Hong Kong Salaries Tax

Flashcards covering the scope, source, basis period, assessable income, and exemptions related to Hong Kong Salaries Tax.

Basic charge, S.(?)

s.8(1)

For each year of assessment, on every person, in respect of the income arising in or derived from Hong Kong from any office or employment of profits, S.8(1)(a) and any pension, S.8(1)(b) whole income is assessable.

Basic Charge (Salaries Tax)

Tax on income arising in or derived from Hong Kong from any office, employment, or pension (Section 8(1) of IRO).

Extended Charge, S.(?)

S.8(1A)(a)

For employment sources outside HK, only in respect of income from services rendered in HK, including leave pay attributable to such services.

Common basis applied — time-apportionment

unless specifically exempt — S.8(1A)(b), S.8(2)

Office

A subsisting, substantive, and permanent position, which has an existence independent of the person who fills it, and which goes on and is filled by successive holders.

Employment (in tax context)

Legal relationship of master and servant, bound by a contract of service.

Contract of Service

An employment with a master and servant relationship, subject to salaries tax.

Contract for Service

A business arrangement with a principal to principal relationship, subject to profits tax.

Pension

A periodic or regular payment made to a person by a former employer in consideration of past services.

Source of Income (from office)

Place where the office legally exists;

For a director, the place where the company is centrally managed and controlled.

Centrally managed and controlled = the place where directors’ meetings held and decisions are made.

Source of Income (from employment)

For HK-sourced employment - all income is basically sourced in HK, all taxable, subject to exclusion under S.8(1A)(b) and (c )

For Non-HK-sourced employmenr - all income is basically not sourced in HK, all non-taxable, subject ti inclusion under S.8(1A)(a) regarding to services rendered in HK.

DIPN No.10

1. The place where the contract is negotiated, entered in and enforceable;

2. The place of residence of employer;

3. The place where the remuneration is paid to the employee.

Source of Income (from pension)

Locality of the pension fund (place where the fund is managed and controlled).

Basis Period

From 1 April to 31 March for a year of assessment;

tax is charged on the aggregate income accrued from all sources in that period. S.11B

Assessable Income Accrued

Income a person is entitled to claim payment for, whether or not actually received; additional assessment raised when income is received.

Section 8(1A)(b) & (1B) exemptions

Applicable to employment only, exempting income for services rendered outside Hong Kong or during visits not exceeding 60 days.

Visit (in tax context)

Short or temporary stay with no permanent base in Hong Kong, considering overall duties and work base.

Section 8(1A)(c) Exemption

Excludes income from services rendered outside Hong Kong if taxpayer is chargeable to tax and has paid tax of a similar nature in that territory (only applies if no double taxation agreement exists).

Tax Credit

If a double taxation agreement exists, foreign tax paid can be used to offset against salaries tax payable in Hong Kong (section 8(1C)).

Section 8(2)(j) (Seamen & Aircrew)

Income fully exempt if present in Hong Kong for not more than 60 days in the basis period and 120 days in 2 consecutive years.

Residents of Mainland China

Exempt from Hong Kong salaries tax if present in Hong Kong for not more than 183 days, remuneration not paid by a Hong Kong employer, and remuneration not borne by a permanent establishment in Hong Kong.

General Exemption – Section 8(2)

Includes official emoluments of consuls, commutation of pension, pension for services outside Hong Kong, MPF accrued benefits, and more.