Introduction to Salaries Tax
Salaries tax is charged on income arising in or derived from Hong Kong from an office, employment, or pension. Salaries tax is calculated on the lower of: progressive rates (2%, 6%, 10%, 14%, and 17%) applied to net chargeable income after allowances; or the standard rate of 15% on net total income before allowances.
Key Personal Allowances (2024/25)
- Basic allowance: HK$132,000
- Married person’s allowance: HK$264,000
- Child allowance: HK$130,000 per child
- Dependent parent/grandparent allowance: HK$50,000 (or HK$100,000 if resident with taxpayer)
- Single parent allowance: HK$132,000
Allowable Deductions
- Self-education expenses (up to HK$100,000)
- Home loan interest (up to HK$100,000 per year, for up to 20 years)
- Mandatory Provident Fund (MPF) mandatory contributions
- Approved charitable donations (up to 35% of assessable income)
- Elderly residential care expenses (up to HK$100,000)
Employer Obligations
Employers must file an Employer’s Return (BIR56A) annually, reporting the remuneration of all employees. Employers must also notify the IRD when an employee who is likely to leave Hong Kong permanently ceases employment.
Case Study: Expatriate Assignment Tax Planning
A multinational corporation seconding a senior manager from its UK headquarters to Hong Kong engaged Aaron Wong & Co. to advise on the tax treatment of the assignment package, which included base salary, housing allowance, school fees, and home leave passages. A tax equalisation agreement ensured the net after-tax position of the assignee was equivalent to their home-country position.