What Is Hong Kong Salary Tax?
What Is Hong Kong Salary Tax?When working in Hong Kong, it is vital to know the necessary taxes you must pay from your salary to avoid penalty. Read on to learn more about Hong Kong Salary Tax, and how to file properly. For those working in Hong Kong, Salary Tax is the name given to the tax that individuals must pay each year on their income. Paying the accurate amount each year will help ensure that you are up to date with the IRD and avoid penalty. Ensuring that you understand Hong Kong Salary Tax will help you avoid unexpected costs and headache at tax assessment time. In this article, we will break down the Hong Kong Salary Tax, the specifics of taxable salary and deductions available, and how to file properly.
In This Article:
- What Is Hong Kong Salary Tax?
- What Is Taxable Under Hong Kong Salary Tax?
- How Can I Calculate My Net Chargeable Income?
- What Is Deductible Under Hong Kong Salary Tax?
- How Do I File My Salary Tax?
1. What Is Hong Kong Salary Tax?The Hong Kong Salary Tax is the tax that is applied to individuals who work in Hong Kong and receive income from an employer. While many countries require a flat tax on the total combined income of an individual, Hong Kong features a progressive tax rate that is split between different types of income. In short, those who take an income from work under a Hong Kong-based employer are taxed at rates that progressively grow depending on what is called Net Chargeable Income. The tax rate starts at 2% and grows progressively until it maxes out at 17%.
2. What Is Taxable Under Hong Kong Salary Tax?Knowing the exact type of income that is taxable under Hong Kong Salary Tax can help both taxpayers and employers know what to expect each year. It is important to note that in Hong Kong there is no capital gains tax, dividend tax or inheritance tax. To know what is taxable under Hong Kong Salary Tax, it is important to know your Net Chargeable Income. This income number combines the taxable income elements that you can expect to have to pay upon assessment. Not only are there a variety of income types that go into net chargeable income, but there are also potential deductions that can be taken as well.
3. How Can I Calculate My Net Chargeable Income?So, what is included in a Net Chargeable Income, and how can taxpayers calculate this number to prepare for tax season? According to IRD law, Net Chargeable Income can be calculated with the following formula:
Net Chargeable Income = Income – Deductions – AllowancesIn general, your income includes all general income that is received through an employer, as well as commissions, bonuses, and any allowances allowed by the employer.
4. What Is Deductible Under Hong Kong Salary Tax?Fortunately, there are a variety of items that are deductible under Hong Kong Salary Tax that can quickly reduce the amount of Net Chargeable Income that can be taxed. Among those potential deductions are the following:
- Outgoing payments and expenses (based on IRD-stated conditions)
- Depreciation on plant equipment and machinery that was utilized to generate income
- Any self-education expenses for furthering one’s career and knowledge
- Charitable donations to a list of approved schemes and funds
- Interest from a home loan based on qualifications
- Elderly care expenses