Hong Kong’s eTAX for Non-Resident Directors: Compliance Made Simple

Managing tax compliance from abroad presents unique challenges for non-resident directors of Hong Kong companies. The Inland Revenue Department’s (IRD) eTAX portal has revolutionized the way non-residents fulfill their tax obligations, offering a comprehensive digital solution that transcends geographical boundaries. This detailed guide explores everything non-resident directors need to know about navigating Hong Kong’s tax landscape through the eTAX system in 2024-2025.

Understanding Non-Resident Director Status in Hong Kong

What Defines a Non-Resident Director?

Tax residency in Hong Kong is not solely determined by physical presence. The IRD applies specific tests to ascertain an individual’s tax residency status and subsequent tax liabilities. Understanding these distinctions is crucial for proper compliance.

Hong Kong generally considers you a tax resident if you meet one of the following criteria:

• Ordinary Residence Test: You ordinarily reside in Hong Kong, which typically means your habitual place of residence is Hong Kong
• 180-Day Rule: You stay in Hong Kong for more than 180 days during the year of assessment (April 1 to March 31)
• 300-Day Rule: You stay in Hong Kong for more than 300 days over two consecutive years of assessment, including the relevant year

If you do not meet any of these tests, you are generally considered a non-resident for Hong Kong tax purposes. However, this does not automatically exempt you from Hong Kong tax obligations on Hong Kong-sourced income.

The Territorial Basis of Taxation

Hong Kong operates on a territorial basis of taxation, which means that all individuals—whether residents or non-residents—are subject to Hong Kong salaries tax on:

1. Hong Kong-sourced employment income
2. Income from an office held in Hong Kong (including directorship fees)
3. Income from a Hong Kong pension

For non-resident directors, this means that director’s fees and any remuneration derived from serving on the board of a Hong Kong company are typically subject to Hong Kong salaries tax, regardless of where the services are physically performed or where payment is received.

The 60-Day Exemption Rule

Non-residents can escape salaries tax obligations under limited circumstances. If you stay in Hong Kong for 60 days or less during the tax year AND all services are rendered outside Hong Kong, you may qualify for an exemption. However, this exemption rarely applies to directors, as holding a directorship of a Hong Kong company is considered an office held in Hong Kong, making the income chargeable regardless of where duties are performed.

The eTAX Portal: Your Digital Gateway to Compliance

Overview of eTAX Services for Non-Residents

The IRD’s eTAX portal has undergone significant upgrades in 2024-2025, making it more user-friendly, secure, and comprehensive. For non-resident filers specifically, the eTAX system offers considerable advantages:

• 24/7 Global Access: File returns and manage tax affairs from anywhere in the world
• Automatic Extension: E-filing grants an automatic one-month extension (July 2 instead of June 2 for individual returns)
• Real-Time Tax Calculation: The system automatically computes your tax liability based on information provided
• Secure Transmission: Encrypted communications ensure sensitive tax data remains protected
• Instant Confirmation: Receive immediate acknowledgment of return submission
• Document Upload: Submit supporting documents (PDF/JPG format) electronically
• Payment Integration: Pay taxes online through various payment methods
• Status Tracking: Monitor the progress of your returns and correspondence with IRD

Accessing the Individual Tax Portal

Non-resident directors primarily use the Individual Tax Portal at https://itp.etax.ird.gov.hk for filing their salaries tax returns (Form BIR60). To access the portal, you need:

• Your Tax File Number
• Hong Kong Identity Card number or Passport number
• A valid email address for notifications
• Your unique login credentials (obtained through initial registration)

First-time users must register for an account by providing basic identification information and creating secure login credentials. The IRD may require verification of identity before granting full access to tax services.

Tax Obligations for Non-Resident Directors

Individual Tax Return (BIR60)

The BIR60 is issued to individual taxpayers to report salaries, rental income from solely owned properties, and profits from sole-proprietorship businesses. For non-resident directors, the primary focus is on reporting director’s remuneration.

Key Filing Information:

Employer’s Return Requirements (IR56B)

While directors file their individual tax returns (BIR60), Hong Kong companies employing non-resident directors must also comply with employer reporting obligations through the Employer’s Return (Form BIR56A and IR56 series).

Critical Updates for 2024-2025:

• Electronic Filing Mandatory: From April 1, 2024, the IRD ceased accepting IR56B submissions through storage devices. All records must be submitted through the Employer’s Return e-Filing Services
• Increased Capacity: The IR56 e-filing tool expanded from 800 to 2,000 records per file, with employers able to upload up to 5,000 records in a single submission
• Director Reporting Threshold: Directors must be included on IR56B regardless of the amount paid if they are likely to have other chargeable income. For other employees, reporting is required when total income exceeds HK$132,000 (the basic allowance for 2024/25)
• Filing Deadline: Within one month from the date of BIR56A issuance (typically issued around April 1)

This means Hong Kong companies must report all non-resident directors’ remuneration, including fees, salaries, bonuses, benefits-in-kind, and any other forms of compensation, regardless of where payment is made or received.

Understanding Hong Kong Tax Rates for 2024/25

Salaries Tax Calculation Methods

Hong Kong offers two methods for calculating salaries tax, and the IRD automatically applies whichever method results in lower tax liability:

Method 1: Progressive Rates

Method 2: Standard Rate

Under the two-tiered standard rate system introduced for 2024/25:

• First HK$5,000,000 of net assessable income: 15%
• Net assessable income exceeding HK$5,000,000: 16%

The net chargeable income is calculated as total income minus allowable deductions and personal allowances. The net assessable income is total income minus allowable deductions only (no personal allowances deducted).

Available Allowances and Deductions

Non-resident directors may claim certain allowances and deductions to reduce their tax liability:

Non-residents should note that eligibility for certain allowances may depend on residency status and the nature of family relationships. Consult with a tax professional to determine which allowances you can legitimately claim.

Profits Tax Rates (For Director-Shareholders)

Directors who also receive profits distributions from their Hong Kong companies should be aware of the two-tiered profits tax system:

Notably, Hong Kong does not impose capital gains tax, dividend tax, or withholding tax on interest income, making it an attractive jurisdiction for business operations.

Step-by-Step Guide to eTAX Filing for Non-Resident Directors

Preparing for Your eTAX Submission

Before logging into the eTAX portal, gather the following documents and information:

1. Identity Documents: Hong Kong ID card or passport details
2. Income Records: Details of all director’s fees, salaries, bonuses, and benefits received
3. IR56B Form: Copy of the IR56B issued by your Hong Kong company employer
4. Deduction Evidence: MPF contribution statements, self-education expense receipts, charitable donation receipts
5. Dependent Information: Details of spouse, children, and dependent parents if claiming allowances
6. Bank Account Information: For tax refunds or payment arrangements
7. Prior Year Returns: Previous tax returns for reference

Filing Process Through the Individual Tax Portal

Step 1: Access and Login

• Navigate to https://itp.etax.ird.gov.hk
• Enter your login credentials or register if first-time user
• Verify your identity through two-factor authentication if enabled

Step 2: Select the Appropriate Tax Return

• Choose the BIR60 form for the relevant tax year (e.g., 2024/25)
• Confirm your personal particulars are correct
• Update contact information if necessary

Step 3: Report Your Income

• Enter employment income details in Part 4 of the return
• Report director’s fees separately from salaries if applicable
• Include all benefits-in-kind (housing, car, club memberships, etc.)
• Declare any other Hong Kong-sourced income

Step 4: Claim Allowances and Deductions

• Select applicable personal allowances (basic, married, child, dependent parent)
• Enter deductible expenses (MPF, self-education, approved charitable donations)
• Upload supporting documents in PDF or JPG format

Step 5: Review Automatic Tax Calculation

• The system will automatically compute your tax liability
• Review both progressive rate and standard rate calculations
• Verify the final tax payable amount

Step 6: Submit and Confirm

• Review all information for accuracy
• Make any necessary corrections
• Submit the return electronically
• Save or print the submission acknowledgment receipt
• Note your submission reference number

Step 7: Payment (if tax is payable)

• Wait for the Notice of Assessment from IRD (typically issued 3-6 months after filing)
• Pay by the due date shown on the assessment (usually payable in two installments)
• Use online payment methods: PPS, credit card, bank transfer, or e-cheque

Double Taxation Relief and Tax Planning

Understanding Double Taxation Agreements (DTAs)

As a non-resident director, you may be liable for tax in both your country of residence and Hong Kong on the same income. Hong Kong has comprehensive double taxation agreements (DTAs) with over 40 jurisdictions, which can provide relief through:

• Tax Credits: Offset Hong Kong tax paid against tax liability in your home country
• Exemption Method: Exempt certain income from tax in one jurisdiction
• Reduced Rates: Lower withholding tax rates on certain income types
• Tiebreaker Rules: Clarify tax residency when you qualify as resident in both jurisdictions

To claim DTA benefits, you typically need to obtain a Certificate of Residence from your home country’s tax authority and submit it to the IRD along with relevant claim forms.

Tax Planning Strategies for Non-Resident Directors

Legitimate tax planning can help minimize your overall tax burden while maintaining full compliance:

1. Structure Remuneration Efficiently: Consider the mix of director’s fees, salaries, and dividends based on tax implications in both jurisdictions
2. Timing of Income: Be strategic about when income is paid to optimize allowances and deductions across tax years
3. Maximize Deductions: Ensure you claim all eligible deductions including MPF contributions and qualifying expenses
4. Leverage DTAs: Understand and utilize available treaty benefits to avoid double taxation
5. Document Everything: Maintain comprehensive records to support your tax position and DTA claims
6. Regular Compliance Reviews: Periodically review your tax structure with professionals to ensure ongoing optimization

Compliance Requirements and Record Keeping

Mandatory Record Retention

The IRD requires taxpayers to maintain proper records for a minimum of 7 years. Non-resident directors must retain:

• All tax returns and supporting schedules
• Notices of assessment and demand notes
• Payment receipts and bank statements showing tax payments
• Employment contracts and directorship agreements
• Records of all remuneration received (payslips, bank credits, fee invoices)
• IR56B forms received from employers
• Evidence of deductible expenses (MPF statements, receipts)
• Documentation supporting allowance claims
• Correspondence with the IRD
• Certificates of residence for DTA claims
• Travel records if claiming days in/out of Hong Kong

Failure to maintain adequate records can result in penalties, estimated assessments, and difficulty defending your tax position during audits or reviews.

Penalties for Non-Compliance

The IRD takes non-compliance seriously and imposes various penalties:

The severity of penalties escalates with repeated offenses or intentional non-compliance. The IRD has significant enforcement powers including the ability to conduct audits, issue estimated assessments, and initiate criminal proceedings.

Common Challenges and Solutions

Challenge 1: Determining Source of Income

Issue: Confusion about whether specific income is Hong Kong-sourced

Solution: For directors, the general rule is that director’s fees from a Hong Kong company are Hong Kong-sourced regardless of where services are performed. However, if you also provide executive services (beyond directorship duties), the sourcing may depend on where those services are rendered. Consult a tax advisor to properly allocate income and maintain contemporaneous documentation of where services are performed.

Challenge 2: Accessing eTAX from Abroad

Issue: Technical difficulties accessing the portal, time zone differences for support

Solution: Ensure you have stable internet connection and updated browser. Register for eTAX services well before filing deadlines. Save IRD’s international contact numbers and consider appointing a tax representative in Hong Kong who can assist with filings and communications.

Challenge 3: Understanding Allowable Deductions

Issue: Uncertainty about which expenses are deductible for non-residents

Solution: Review IRD’s departmental interpretation and practice notes (DIPNs). Generally, expenses must be wholly, exclusively, and necessarily incurred in the production of assessable income. Common deductible items include MPF contributions, approved charitable donations, and certain self-education expenses. Travel expenses and accommodation costs are typically not deductible for directors unless they meet very specific criteria.

Challenge 4: Managing Multiple Jurisdictions

Issue: Coordinating tax obligations across different countries with varying deadlines and requirements

Solution: Create a comprehensive tax calendar tracking all filing deadlines, payment dates, and documentation requirements across jurisdictions. Engage tax professionals familiar with international tax issues. Utilize DTAs to minimize double taxation and maintain detailed records that satisfy requirements in all relevant jurisdictions.

Enhanced Disclosure and Recent Regulatory Changes

2024-2025 Updates Affecting Non-Resident Directors

The IRD has implemented several significant changes in recent years that impact non-resident directors:

• Mandatory Electronic Filing for IR56B: Effective April 1, 2024, storage device submissions are no longer accepted. This requires Hong Kong companies to use the online e-filing system for all employee and director reporting
• Expanded Filing Capacity: The increase from 800 to 2,000 records per file and up to 5,000 records per submission makes it easier for companies with multiple non-resident directors to comply
• Enhanced Disclosure Requirements: The level of detail required for certain declarations has increased, particularly regarding the nature of services performed, location of duties, and basis for claiming exemptions or treaty benefits
• Improved eTAX Platform: Late 2024 and 2025 upgrades have made the platform more user-friendly, with better navigation, enhanced security features, and improved mobile compatibility
• Stricter Verification Procedures: The IRD has enhanced identity verification and authentication processes to prevent fraud and ensure data security

Preparing for Future Changes

Tax compliance is an evolving landscape. Non-resident directors should stay informed about:

• OECD Base Erosion and Profit Shifting (BEPS) initiatives affecting international tax arrangements
• Potential changes to Hong Kong’s tax residency rules
• Expansion of Hong Kong’s DTA network
• Updates to Common Reporting Standard (CRS) requirements
• Introduction of new digital services and features in the eTAX portal

Professional Assistance and Resources

When to Seek Professional Help

While the eTAX system is designed to be user-friendly, non-resident directors should consider engaging professional tax advisors in the following situations:

• First-time filing in Hong Kong
• Complex income structures involving multiple entities or jurisdictions
• Significant changes in personal circumstances (relocation, change in directorship arrangements)
• Disputes with the IRD or receipt of queries about your tax position
• Claiming relief under double taxation agreements
• Structuring remuneration packages for tax efficiency
• Managing tax implications of stock options, equity awards, or other complex compensation
• Facing potential penalties or investigating voluntary disclosure options

Official IRD Resources

The IRD provides extensive resources to help taxpayers understand and meet their obligations:

• IRD Website: www.ird.gov.hk – Comprehensive information on all tax types, forms, and guidance
• eTAX Portal: https://itp.etax.ird.gov.hk – Individual tax filing and management
• Taxpayer Hotline: For general enquiries and technical support
• DIPNs (Departmental Interpretation and Practice Notes): Detailed guidance on specific tax issues
• Tax Publications: “A Brief Guide to Taxes” and other taxpayer pamphlets
• FAQ Sections: Answers to common questions about eTAX and tax obligations
• Video Tutorials: Step-by-step guides for using eTAX services

Conclusion

Hong Kong’s eTAX system has transformed tax compliance for non-resident directors, providing a sophisticated yet accessible digital platform that bridges geographical distances and simplifies complex obligations. By understanding your tax residency status, source of income, applicable rates, and filing requirements, you can navigate Hong Kong’s tax landscape with confidence.

The key to successful compliance lies in:

• Understanding your status and obligations as a non-resident director
• Maintaining comprehensive, organized records for at least 7 years
• Leveraging the eTAX portal’s features for efficient, accurate filing
• Staying current with regulatory changes and enhanced disclosure requirements
• Utilizing double taxation agreements to minimize overall tax burden
• Seeking professional guidance when circumstances are complex
• Meeting all deadlines to avoid penalties and surcharges

As Hong Kong continues to enhance its digital tax infrastructure and adapt to international tax developments, non-resident directors who embrace proactive compliance and stay informed will find that meeting their obligations need not be burdensome. The eTAX portal, combined with proper planning and documentation, truly makes compliance simple—regardless of where in the world you call home.

Disclaimer: This article provides general information about Hong Kong tax requirements for non-resident directors and should not be construed as professional tax advice. Tax laws and regulations are subject to change, and individual circumstances vary significantly. Always consult with qualified tax professionals regarding your specific situation before making tax-related decisions.