Hong Kong Taxation
LECTURE 1: Salaries tax and salaries tax planning, Double taxation arrangement with Mainland China
|Salaries tax | |- |Scope of charge, format and presentation of salaries tax | |- |Locality of employment | |- |Taxability of fringe benefits | |Salaries tax planning | |- |Remuneration package and fringe benefits | |Double taxation relief | |- |Arrangement between Mainland China and the HKSAR |
- Dora Lee, Advanced Taxation in Hong Kong, 15th edition, 2012,
Pearson, Hong Kong, Chapters 2 to 5, 23 & 24
Under s8 of the Inland Revenue Ordinance, salaries tax is charged on every person in respect of his income arising in, or derived from Hong Kong from the following sources: 1) an office
Source of Income from Office
The source of income from an office is determined by the location of the office, which is at the place where the central management and control of the company is located. Normally, this means the place where directors hold their meetings. Once it is determined that an office is located in Hong Kong, the whole income from such office is chargeable to salaries tax. No question of apportionment arises.
Source of Income from Pension
The source of income from pension is the place where the pension fund is managed.
Source of Income from Employment
A taxpayer having an employment located in Hong Kong (Hong Kong employment) is chargeable under s8 above. Taxpayers whose employment is not in fact located in Hong Kong (Non-Hong Kong employment) may still be liable to salaries tax if they render services in Hong Kong. The basic charge to salaries tax is specifically extended to include the income of overseas employees working in Hong Kong during visits exceeding 60 days [S8(1A)].
Hong Kong Employment
a) No time-apportionment
b) All income included despite part of services rendered outside Hong Kong c) Exceptions:
i) rendered ALL services outside Hong Kong
ii) visited Hong Kong for 60 days or less in a year of assessment concerned
i) income excluded for income attributable to services rendered in that territory and foreign tax paid ii) tax credit under Double Tax Arrangement with Mainland China and other tax treaty countries
According to DIPN10, the IRD accepts that employment is located outside Hong Kong where all the following factors are present: a) the contract of employment was negotiated, and entered into, and is enforceable outside Hong Kong; b) the employer is resident outside Hong Kong;
c) the employee’s remuneration is paid to him outside Hong Kong.
In appropriate cases, the IRD may need to look further facts.
Comparison of Hong Kong employment and non-Hong Kong employment: | |Hong Kong employment |Non-Hong Kong employment | |All services rendered in Hong Kong |Taxable in full |Taxable in full | |Services partly rendered in Hong Kong |Taxable in full |Time apportionment | |All services...