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Payroll in Hong Kong
Updated on Tuesday 11th April 2023 Rate this article
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based on 3 reviews
Payroll in Hong Kong is important for any company incorporated in the city. Payroll includes all the wages paid to an employee during his or her time at that company. This activity is essential for managing an employee’s payment and it includes the financial records of salaries, any bonuses and deductions.
While there is no tax for payroll in Hong Kong per se, employers do need to make the needed payments for social security purposes. Both the company (the employer) and the employees make these contributions in varying percentages of the employees’ relevant income.
A company in Hong Kong can choose to deal with the employee’s salaries internally or outsource payroll to another company that offers professional services. Our Hong Kong company formation agents can help you with payroll services for your company.
The basics of payroll in Hong Kong
Hong Kong has a relatively simple payroll system. The employee remuneration package is decided by the company and there are a few taxes in Hong Kong that need to be considered when doing so. The mandatory social contribution is one of them.
Although there is no tax for payroll in Hong Kong, the social security contributions that apply are the following:
- - 5% of the relevant employee’s salary – the contribution to the MPF scheme (see below) which is made both by the employer and the employee according to the relevant minimum and maximum income rates;
- - for employees paid on a monthly basis, the minimum income level is HKD 7,100;
- - for employees who are paid monthly, the maximum income level is HKD 30,000;
- - employees who have a monthly income below HKD 7,100 do not make contributions to the MPF scheme, only the employer is required to pay the required 5% to this scheme;
- - when the employee’s monthly income is HKD 7,100 or more, the employer will pay the 5% in the form of its own contribution and will deduct the employee’s 5% (the employee’s portion for the MPF scheme).
The remuneration of an employee in Hong Kong is calculated by taking into consideration the basic monthly salary to which bonuses can be added or leave days can be deducted. Car allowances, commissions, holiday payments and other allowances must also be considered.
The Hong Kong Labour Department imposes a statutory minimum wage. Its value will increase starting with May 2023, from an hourly rate of $37.5 to $40. Employers are expected to take this into consideration, as well as all the other rules and regulations for hiring employees in Hong Kong, in addition to issues considering payroll in Hong Kong.
For complete information on how the minimum wage is calculated (how to compute work hours, and how to calculate the wages for employees with disabilities, among other issues), please refer to our team specializing in company formation and management matters in Hong Kong.
Taxation in Hong Kong
Making the needed social security contributions according to the employee’s salary, along with the monthly calculations for payroll in Hong Kong are not the only issues company owners should take into account as part of their business expenses.
While business overhead differs according to the size and type of company and, more importantly, the industry in which it activates, the following taxes are relevant for all Hong Kong companies:
- - 8.25% corporate income tax rate on the first HKD 2 million of assessable profits ( and 7.5% for unincorporated businesses);
- - 16.5% corporate income tax (15% for unincorporated businesses) on the remainder of the company’s assessable profits;
- - no withholding tax on dividends;
- - no sales or value-added tax;
- - social security contributions as per the rules briefly outlined above.
Hong Kong has signed more than 40 tax treaties that allow for the avoidance of double taxation. These impact both companies and individuals and our team can give you more details if you are a tax resident of a country that has signed such a treaty with the HKSAR and you also derive income from Hong Kong.
According to the requirements for tax filing and payment set forth by the Inland Revenue Department, Hong Kong companies are expected to file IRD returns on an annual basis, and they pay a provisional profits tax, usually based on the profits recorded for the previous year. The annual report is accompanied by audited financial statements (as needed). Surcharges and penalties apply when taxpayers fail to comply with the filing and payment obligations, this is why many companies choose to outsource accounting.
Payroll services for companies in Hong Kong
Our experts in Hong Kong can provide various payroll services for your company. We can help you with the following:
- - the gross/net pay for employees, monthly payroll calculations;
- - electronic payment transfer to employees;
- - social security contributions calculations;
- - taking care of the formalities required by the Inland Revenue Department for new employees;
- - the mandatory insurance packages for your workers;
- - annual employer’s return;
- - enrolling in the Mandatory Provident Fund (MPF) – private pension for employees who work more than 60 days.
In addition to services related to payroll, social security contributions, and the management of the payments to the employees, businesses usually request a more comprehensive accounting package, like those offered by our local accountants in Hong Kong. These also include the preparation of the annual financial statements, tax filing and payment, complete bookkeeping, cashflow management, bank account reconciliation, or tax counsel and optimization.
If you are interested in company formation in Hong Kong we can also help you with information about company registration and staffing, in addition to Hong Kong payroll matters. Our partner lawyers in Hong Kong can help you with legal services for concluding employment contracts.
You can contact our Hong Kong company formation representatives if you are interested in additional services except payroll, like accounting in Hong Kong.
Meet us in Hong Kong
Roger Pay is the Managing Director of our company and an experienced company incorporation specialist. He will help you open your company in Hong Kong as fast as possible.
Call us now at +852 35651861 to set up an appointment with our company formation experts in Hong Kong. As our client, you will benefit from the joint expertise of local lawyers and consultants for opening an offshore company in Hong Kong.
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