Immigraion To Hong Kong

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PAYING YOUR DUES

It is possible to pay personal salaries tax (income tax) in
monthly installments (Pay-As-You-Earn), but most people
elect to subscribe to the other option offered by the Inland
Revenue Department (IRD) and pay by two installments.
Under this system payment for the financial year 2003 (1st
April 2003 to 31st March 2004), for example, would become
payable in 2004, part in January and part in April. Now a
word about the one irksome aspect of the Hong Kong
taxation system – the IRD’s practice of charging Provisional
Salaries Tax. Based on a taxpayer’s earnings during the
current tax year, the IRD estimates his assessable income in
the following year to calculate his provisional tax for that
year also. His tax liability for the two years is then added
together and becomes payable during the current tax year. In other words, at the end of his first tax year in Hong Kong a newcomer can expect to pay not only what he owes in tax for that year, but also what he is expected to owe on the
following year’s earnings. Although something of an
imposition at the outset, from the second year on this system ceases to have any practical impact, since each current year’s tax will have been paid the previous year, any adjustments in tax paid on provisional earnings and actual earnings being reconciled automatically by the IRD. I suspect the reason for the provisional taxation system is the transient nature of Hong Kong’s expatriate population, and the distinct possibility that, in the excitement of returning to their homeland after a temporary posting to Hong Kong, some expats might “forget” to discharge their outstanding income tax liabilities.

For more information on all matters concerning taxation in
Hong Kong, as well as a salaries tax computation facility (fill
in the blanks and it will calculate your tax liability online for
you!), go to the IRD’s website at: http://www.info.gov.hk/ird
, or contact the IRD by phone at (852) 2594 2561, by fax at
(852) 2877 1232, or by email – mailto:taxinfo@ird.gov.hk.