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Hong Kong Salaries Tax - Location of Employment

1. What is the taxation status of workers who partly render services in Hong Kong and partly in foreign countries?


Such workers can make an application for exemption on the form (B.I.R.60) "Tax Return -Individuals" and its Appendix, together with the supporting documents required (e.g. a copy of employment contract or any documents verifying tax payment in a foreign country, etc.) . Full or partial exemption of income, or relief from tax, may be available to these persons if they satisfy one of the following conditions:


i) Only part of the income was arising in or derived from Hong Kong from an employment (i.e. under Section 8(1A)(a) of the Inland Revenue Ordinance)

This exemption is only applicable for employees having a source of employment outside Hong Kong (e.g. assigned to work in Hong Kong by overseas employers). As Salaries Tax is in this circumstance levied on income derived from services rendered in Hong Kong, income attributable to services rendered outside Hong Kong is exempt from tax. The amount of income exempted is generally computed by time-basis apportionment by reference to the number of days spent outside Hong Kong .


For the purpose of counting the number of days in Hong Kong, the day of departure from Hong Kong and the day of arrival to Hong Kong together are counted as one day only.


Examples


Arrival in Hong Kong


Departure from Hong Kong


No. of days in Hong Kong


1 February 2005


4 February 2005


 


at 23:30


at 00:30


3


 


 


 


1 March 2005


1 March 2005


 


at 11:30


at 18:30


1/2


Thus, broadly speaking, if your annual income for a year of assessment was $365,000 and you were in Hong Kong for 100 days in that year, your assessable income would be $365,000 x 100/365 = $100,000.


ii) All services were rendered outside Hong Kong during the year (i.e. under Section 8(1A)(b)(ii) of the Inland Revenue Ordinance)

This exemption is generally available to employees irrespective of the locality of the employment. Attending trainings, meetings or reporting in Hong Kong is regarded as services rendered in Hong Kong for the purpose of the exemption. You are exempt from Salaries Tax for a year of assessment if you rendered all your services outside Hong Kong in that year of assessment, unless you are a civil servant, or a crew member of a ship or an aircraft. Income from services rendered in Hong Kong during " visits" not exceeding a total of 60 days in the year is also excluded from Salaries Tax.


Visit means a short or temporary stay. Whether the nature of a trip to Hong Kong made by a Hong Kong resident is "visit" or not depends on the circumstances of each case. In general, if a Hong Kong resident has a work base in a foreign country and is required to render services there as a permanent employee, the person's occasional return to Hong Kong will be recognized as a "visit".


In deciding whether visits to Hong Kong exceed a total of 60 days, the "days of presence" are counted. A day is counted although you may be present in Hong Kong for part of the day only. Therefore, the day of departure from Hong Kong and the day of arrival to Hong Kong are counted as two days.


Example


Arrival in Hong Kong


Departure from Hong Kong


No. of days in Hong Kong


1 February 2005


4 February 2005


 

at 23:30


at 00:30


4


iii) Part of the income has already been charged to the tax in Mainland China or other countries during the year (i.e. under Section 8(1A)(c) of the Inland Revenue Ordinance)

This exemption is generally only applicable for employees having a source of employment in Hong Kong . If you have paid tax of substantially the same nature as Hong Kong Salaries Tax to a territory outside Hong Kong in respect of income relating to services rendered by you in that territory, that part of the income which has already been subject to foreign tax will be exempt from Hong Kong Salaries Tax. Evidence of foreign tax payment is required.


For example, your annual income for a year of assessment was $300,000 and two-third of the income (i.e. $200,000) was attributable to services rendered by you in, say, Country A. If you had paid tax similar to Hong Kong Salaries Tax in Country A on the $200,000 income, your assessable income in Hong Kong would be $100,000 only.


If a Hong Kong resident provides services both in the Mainland and in Hong Kong, the income derived from that person's Hong Kong employment will be fully assessable. But he/she may either apply for tax exemption under section 8(1A)(c) in respect of that part of income already subject to Individual Income Tax in the Mainland or apply for a tax credit under the Arrangement between the Mainland of China and the HKSAR for Avoidance of Double Taxation ("the Arrangement") by respectively completing Section 6 or Section 4 of the Appendix to Tax Return - Individuals. Evidence of the payment of Individual Income Tax is required. In general, tax exemption under section 8(1A)(c) provides greater relief than that would be provided by tax credit.



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