Hong Kong companies pay salaries to their employees. Do both companies and employees pay taxes on this business? Is a Hong Kong company liable to withhold salaries tax? This article is described in detail below.

As we all know, when Chinese companies pay salaries to their employees, individual income tax must be withheld and paid. This is because China implements the principle of withholding at the source, which is withheld and paid by wage payers. However, Hong Kong does not have a source withholding rule, so Hong Kong companies do not have to withhold salaries tax from their employees (salaries tax is similar to the domestic personal income tax, but is more narrowly levied only on salaries earned by individuals from Hong Kong companies). Although Hong Kong companies are not required to withhold salaries tax every year4Hong Kong companies must report to the Hong Kong Tax Bureau in January56BA form (the Employee Return Form) which states the basic information of the employee, including his/her identity, nationality, job title, address and annual salary.

Are individuals subject to salaries tax on salaries received from Hong Kong companies? If the annual salary exceeds13200In Hong Kong dollars, the Inland Revenue Department of Hong Kong issues a Salaries tax return to an individual every year. The individual will complete the return. After completing the return, the Inland Revenue Department will issue a Salaries tax return. Upon receipt of the tax return, the amount of tax on the tax return should be paid in a timely manner. If an individual is not a Hong Kong person and works for a Hong Kong company in a place other than Hong Kong, he or she can raise a tax objection at the same time of paying tax. If the objection is successful, the tax office will refund the tax paid.

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