The Hong Kong tax system is based on the territorial concept. Salaries Tax is imposed on all income arising in or derived from Hong Kong from an office or employment or any pension irrespective of whether tax on the income has been paid in other jurisdictions.

In determining the source of employment, the following three factors are relevant:-

In general, the employment is regarded as located outside Hong Kong if all the above three factors take place outside Hong Kong. In the greater majority of cases, the question of the source of employment will be resolved by considering these three factors. However, the Department reserves the right, in appropriate cases, to look beyond these factors. For further information, refer to Departmental Interpretation & Practice Notes No. 10 – The Charge to Salaries Tax.

If your source of employment is Hong Kong, e.g. you are employed by a Hong Kong company to work in Hong Kong, your full income is chargeable to Salaries Tax even though part of your duties are performed outside Hong Kong. However, you may claim exemption and relief on a year-by-year basis under certain circumstances. For further details, refer to full/partial exemption of income or relief below.

If your source of employment is outside Hong Kong, e.g. you are assigned to work in Hong Kong for a few years by your overseas employer and you have to perform part of the services in different countries in the Asia Pacific Region, you are only assessed on your income attributable to your services rendered in Hong Kong including leave pay attributable to such services and in general, according to the number of days you were in Hong Kong (day-in-day-out basis) in a year of assessment. Exemption of income is available on a year-by-year basis. For further details, refer to full/partial exemption of income or relief below.

For the purpose of calculating leave pay attributable to services rendered in Hong Kong, leave days attributable to services rendered in Hong Kong is computed as follows:-

The above exemption and relief is, however, only granted upon application with supporting documents and a taxpayer seeking tax exemption/relief is required to complete, as appropriate, Section 4 (i.e. Tax Credit under the Arrangement for the Avoidance of Double Taxation on Income with the Mainland) or Section 5 (i.e. Application for Full/Partial Exemption of Income Included under Part 4.1 of B.I.R.60) of the Appendix to Tax Return – Individuals.

Supporting Documents

In processing the claim for either exemption/relief, the following copies of documents are usually required:-

	Employment contract
	Letter of assignment to Hong Kong (for expatriates coming to work in Hong Kong)
	Tax payment notices or receipts issued by tax authorities outside Hong Kong
	Passport or other travel document showing your movements into and outside Hong Kong in the relevant year of assessment
	Schedule of your movements into and outside Hong Kong in the relevant year of assessment (1/4/yyyy – 31/3/yyyy) in the following format:

A taxpayer claiming exemption/relief under section 8(1A)(c) of the Inland Revenue Ordinance / tax credit under the Arrangement for the Avoidance of Double Taxation on Income with the Mainland is required to submit with his tax return the evidence of tax payment, such as the Mainland Income Tax Return and tax receipts and a schedule of itinerary.

Hong Kong resident working across the Mainland Border

See

• Arrangement between the Mainland of China and the HKSAR for Avoidance of Double Taxation: A Guide for Hong Kong Residents Working Across the Mainland Border
  
  This booklet discusses tax issues that may concern a Hong Kong resident exercising employment both in Hong Kong and in the Mainland of China.
  
  
• Arrangement between the Mainland of China and the HKSAR for Avoidance of Double Taxation: Guide for Personal Services
  
  Brief explanation of how "The Arrangement between the Mainland of China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation on Income" applies to an individual.
  
  
• FAQ: Double Taxation Relief
  
  
• Departmental Interpretation & Practice Notes No. 32: Arrangement between the Mainland of China and the HKSAR for the Avoidance of Double Taxation on Income
  
  
• Departmental Interpretation & 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

Tax Return – Individuals (i.e. B.I.R. 60)

A taxpayer is required to declare his full remuneration arising in or derived from Hong Kong from an employment or office irrespective of the locality the remuneration is paid and whether tax exemption/relief is available. A taxpayer is required to report his full remuneration in Part 4 of the Tax Return – Individuals and if he wishes to claim tax credit or income exemption, full details must also be provided, as appropriate, in Section 4 or 5 of the Appendix to the Tax Return with documents in support.

Example

The remuneration of Employee A for the year of assessment 2007/08 is as follows:

		HK$
	Paid by ABC Company (a Hong Kong Company)	800,000
	Paid by XYZ Company (a PRC Company)	200,000

Employee A wishes to claim income exemption under Section 8(1A)(c) of the Inland Revenue Ordinance in respect of the remuneration of $200,000 received from XYZ Company on the ground that Individual Income Tax in PRC has been charged and paid on $200,000.

Tax Return – Individuals (B.I.R.60)

Appendix to B.I.R.60