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Hong Kong Tax Return Guide: Salaries Tax Returns (BIR60)

By FastLane Team, April 2, 2020 (5 mins)

The Hong Kong tax system is not only incredibly friendly to businesses, but is also friendly to individual taxpayers! Hong Kong Salary Tax, also commonly referred to as income tax, is among the most accommodating tax systems in the world as individuals are not only able to claim progressive tax rates but they also have a multitude of allowances and exemptions available that they may utilize. In this article, we look to provide greater guidance to clear up any misconceptions individuals may have as they receive their Salary Tax Return.

 

What you will learn from this article:

1. How much is the salaries tax in Hong Kong?

2. Salaries Tax Filing Process

3. When can I expect to receive my salaries tax return?

4. What Are My Obligations As An Employee Towards My Salaries Tax Return?

5. What Are My Employers Obligations Towards My Salaries Tax Return?

6. What allowances/deductions can I claim in my salaries tax return?

7. What are the penalties for salaries tax non-compliance?

8. Duplicate Returns

1. How much is the salaries tax in Hong Kong?

Individual taxpayers in Hong Kong who have income arising in, or derived from Hong Kong on any employment, office, and pension are liable to pay Salary Tax at a progressive rate. 

The progressive rate is on the right hand side table:

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1. How much is the salaries tax in Hong Kong?

Individual taxpayers in Hong Kong who have income arising in, or derived from Hong Kong on any employment, office, and pension are liable to pay Salary Tax at a progressive rate. 

The progressive rate is on the right hand side table:

Individual taxpayers may also elect to be taxed at a flat rate of 15%. In addition to a standard salary, benefits in kind may also be subject to Salary Tax. For instance, any commission received, allowances or perquisites or any Salary Tax paid by an employer, on behalf of their employee will be computed and subject to tax.

2. Salaries Tax Return Filing Process

While the process of completing and submitting a Salary Tax Return, which is also known as a BIR60, may be considered intimidating, it is actually very simple. The standard Salary Tax Return filing process is as follows:

 

1. Employers must notify the IRD of an employee’s chargeability to Salaries Tax (via Form IR56E) within 3 months after employing the employee

2. Upon receipt of Form IR56E, the IRD tax system will automatically create a tax file in the employee’s name and will issue a salaries tax return (if necessary) within 5 months

The employee will be required complete and submit the tax return to the IRD in accordance with the date printed on the salaries tax return (along with any supporting documentation if deemed necessary)

3. When can I expect to receive my salary tax return?

Salary Tax Returns are usually sent out by the IRD on / about the first working day of May each year and are to be completed and returned to the IRD in accordance with the due-date printed on the individual Salary Tax Return.

 

To the extent that an individual is a first time taxpayer, a salary tax return will normally be issued within 5 months after the receipt of the employer’s notification of employment (IR56E) or when the taxpayer has notified the IRD of their liability to salaries tax. 


Individuals who are liable to pay Salary Tax but have not yet received a tax return, must notify the IRD of their chargeability to Salary Tax by 31 July of the year following that year of assessment.

4. What are My Obligations as an Employee Towards My Salaries Tax Return?

As an employee, your Salary Tax obligations are primarily related to notifying the IRD your chargeability to Salary Tax, or any changes towards that status. To the extent that an individual has obtained a new source of revenue, or has lost any, the IRD must be notified accordingly.

 

If you are liable to tax in Hong Kong, you must inform the IRD in writing no later than 4 months after the end of the basis period (1 April to 31st March of the following year) for that year of assessment.

 

Individuals who are about to migrate to other countries, regardless of whether it is to study or work, are also required to notify the IRD in writing at least 1 month before the expected date of departure.

5. What Are My Employers Obligations Towards My Salaries Tax Return?

As a Hong Kong employer is required to inform the IRD of any changes to their employees personal particulars or remuneration package, the IRD should already have an understanding of how much assessable income is subject to salary tax for that year of assessment. Therefore, simply make sure that the assessable income indicated by the IRD is consistent with the sum provided in your company’s annual Employer Return.

6. What allowances/deductions can I claim in my salaries tax return?

Much like profits tax, salaries tax allows for the deduction of expenses that were wholly, exclusively and necessarily incurred in the production of assessable income. It is common that employers will not be privy to what expenses an employee has incurred on their own behalf (or sometimes even on behalf of the company). Individual taxpayers should thus ensure that they understand what deductions and allowances they are eligible to. When completing a salaries tax return, the following deductions may be claimed:

 

  • Outgoings and expenses (including expenses of self-education)
  • Concessionary deductions
  • Allowances (Except for taxpayers paying Salaries Tax at the standard rate)

 

While it is not necessary to provide any documents to verify your employment income, individuals who wish to claim the entirety or part of their employment income as exempt from salaries tax must provide supporting evidence. For record keeping purposes, it is recommended to maintain relevant receipts and documents for at least 6 years after the expiration of the relevant year of assessment. 

 

In addition to exemptions/deductions, taxpayers can also claim allowances or have elected personal assessment to reduce their total assessable income. For instance, all Hong Kong individual taxpayers are eligible for a Basic Allowance of HKD132,000 for the financial year 2018-19 onwards. Taxpayers can view the IRD’s allowances, deductions, and tax rate table here.

7. What are the penalties for salaries tax non-compliance?

Non-compliance with Salary Tax occurs when a taxpayer fails to notify the IRD on their chargeability to Salary Tax, or fails to submit a tax return on time. Taxpayers can expect the following penalties in accordance with their frequency of non-compliance.

  • First offence – 10% of the amount of tax undercharged
  • Second offence within 5 years – 20% of the amount of tax undercharged
  • Third or subsequent offence within 5 years – 35% of the amount of tax undercharged

 

8. Duplicate Returns

Oftentimes, individual taxpayers will not receive, will misplace or may even damage their tax returns. While one may panic initially, this is not something to be worried about as the IRD can assist in providing a duplicate tax return. 

 

Conclusion

Completing tax returns can be an intimidating process for individual taxpayers, especially when it’s your first time!. Everyone is scared of making a mistake, especially when doing so can be so costly! For Profit Tax Return, please visit our blog Hong Kong Tax Return Guide: Profits Tax Returns (BIR51 / BIR52 / BIR54)!

 

With our team of qualified professionals, we can assist clients in preparing, completing your profits tax returns or even communicating with the IRD! please contact the FastLane Group for a price quotation!



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