Answer ... Salaries tax: Salaries tax is imposed on any income arising in or derived from Hong Kong from any office or employment. Salaries tax is calculated at progressive rates from 2% to 17% on the net chargeable income, or at the standard rate of 15% of the net income (without allowances), whichever is lower. In order to determine the location of the source of income or employment, the Inland Revenue Department will consider all relevant factors, focusing particularly on:
- where the employer is resident;
- where the contract employment was negotiated, entered into and enforced; and
- where the taxpayer’s remuneration is paid to him or her.
For the 2021/2022 year of assessment, the basic allowance is HK$132,000. There are various allowances that individuals may claim if the prescribed conditions specified in the Inland Revenue Ordinance are satisfied. These allowances include:
- child allowance;
- married person’s allowance;
- dependent brother or sister allowance;
- dependent parent allowance;
- dependent grandparent allowance;
- single parent allowance;
- disabled dependent allowance; and
- personal disability allowance.
There are also some deductions allowed, such as mandatory contributions paid to a mandatory provident fund scheme, donations to recognised charities and expenses of self-education for certain educational courses.
Completed Form BIR60 (“Tax Return – Individuals”) and the relevant supplementary forms must be submitted to the Inland Revenue Department within one month of the date of issue of the return. If the return is filed electronically, an extension of one month will be given automatically.
Profits tax: All entities that carry on a trade, profession or business in Hong Kong – including partnerships, corporations, trustees and bodies of persons – are chargeable to tax on all profits arising in or derived from Hong Kong from such trade profession or business. The sole exception is profits arising from the sale of capital assets. In determining whether the profits arise in or are derived from Hong Kong, the operations which produced the relevant profits and where those operations took place will need to be ascertained.
With effect from the year of assessment 2018/19, two-tiered profits tax rates apply to
corporations and unincorporated businesses:
For corporations, the tax rate is:
- 8.25% on the first HK$2 million of assessable profits; and
- 16.5% on any part of assessable profits exceeding HK$2 million.
For unincorporated businesses, the tax rate is:
- 7.5% on the first HK$2 million of assessable profits; and
- 15% on any part of assessable profits exceeding HK$2 million.
Any expenses which have been incurred by the taxpayer in generating chargeable profits can be allowed as deductions. Some examples include:
- rent of buildings or land occupied for producing the profits;
- repairs of premises, plant, machinery or articles used to produce the profits;
- interest on funds borrowed;
- bad and doubtful debts;
- annual contributions to a fund under a recognised occupational retirement scheme; and
- donations to recognised charities.
There are tax concessions for profits derived from qualified debt instruments and offshore funds.
Dividends received from a corporation are excluded from the assessable profits of the recipient.
The appropriate profits tax return, together with the relevant supplementary forms, should be filed with the Inland Revenue Department within one month of the date of issue.
Please see question 2.7 for income derived from properties.