I. Salaries Tax
The charging of Salaries Tax in Hong Kong is based on the territorial concept.
According to section 8(1) of the Inland Revenue Ordinance (Cap. 112 of the Laws of Hong Kong), Salaries Tax shall be charged for each year of assessment on every person in respect of his/her income arising in or derived from Hong Kong from any office or employment of profit or any pension. In simple words, you may be required to pay Salaries Tax if you have rendered services and received salaries/remunerations under a contract of employment in Hong Kong, irrespective of whether tax on that income has been paid in other jurisdiction. However, taxpayers can claim “deductions” and “allowances” in order to reduce their Salaries Tax burden.
Liability to Salaries Tax is based on the chargeable income of the year of assessment, but the total amount of income for the year cannot be ascertained until the year has passed. Hence, the Inland Revenue Department will first demand payment of Provisional Salaries Tax during the year of assessment, and then make adjustments in the following year. Any Provisional Tax paid for a year of assessment is applied firstly against the Salaries Tax payable on the income for that year, and secondly, if there is any excess, it will be applied against the following year's provisional tax liability. Further illustration can be found in the questions and answers below.
Year of assessment
A year of assessment runs from 1 April to 31 March of the following year.
Tax Return
The law requires both the employee and the employer to separately report employment income/employment expenses to the Inland Revenue Department.
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