Hong Kong Tax Filing Requirements

Hong Kong Tax Filing Requirements

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The Inland Revenue Ordinance defines all information related to income tax that KPMG summarizes that is Hong Kong’s (SAR) associate firm of KPMG International. Generally, Hong Kong (SAR) levies zero general income tax. Nonetheless, you will earn a taxable income if it falls in any of the following unique categories:

  1. Salaries tax- this is levied on incomes from employments, offices and pensions
  2. Profit tax- levied on incomes from businesses, professions and trades
  • Property tax- levied on income generated from your buildings and lands in Hong Kong (SAR)

Tax Returns And Compliance

A taxpayer must inform Hong Kong’s Commissioner of Inland Revenue whether he/she is taxable within the first four months following the end of a year of taxation in which he/she was taxable. However, you do not have to issue this notification after receiving your Individual Tax Return from the commissioner for the specific year of assessment.

Once the Inland Revenue Department receives a notice of the start of employment for any employee with the chance of earning taxable salaries, it issues the specified employee with the provisional tax return form. In return, the employee should provide an approximation of his/ her income beginning from the start of the employment to the end of the next March. Then, the Inland Revenue Department will assess the information with respect to the employee’s provisional salaries tax.

Once the tax year terminates, the Inland Revenue Department sends the employer a notice asking them to submit their returns. They must indicate the exact amount of remuneration for each employee for the previous year ending the latest 31 March. Additionally, all workers must file their personal tax returns for the same period in May annually. At this point, the Inland Revenue Department can calculate each employee’s ultimate liability for the concerned year alongside his or her provision tax liabilities for the next year. You should pay your tax in both January and April. In January, you will essentially pay your tax balances from the previous year together with 75% of your provisional tax for the existing period. You will pay the other 25% in April upon the completion of the assessment year.

Residence Rules

You must know the criteria of defining individual residents in Hong Kong (SAR) for the sake of taxation. This is because of Hong Kong’s territorial nature of taxation.

Employees’ residential statuses do not influence their salaries’ tax liabilities in the Hong Kong tax filing requirements. Hong Kong (SAR) levies salaries tax on income generated in Hong Kong. This equates to benefits from profitable employments, offices and pensions. Hence, when considering the impact of your employment on salaries’ taxation, you should first classify the income from that employment as located in or outside Hong Kong. If your employment dwells in Hong Kong, it will fall in the category of SAR- located employment. In this case, all benefits from that employment will fall among chargeable salaries. On the other hand, when your employment falls outside SAR, it will rank among non-Hong Kong located employments. This in turn limits the liability of your salaries’ tax on generated incomes to those resulting from services that you offer in Hong Kong in addition to your attributable leave. As a result, you will divide your incomes into two categories: the SAR and non-SAR services depending on the days that you spent within or outside SAR.

Hong Kong’s Inland Revenue Department looks into several facts before classifying taxpayers’ employments as non-Hong Kong-located or SAR located employments. Thus, they focus on the following aspects of your employment:

  • The circumstances of your employment: They try to establish whether you entered into your employment contract through negotiation and the enforceability of the same agreement. They do this to employments both inside and out of SAR.
  • Your residential quarters: this can either be outside or inside SAR
  • The ways of receiving your remuneration: do you earn in Hong Kong or outside the city?

Varying Rubrics Influence The Location Of Director’s Pensions & Fees

Certain Hong Kong tax filing requirements and exemptions apply to employees on their salaries tax. For example, your will earn totally tax-free income if you render services linked to your employment outside Hong Kong (SAR) exclusively. In this case, the classification of your employment will not matter. Furthermore, the state will not tax your salaries from services that you provide in Hong Kong when you only work during visits that do not exceed 60 days in a financial year. However, when you own a residential place in SAR and when visiting Hong Kong, you opt to stay at your establishment, then the Inland Revenue Department will fail to classify your stay as a visit. Equally, they will not care the number of days that you spent in the city. Ideally, the exemption of 60 days only holds for employments rather than the director’s fees.

Another exemption aids in eradicating double taxation. Therefore, if you offer services outside Hong Kong and the authorities in your residence deduct a salaries tax on your income, then, Hong Kong (SAR) will not tax you. The Inland Revenue Department considers the original taxation on your income as sufficient.

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