What tax obligation do an employer has in Hong Kong?
Keeping payroll records
Tax obligations as an employer commence when you hire the first employee no matter the employee work on the premises within Hong Kong or not
On hiring the employee, the employer has to maintain a record of that employed person’s:
- personal particulars (name, address, identity card or passport number with country of issue, marital status)
- nature of employment (full time or part-time)
- capacity in which employed (e.g. sales manager, salesman, worker, in-house lawyer, accountant, director)
- amount of cash remuneration (regardless of denomination in domestic or foreign currency and remuneration paid overseas)
- non-cash and fringe benefits (such as quarters, holiday journey benefits, share award, share option)
- employer’s and employee’s contributions to the Mandatory Provident Fund (MPF) or its equivalent
- employment contract and amendments to terms of employment
- period of employment
During the employment period, an employer has to inform the Inland Revenue Department (“IRD”) for any change as follows:
- the employee’s personal particulars (such as change in residential and postal address, change in marital status)
- the employee’s terms of employment (such as a change from full time to part-time)
- the Hong Kong Identity Card No. of the employee
Even the employment is end, the employer is required to keep business accounting records, including payroll records, for at least 7 years.
Reporting remuneration paid to an employee
When a business owner received an Employer’s Return from IRD, it must be completed and returned to IRD within 1 month even under the circumstances:
- none of employee (a Nil return should be made)
- the business has not commenced, or
- the business has ceased.
The Hong Kong Identity Card No. of the employee
If an employee does not possess a Hong Kong Identity Card (e.g. the employee was recruited from overseas or seconded from an overseas corporation) when the employer completes the Employer’s Return, filling in this employees passport number with country of issue is required. After filing the Employer’s Return, the employer still have to follow up with the employee and write in to inform the IRD when the employee’s Hong Kong Identity Card No. is known.
The employer has to report all the employees of following on Employer’s Return:
- single and paid an annual income of $120,000 or more
- married (regardless of amount)
- a part-time staff (regardless of amount)
- a director (regardless of amount)
When an new employment with Salaries Tax chargeable employee commence, the employer within 3 months of employing a person if you anticipate that the employee is likely to be chargeable to Salaries Tax.
On termination of his service (or death)
The employer have to file to IRD one month before the date of termination of his employment.
On his leaving Hong Kong for a substantial period of time
- Expected date of departure of the employee should be obtained.
- File to IRD one month before the expected date of departure.
- From the date of filing to IRD to the time the employee’s tax clearance and “letter of release” by IRD having been made, the employer should not pay any amount including salaries, commission, bonus, reimbursement of rent/expense, money or money’s worth included to this employee.
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