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Hong Kong Tax Structure
Salaries Tax

Employment income with a Hong Kong source is strictly subject to Salaries Tax. To high income earners, salaries tax is payable at a flat rate of tax (for 2017/18: 15%). However, in the case of annual income levels below HK$1,797,000 (for a single person) or HK$2,919,000 (for a married couple) for the year of assessment 2017/18, lower effective rates can apply. These lower rates are applicable irrespective of whether or not the salary earner is a resident of Hong Kong.

Source of Income

Salaries Tax is charged on the basis of the principle of the “fundamental source of employment” being in Hong Kong. The basic principle is that if a person’s fundamental employment is in Hong Kong, his or her income is assessable in full to Salaries Tax unless all the services of the employment are rendered outside Hong Kong. The criteria to determine whether the fundamental source exists in Hong Kong includes: whether the employment contract was negotiated, concluded and is enforceable in Hong Kong, whether the employer is resident in Hong Kong; and where the remuneration is paid. A concession exists to exempt income derived from services rendered outside Hong Kong if a tax similar to Salaries Tax has been paid on the income. This exemption is principally to reduce the double taxation of those employees who are subject to China’s Individual Income Tax, but has wider applications.

Separate rules apply to income received in the capacity as company director. The source of income of a company director is located at the place where the central management and control of the company is located. Where the company is managed and controlled in Hong Kong, such income would be fully taxable irrespective of whether the director has rendered any services in Hong Kong.

If you are in doubt as to whether you or your employees are or will be subject to Salaries Tax, our Tax Department would be pleased to advise.


Although Salaries Tax is levied irrespective of whether the salary earner is a Hong Kong resident, as long as the employee renders all services outside Hong Kong during the year of assessment or visits Hong Kong for not more than 60 days during the year of assessment, he/she will be exempted from Salaries Tax on such income. However, this exemption does not apply to income received in the capacity as director.

In addition, an employee who has a Hong Kong source employment and earns salary income for rendering services in places outside Hong Kong is exempt from Salaries Tax if he has paid tax in those places from which the income was derived.

Special rules apply to seamen and aircrew.

The Mandatory Provident Fund scheme (MPF) was implemented in 2000 with the aim of providing retirement benefits for the work force, and is calculated at 5% of an employee’s income (capped at monthly relevant income of HK$30,000 per month from 1 June 2014.). However, other than MPF, no other costs such as Social Security, National Insurance, etc. arise either to the employee or the employer. A tax deduction of up to HK$18,000 per year is available to the employee in respect of employees’ contributions to MPF.

Benefits in Kind

There are generous tax treatments offered where companies supplied housing and some other “benefits in kind” which makes Hong Kong a competitive location for senior executives of international groups responsible for the Asian region.

If you or your employees are in doubt as to the best way to structure possible benefits packages, our Tax Department would be pleased to advise.