Application for Full or Partial Exemption of Income or Claim for Tax Credit under Salaries Tax

Whether or not you can apply for an exemption of some or all of your income from salaries tax depends on the source of your employment. This note provides information on the territorial concept of taxation used in Hong Kong and how different types of taxpayers are subject to it.

The Territorial Concept of Taxation

The charging of salaries tax in Hong Kong is based on the territorial concept. This means that all income arising in or derived from Hong Kong from an office, employment or any pension is assessable irrespective of whether tax on that income has been paid in other jurisdictions. The following sections describe how these conditions relate to most taxpayers.

More on how to determine your source of employment

Directors

You are a director of a Hong Kong company if your position is defined by the relevant duties and responsibilities stipulated in the Companies Ordinance, and a director of a non-Hong Kong company if you have similar duties and responsibilities as laid out by corresponding foreign legislation. A directorship is regarded as an office. In general, if you are a director of a company resident in Hong Kong, your full income derived from that office in Hong Kong is chargeable to salaries tax. This is not affected by the number of days during the year of assessment that you stayed in Hong Kong, and no exemptions or relief are available.

Employees

If you are an employee and your source of employment is in Hong Kong, your full income is chargeable to salaries tax even if some of your duties are performed outside of Hong Kong. However, you may claim exemption or relief on a year-by-year basis under certain circumstances.

Full or Partial Exemption of Income or Tax Credit

You can apply for full or partial exemption of income or claim for tax credit when filing your Tax Return – Individuals (BIR60) and its Appendix if you satisfy the specified conditions.

More on employee’s full or partial exemption of income or tax credit under salaries tax

Hong Kong Residents Working Across the Border in Mainland China

If during the relevant year of assessment, you work part of the year across the border in Mainland China, all of your income will be chargeable to salaries tax in Hong Kong. Your income can also be charged to Individual Income Tax in the Mainland, but exemptions are possible under certain circumstances.

For a year of assessment up to 2017/18, if you have paid Individual Income Tax in the Mainland in respect of your income derived from services rendered in the Mainland, you may either apply for income exemption under section 8(1A)(c) of the Inland Revenue Ordinance (“IRO”) in respect of that part of income or claim for tax credit under section 50 of the IRO and the Arrangement between the Mainland of China and the HKSAR for the Avoidance of Double Taxation and Prevention of Fiscal Evasion with respect to Taxes on Income ("the Comprehensive Arrangement").

From the year of assessment 2018/19 onwards, section 8(1A)(c) is not applicable to income derived by a person from services rendered in a territory which has made a comprehensive avoidance of double taxation agreement or arrangement with Hong Kong. If you are a Hong Kong resident person (a person who is resident for tax purposes in Hong Kong) and have paid Individual Income Tax in the Mainland in respect of your income derived from services rendered in the Mainland, you may claim for tax credit under section 50 and the Comprehensive Arrangement.

You are required to provide evidence of payment of Individual Income Tax to support your application for income exemption or claim for tax credit.

Further Information

More information on the arrangement between the Mainland of China and the HKSAR for the avoidance of double taxation and prevention of fiscal evasion is available through the following links.

Departmental Interpretation and Practice Notes No. 44: Arrangement between the Mainland of China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income (pdf file)Frequently asked questions about Double Taxation Relief

People Coming to Work in Hong Kong

If you are about to travel to Hong Kong for work or have already arrived, you should find out about your tax obligations. Salaries tax is payable on all income arising in or derived from an office or employment in Hong Kong, and the year of assessment runs from 1 April to 31 March.

A Guide to Salaries Tax for People Coming to Work In Hong Kong (pdf file)

If your income is taxed outside Hong Kong, you should also determine whether you are liable for double taxation, and what you can do to reduce the burden.

Double Taxation Relief and Exchange of Information Arrangements
Last revision date: October 2018
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