Hong Kong Salaries Tax: A Comprehensive Guide for Employers

As an international HR professional, understanding Hong Kong's Salaries Tax system is fundamental to compliant workforce management. This tax, levied on employment income derived from Hong Kong, requires careful attention from employers to ensure proper administration and reporting.

Understanding Salaries Tax Obligations

Hong Kong's Salaries Tax applies to all income arising from employment within the territory, including salaries, bonuses, allowances, and commission payments. Both employers and employees have distinct responsibilities under the Inland Revenue Ordinance.

Key Responsibilities for Employers

Accurate reporting of employee compensation through IR56 series forms
Maintaining payroll records for at least seven years
Implementing salary retention arrangements when employees leave Hong Kong permanently
Utilizing electronic tax services for efficient submission

Tax Calculation Methods: Progressive vs. Standard Rates

Hong Kong employs a dual-rate system where taxpayers pay the lower amount calculated under either progressive or standard rates.

Progressive Tax Rates (2025/26 Assessment Year)

Taxable Income (HKD)	Tax Rate
First 50,000	2%
Next 50,000	6%
Next 50,000	10%
Next 50,000	14%
Remaining amount	17%

Standard Rate Calculation

The standard rate remains at 15% of net income, with a higher 16% rate applying to annual income exceeding HKD 5 million since the 2024/25 tax year.

Cross-Border Employment Considerations

For multinational companies with employees working across Greater Bay Area locations, SailGlobal recommends careful attention to dual taxation arrangements. The Mainland-Hong Kong Double Taxation Agreement provides relief mechanisms for eligible employees.

Practical Case Study: Cross-Border Worker

Consider a mainland Chinese professional working 120 days annually in Hong Kong. Under the double taxation agreement, this employee may qualify for tax exemption in Hong Kong if they maintain mainland tax residency and submit the appropriate exemption application (IR623).

Compliance Best Practices

Implement robust payroll systems that automatically track tax thresholds
Conduct regular training for HR staff on latest tax regulations
Maintain detailed records of employee movements and work locations
Establish clear procedures for handling departing employees

Proper Salaries Tax management not only ensures regulatory compliance but also enhances employee satisfaction through transparent compensation practices. SailGlobal's expertise in international payroll solutions can help streamline these processes for optimal efficiency.

Hong Kong Salaries Tax Guide 2025: Employer Compliance & Calculation