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As a non-resident working in Hong Kong, you are liable to salaries tax. Salaries Tax is charged for every person in respect of his/her income arising in or derived from Hong Kong from any office or employment of profit and any pension. Income includes all income, perquisites and fringe benefits from the employer or others.
However, if your income is no more than the basic allowance ($132,000 in 2022/23) in the year of assessment (For example, the year of assessment 2021/22 covers the 12 months from 1/4/2021 to 31/3/2022.), you don’t need to pay salaries tax.
You can refer to this website for the updated basic allowance:
http://www.ird.gov.hk/eng/pdf/pam61e.pdf
Your employer shall fill in an employer’s return and notification forms (IR56B and IR56M) and return them to the Inland Revenue Department (IRD) before May of this year, therefore IRD will mail Tax Return – Individuals (BIR60) on the first working day of May to you. If it is your first time to pay tax, IRD will set up a new account for you, so your tax return forms mailing date is not fixed.
If you do not receive your tax return forms, you can notify IRD by filling in the IR6167 form (http://www.ird.gov.hk/chs/pdf/ir6167.pdf) within 4 months after a year of assessment (which is before July 31st).
If you receive your tax return forms, you must complete and return the forms to IRD within 1 month from the date the forms were sent.
You can make use of the online taxation calculator to calculate your tax:
http://www.gov.hk/en/residents/taxes/etax/services/tax_computation.htm
You must inform IRD immediately if you change your postal address. Please find the Notification of Change of Postal Address for your use.
http://www.ird.gov.hk/chi/pdf/ir1249.pdf
Provisional Salaries Tax of the following year is also required by IRD. Therefore the total salaries tax you need to pay is:
Total Salaries Tax for 2022/23 = Salaries Tax required 2022/23 + Provision Salaries Tax 2023/24
Your salaries tax can be paid in 2 installments, in January and April of the following year separately.
Examples
A. I earned a salary of $40,000 and contributed $1,500 to a Mandatory Provident Fund (MPF) Scheme per month as from 1 October 2021. How is Salaries Tax computed for 2021/22?
Year of Assessment 2021/2022 | |
Income ($40000 x 6 months) | $240,000 |
Less: MPF contributions ($1,500 x 6 months) | ($9000) |
Net Total Income | $231,000 |
Less: Basic allowance | ($132,000) |
Net Chargeable Income | $99,000 |
Progressive Rate | |
Salaries Tax payable – First $50,000 (2% progressive) | $1,000 |
Balance $49,000 x 6% | $2,940 |
Salaries Tax payable at progressive rate | $3,940 |
Standard Rate | |
Salaries Tax at standard rate $231,000 x 15% | $34,650 |
Salaries Tax payable (the smaller amount) | $3,940 |
Less: 100% Tax reduction (capped at $10,000*) | ($3,940) |
$0 |
(*Note – Government Tax Refund) For 2021/22, 100% of the final tax payable under profits tax, salaries tax and tax under personal assessment would be waived, subject to a ceiling of $10,000 per case.
B. Do I have to pay Provisional Salaries Tax (PST) for 2022/23?
Yes, the Salaries Tax demand note for you consists of two components:
2021/22 Salaries Tax | $0 |
2022/23 PST | $38,100 |
Total Salaries Tax Payable | $38,100 |
Calculation of PST for 2022/23 is based on the income for 2021/22, but grossed up to 12 months, as follows:
Year of Assessment 2022/2023 | |
Income ($40000 x 12 months) | $480,000 |
Less: MPF contributions ($1,500 x 12 months) | ($18,000) |
Net Total Income | $462,000 |
Less: Basic allowance | ($132,000) |
Net Chargeable Income | $330,000 |
Progressive Rate | |
Salaries Tax payable – First $200,000 (2-14% progressive) | $16,000 |
Balance $130,000 x 17% | $22,100 |
PST payable at progressive rate | $38,100 |
Standard Rate | |
Salaries Tax at standard rate $462,000 x 15% | $69,300 |
PST payable (the smaller amount) | $38,100 |
C. Questions A & B show that my total tax payable is $38,100 (Salaries Tax required 2021/22 [$0] + Provision Salaries Tax 2022/23 [$38,100].) When do I pay? Do I pay by two instalments?
Normally you would be asked to pay the sum of $38,100 by 2 instalments as follows:
Amount Payable | Due date | |
1st instalment | $28,575 ($38,100 x 75%) | Around Jan 2023 |
2nd instalment | $9,525 ($38,100 x 25%) | Around April 2023 |
By 1 January 2023 you would have earned income for 9 months to 31 December 2022 (75% of annual income). By 1 April 2023 you would have earned income for the 12 months to 31 March 2023. Hence, paying provisional tax is not paying tax in advance, nor paying tax on future income.
On the First 50,000 | 2% |
On the Next 50,000 | 6% |
On the First 50,000 | 10% |
On the Next 50,000 | 14% |
Remainder | 17% |