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Salaries Tax | Employer Tax Filing & Advisory | Deep Blue CPA

Comprehensive Hong Kong salaries tax services for employers and employees. IR56 forms filing, employer tax returns, tax planning, and IRD enquiry handling by AFRC registered CPAs.

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Salaries Tax Services

Hong Kong salaries tax is governed by the Inland Revenue Ordinance (Cap. 112) and applies to income arising in or derived from Hong Kong from any employment, office of profit, or pension. Hong Kong operates a territorial source principle — only income from services performed in Hong Kong is subject to salaries tax, while income from services rendered outside Hong Kong is generally exempt.

At Deep Blue CPA Limited, we provide comprehensive salaries tax compliance, advisory, and planning services for both employers and employees. Our AFRC registered CPAs (Registration No. M0307) bring extensive experience in handling IR56 forms, individual tax returns (BIR60), tax-efficient compensation structuring, and IRD enquiry resolution. Since 2008, we have helped hundreds of Hong Kong businesses and individuals navigate their salaries tax obligations with confidence.

Our Salaries Tax Services

Employer Tax Compliance

  • IR56B preparation and filing — Annual employer return of remuneration and pensions for all married employees and unmarried employees earning above HK$145,000 per year
  • IR56E notification — Notification of new employees within three months of commencement of employment
  • IR56F and IR56G filing — Returns for employees ceasing employment or departing Hong Kong, ensuring timely submission to avoid penalties
  • IR56M preparation — Return for non-employee workers such as consultants, agents, and sub-contractors receiving remuneration
  • MPF records reconciliation — Cross-checking employer MPF contributions against reported remuneration to ensure accuracy and consistency
  • Group employer return management — Centralised coordination of multiple employee returns for corporate groups

Individual Tax Return Filing

  • BIR60 preparation and filing — Complete individual tax return preparation with accurate income disclosure and deductions maximisation
  • Tax computation — Detailed computation of assessable income, allowable deductions, personal allowances, and tax payable
  • Deductions maximisation — Strategic identification of all eligible deductions including self-education expenses, charitable donations, MPF voluntary contributions, home loan interest, and elderly care expenses
  • Foreign income exclusion — Assessment and documentation of foreign-sourced employment income eligibility for exemption under the territorial source principle
  • Joint assessment election — Advisory on whether married couple joint assessment or separate assessment produces a lower overall tax liability
  • Personal assessment review — Evaluation of whether electing personal assessment (combining profits, property, and salaries tax) reduces total tax payable

Tax Planning & Advisory

  • Tax-efficient remuneration structures — Advisory on salary, bonus, and benefit-in-kind structuring to optimise tax outcomes for both employer and employee
  • Share-based compensation — Tax implications of employee share awards, share option schemes, and equity-based incentives
  • MPF voluntary contributions — Strategic use of MPF voluntary contributions to reduce taxable income while building retirement savings
  • Double taxation relief — Applications for tax treaty relief and foreign tax credit claims for cross-border employment income
  • Expatriate tax planning — Advisory for inbound and outbound expatriates on Hong Kong tax residence, home leave passages, and housing allowances
  • Housing allowance and benefit-in-kind — Structuring accommodation benefits, education subsidies, and other non-cash benefits within IRD guidelines

IRD Enquiries & Disputes

We act as your authorised tax representative in all dealings with the Inland Revenue Department regarding salaries tax matters, including:

  • Handling IRD enquiries on employer returns and individual assessments
  • Responding to IRD questionnaires and information requests on employment income
  • Filing objections against salaries tax assessments and estimated assessments
  • Holdover of provisional salaries tax applications
  • Representation during IRD field audits and tax investigations targeting employer compliance
  • Appeals to the Board of Review and beyond for disputed tax matters

Salaries Tax Rates & Thresholds

Hong Kong salaries tax is calculated on a progressive basis. The net chargeable income (assessable income minus deductions and allowances) is taxed at the following marginal rates:

Net Chargeable Income (HK$) Tax Rate Tax on Band (HK$)
0 – 50,000 2% 1,000
50,001 – 100,000 6% 3,000
100,001 – 150,000 10% 5,000
150,001 – 200,000 14% 7,000
200,001+ 17% Marginal

Important: The total salaries tax payable is capped at a maximum of 15% of assessable income (before deductions and allowances). This standard rate cap ensures that high-income earners pay no more than 15% of their gross assessable income, providing a ceiling on the progressive tax system.

Personal allowances (such as the basic allowance of HK$145,000, married person's allowance, and child allowance) are deducted from assessable income before applying the progressive rates. The interaction between the progressive tax calculation and the standard rate cap means the IRD automatically calculates the lower of the two amounts.

Why Choose Deep Blue CPA for Your Salaries Tax Needs?

  • AFRC Registered CPA Firm (Registration No. M0307) — all tax compliance work is supervised by qualified certified public accountants with practising certificates
  • Over 15 Years of Experience — established since 2008, serving hundreds of employers and individuals across diverse industries
  • Employer Compliance Specialists — deep expertise in IR56 form preparation, MPF reconciliation, and group employer return management
  • Cross-Border Tax Expertise — extensive knowledge of Hong Kong territorial source rules, double taxation treaties, and expatriate tax planning
  • Proactive Advisory Approach — we identify tax-saving opportunities, flag filing deadlines, and monitor IRD practice changes that affect your obligations

Frequently Asked Questions

What is the Hong Kong salaries tax rate?

Hong Kong salaries tax is calculated on a progressive basis at rates of 2%, 6%, 10%, 14%, and 17% on successive bands of net chargeable income. However, the total tax payable is capped at a maximum of 15% of assessable income (before deductions and allowances). This means the IRD will calculate tax using both methods and charge the lower amount. Foreign-sourced employment income may be exempt under the territorial source principle.

Who needs to file a salaries tax return in Hong Kong?

Any individual earning assessable income from employment in Hong Kong exceeding HK$145,000 per year (the basic allowance) must file a salaries tax return (BIR60). Non-resident individuals earning income from Hong Kong sources are also liable to file. Married couples may elect for joint assessment, which allows them to combine their incomes and deductions to potentially reduce the overall tax burden.

What are employer return obligations in Hong Kong?

Employers in Hong Kong must file annual employer returns (IR56B) for all married employees regardless of income level, and for unmarried employees earning above HK$145,000 per year. Additional returns are required: IR56E for new employees within 3 months of commencement, IR56F for employees ceasing employment, and IR56G for employees departing Hong Kong. Employers must also maintain accurate MPF contribution records to support their filings and respond to IRD enquiries promptly.

What deductions are available against salaries tax?

Common deductions available against Hong Kong salaries tax include: self-education expenses (up to HK$100,000), charitable donations (up to 35% of assessable income), MPF mandatory contributions (up to HK$18,000) and MPF voluntary contributions (up to HK$60,000), home loan interest (up to HK$100,000 per year for 20 years), and elderly residential care expenses (up to HK$110,000). Personal allowances such as the basic allowance (HK$145,000), married person's allowance (HK$290,000), child allowance (HK$140,000 per child), and dependent parent allowance are also available.

Are foreign-sourced employment income subject to HK salaries tax?

Hong Kong operates a territorial source principle. Employment income is sourced in Hong Kong only to the extent that services are performed in Hong Kong. Income from services rendered entirely outside Hong Kong is generally not subject to salaries tax. The 60-day rule provides that if an individual visits Hong Kong for no more than 60 days in a tax year and performs all duties outside Hong Kong, the entire employment income may be treated as foreign-sourced and exempt from salaries tax.

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