Hong Kong Payroll and Income Tax Guide

Learn about payroll and income taxes in Hong Kong, including employer contributions and tax treaties.

Despite its compact size of 1,108 square km, Hong Kong punches well above its weight on the global economic stage. Known for its status as one of the world’s freest economies, the city boasts a vibrant financial sector, a sophisticated legal framework, and a straightforward tax regime. As of 2023, its GDP reached approximately USD 381 billion, primarily driven by finance, logistics, professional services, and a growing tech sector.

While Hong Kong boasts a strategic location and world-class infrastructure, what really attracts it to international employers and business investors is the territorial tax system.

In Hong Kong, individuals and companies are taxed only on income earned in the country, and generous exemptions mean many foreign-sourced earnings are entirely untaxed. There’s no VAT, no capital gains tax, no payroll tax per se, and no withholding taxes on dividends or interest.

Thinking about doing business in Hong Kong already? Well, yesterday was the best time!

With capped tax salaries and streamlined electronic filing, Hong Kong offers one of the most compliance-friendly payroll landscapes in Asia. For companies looking to tap into a skilled and cosmopolitan workforce, this guide will tell you all you need to know!

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What is Payroll Tax in Hong Kong?

Hong Kong does not have a traditional “payroll tax” like many other countries. Instead, it operates a mandatory Social Security Contribution and a Salaries Tax, a form of personal income tax (PIT), that applies to income earned from formal employment.

Social Security Contributions

The entirety of the social security contributions culminates in the Mandatory Provident Fund (MPF). Introduced in 2000, the MPF is a defined-contribution retirement savings scheme designed to ensure that both local and expatriate workers in Hong Kong set aside funds during their working lives to support themselves in retirement.

These payments are regulated by the MPF Authority (MPFA) and are mandatory for the following:

All employees aged 18 to 64 working in Hong Kong
Persons on continuous employment for 60 days or more, including foreign employees

Every month, both employers and employees contribute a fixed 5% of their income, totalling 10%. These contributions are applied to relevant monthly income between HKD 7,100 and 30,000.

In other words, persons earning below HKD 7,100 monthly are not required to make contributions (only the employer contributes), and employees earning above HKD 30,000 are not required to make any further contributions beyond the HKD 1,500 cap (5% of 30,000).

Monthly Relevant Income	Employee Contribution	Employer Contribution	Total	Notes
Below HKD 7,100	0%	5%	5%	Employee exempt from contribution
HKD 7,100 – HKD 30,000	5%	5%	10%	Standard contributions apply
Above HKD 30,000	5% of HKD 30,000 = HKD 1,500	5% of HKD 30,000 = HKD 1,500	HKD 3,000 max	Contributions capped at this level

While employees may voluntarily contribute more than 5% to boost retirement savings, employers are not obliged to match.

These payments are withheld at the source by the employer, and the combined 10% is made to the MPF trustee/provider within 10 days of the end of each contribution period.

Salaries Tax

This is equivalent to the personal income tax found in other countries, and is managed by the Inland Revenue Department (IRD).

In Hong Kong, however, and unlike in many countries where employers are responsible for withholding and remitting these taxes, this responsibility primarily rests on the employee.

Another important distinction is that Hong Kong only taxes income arising in or derived from the country. This means that income from offshore employment and duties performed wholly outside Hong Kong may be fully exempt from taxation.

The Inland Revenue Department (IRD) uses criteria such as the contract location, payment origin, and where services are rendered to determine taxability (source).

Salaries Tax is computed on the lower of:

Net chargeable income, taxed using progressive rates, or
Net income is taxed at a standard rate of 15%.

Net Chargeable Income

Net chargeable income = Assessable income − allowable deductions − personal allowances

Net Chargeable Income (HKD)	Tax Rate
First 50,000	2%
Next 50,000	6%
Next 50,000	10%
Next 50,000	14%
Remainder	17%

Some deductible items include:

MPF contributions (up to HKD 18,000/year)
Charitable donations
Home loan interest (up to 20 years)
Self-education expenses
Elderly/residential care expenses

Some personal allowances include:

Personal Allowance Type	Amount (HKD)
Basic Allowance	132,000
Married Person’s Allowance	264,000
Child Allowance (1st–9th child)	130,000 per child
Dependent Parent/Grandparent	100,000 each
Disabled Dependent	75,000

Net Income

Net income = assessable income – deductions only

This is calculated at a fixed 15%.

If the tax calculated using net income is lower than that calculated using net chargeable income, the taxpayer pays the lower amount; and vice versa.

Yes, Hong Kong is really what tax dreams are made of.

Hong Kong Payroll Tax Calculator

Picture trying to work out progressive tax brackets, or any other intricate payroll details, by hand. It’s a headache you don’t need, especially when the Remote People Global Payroll Calculator does it all for you. Whether you’re dealing with local or foreign employees, this tool helps you accurately calculate payroll taxes in any country with ease.

All you need to do is select the country (in this case, Hong Kong), then choose the employee type: local or expatriate. Set your calculation period (monthly or annually), enter the gross salary, and you’re good to go.

Salaries Tax Filing and Payment

In Hong Kong, the tax year runs from April 1 to March 31 of the following year. After the tax year ends, the Inland Revenue Department (IRD) assesses your income earned during that period to determine your final tax liability. However, to help taxpayers manage their payments, Hong Kong operates a provisional tax system based on the previous year’s income.

Here’s how it works.

The IRD estimates your tax for the upcoming year using your assessed income from the previous tax year and issues a provisional tax bill. This provisional tax is designed to cover your anticipated tax liability for the current year, helping spread your tax payments over time.

The provisional tax is split into two instalments — typically 75% due in January and the remaining 25% due in April of the tax year. These instalments act as advance payments, meaning you pay most of your expected tax early in the year, then the rest shortly after.

Once the tax year concludes and your actual income is fully assessed, the IRD compares your provisional tax payments to your actual tax liability. If you’ve paid too much, the excess is refunded; if you’ve underpaid, you must settle the balance.

So, while you receive your salary monthly, your income tax payments in Hong Kong come twice a year, in these two instalments, making the process manageable and aligned with your prior year’s earnings.

Employer and Employee Contributions

Compliant payroll taxation in Hong Kong is a joint effort between employers and employees.

While employees are responsible for paying their salaries tax, employers are not absolved of related duties. They are to notify the IRD within 3 months of hiring their first employee using Form IR6163 and report employees’ annual returns by submitting the various IR56 Forms within 1 month of the relevant event.

Form IR56B – annual returns for existing employees
Form IR56E – upon commencement of employment
Form IR56F – upon cessation of employment
Form IR56G – when an employee is about to leave Hong Kong

While employers may not deduct salary tax, they may be required to withhold final payments, such as bonuses or unused leave pay, for employees who are leaving Hong Kong until they receive clearance from the IRD.

Other employer responsibilities include enrollment of eligible employers into an MPF scheme within the first 60 days of employment and making the required contributions. They must also retain employment and salary records for a minimum of 7 years.

Employee responsibilities include filing tax returns via Form BIR60, usually issued in May; making salaries tax contributions in two installments; and contributing their 5% monthly income towards MPF contributions.

Before permanently leaving the country, employees must inform the IRD and request a tax clearance, file Form IR56G via their employer, and settle any tax obligations before departure.

Industry-Specific Tax Rates in Hong Kong

Hong Kong maintains a flat, low-tax regime with uniform tax rates across all industries. All businesses benefit from a two-tiered profits tax system:

Taxable Profits (HKD)	Tax Rate
First 2 million	8.25%
Above 2 million	16.5%

However, certain sectors enjoy targeted incentives, such as:

300% R&D tax deductions
Tax breaks for corporate treasury, reinsurance, and aircraft leasing
Exemptions for international shipping profits
Accelerated deductions for green tech and IP assets

These perks make Hong Kong especially attractive for finance, tech, logistics, and innovation-focused industries.

Simplify Payroll and Tax Compliance in Hong Kong

Staying compliant with Hong Kong’s payroll and tax system doesn’t have to be a herculean task. With Remote People, you get a streamlined solution that handles everything from calculating salaries, tax, and MPF contributions to staying ahead of deadlines and changing tax rules.

Whether you’re managing local hires or expat employees, our platform helps you run compliant, stress-free payroll in one of Asia’s most dynamic markets.