details are accurate and complete.

Consequences of Non-Compliant Salary Tax Return

Non-compliance occurs when a person fails to advise the IRD of their liability to pay tax or fails to file Salaries Taxes Returns on time.

According to the frequency of non-compliance, individual taxpayers should expect the following penalties:

• First offense – 10% of the undercharged tax amount
• Second offense within 5 years – 20% of the undercharged tax amount
• Third or subsequent offense within 5 years – 35% of the undercharged tax amount

Exemptions from Salaries Tax

Hong Kong tax system is territorial based where Salaries Tax is charged on all amounts earned in or derived from Hong Kong.

You can apply for a total or partial income exclusion or a tax credit while submitting your Salaries Tax Returns.

The following conditions need to be met:

1. A part of your employment salary was earned in Hong Kong. Taxes are levied only on assessable income derived in Hong Kong, so if your income is from outside of Hong Kong, you will be taxed for the entire assessable income earned in the region.
2. All the work services were made abroad. An employee does not have to pay Salaries Tax in the year he has worked abroad.
3. Seafarers and aircrew members are not chargeable to Salaries Tax if they were in Hong Kong for less than 60 days during the year of assessment. Nonetheless, pay attention in transit days calculation.
4. Some of your total assessable income has already been taxed in other jurisdictions.

Income earned outside of Hong Kong by individuals who do not reside in Hong Kong for more than 60 days in a tax year is exempt from salaries tax. This exemption is commonly known as the “60-day rule.” However, individuals who are employed by a Hong Kong entity but perform duties outside the territory may still be subject to salaries tax if the income is paid by or borne by a Hong Kong employer.

Consult with a tax advisor to determine if you qualify for this exemption, especially if you travel frequently for work.

How FastLane Group can Help?

We trust that you have a clearer picture of Salary Tax Return and your obligations as an employer from this article. And if you are willing to save yourself from the pain of admin tasks and grow your business, feel free to contact us.In case you need help with filing your tax return or professional accounting services, feel free to contact FastLane Group.