Are you an expatriate navigating Hong Kong’s tax landscape? With its territorial tax system and favorable rates, Hong Kong offers significant advantages for international professionals. However, understanding the nuances of the 60-day rule, time apportionment calculations, and recent changes to the standard rate system is crucial for optimizing your tax position. This comprehensive guide breaks down everything expatriates need to know about Hong Kong’s salaries tax for the 2024/25 assessment year.

Hong Kong’s Salaries Tax System: Territorial and Competitive

Hong Kong operates on a territorial tax principle, meaning only income sourced in Hong Kong is taxable. This system applies equally to residents and non-residents, making it particularly advantageous for expatriates with regional roles. For the 2024/25 year of assessment (April 1, 2024 to March 31, 2025), the Inland Revenue Department (IRD) maintains Hong Kong’s reputation as one of the world’s most tax-competitive jurisdictions while introducing refinements that affect high-income earners.

2024/25 Tax Rates: Progressive vs. Standard Rate

Hong Kong offers two calculation methods, with taxpayers automatically paying the lower amount. The IRD calculates both and applies the more favorable result.

Progressive Tax Rates

Progressive rates apply to net chargeable income (after deducting allowances and approved expenses):

Two-Tiered Standard Rate System

Starting from 2024/25, Hong Kong introduced a two-tiered standard rate system for high-income earners:

• First HK$5,000,000 of net income (before allowances): Taxed at 15%
• Amount exceeding HK$5,000,000: Taxed at 16%

Personal Allowances and Deductions

Basic Personal Allowances (2024/25)

• Basic Personal Allowance: HK$132,000
• Married Person’s Allowance: HK$264,000
• Child Allowance (each): HK$130,000
• Child Allowance (year of birth additional): HK$130,000
• Dependent Parent/Grandparent (60+): HK$50,000
• Single Parent Allowance: HK$132,000

Key Deductions for Expatriates

The 60-Day Rule: Short-Term Expatriate Exemption

The 60-day rule is one of Hong Kong’s most valuable tax provisions for expatriates. It provides full exemption from salaries tax for individuals working in Hong Kong for 60 days or less during a tax year.

How the 60-Day Rule Works

1. Counting Days: The IRD counts “days of presence” in Hong Kong. A day counts even if you’re present for only part of it.
2. Arrival/Departure: The day of arrival and day of departure count as two separate days.
3. Full Exemption: If total days ≤60, all employment income for that year may be exempt from Hong Kong salaries tax.

Practical Example: 60-Day Rule Application

An expatriate makes three business trips to Hong Kong:

• Trip 1: Arrive May 1, depart May 10 (10 days)
• Trip 2: Arrive August 15, depart August 25 (11 days)
• Trip 3: Arrive November 5, depart December 20 (46 days)

Total days: 10 + 11 + 46 = 67 days. Since this exceeds 60 days, the 60-day rule doesn’t apply. The expatriate would need to use time apportionment instead.

Time Apportionment for Non-Hong Kong Employment

For expatriates under non-Hong Kong employment who exceed 60 days in Hong Kong, only income attributable to Hong Kong services is taxable. This requires meeting three conditions:

1. Contract Location: Employment contract negotiated and entered into outside Hong Kong
2. Employer Residence: Employer is resident outside Hong Kong
3. Payment Location: Remuneration is paid outside Hong Kong

Time Apportionment Calculation

The formula for calculating assessable income is:

Real-World Example

Consider an expatriate with:

• Annual income: HK$1,200,000
• Days in Hong Kong: 120 days
• Total tax year days: 365 days

Calculation: HK$1,200,000 × (120 ÷ 365) = HK$394,521 assessable income

Only HK$394,521 would be subject to Hong Kong salaries tax. The remaining HK$805,479 (attributable to services rendered outside Hong Kong) would be exempt.

Hong Kong Employment vs. Non-Hong Kong Employment

Hong Kong Employment Rules

For Hong Kong employment (contract negotiated/enforceable in Hong Kong, Hong Kong-resident employer, or payment in Hong Kong), all employment income is taxable regardless of where services are rendered. However, exemption may be claimed for income attributable to services rendered outside Hong Kong if:

• Services rendered outside Hong Kong exceed 60 days in the tax year
• Foreign tax of substantially the same nature was paid on that income

Filing Requirements and Deadlines

Expatriates must file tax returns annually and claim exemptions on a year-by-year basis:

• Tax Returns Issued: Early May annually
• Standard Deadline: Approximately 1 month from issue (typically early June)
• Extended Deadline: Available through tax representatives
• Record Retention: 7 years required for supporting documents

Practical Considerations for Expatriates

Essential Documentation

Maintain detailed records to support exemption or time apportionment claims:

• Travel itineraries, boarding passes, and passport stamps
• Work calendars documenting service locations daily
• Employment contracts and amendments
• Payroll records showing payment locations
• Evidence of foreign tax payments (for foreign tax credits)

Double Taxation Agreements (DTAs)

Hong Kong has Comprehensive Double Taxation Agreements with 45+ jurisdictions. These agreements can provide relief from being taxed on the same income in both Hong Kong and your home country. Key DTA partners include Mainland China, Singapore, the UK, Japan, and many European countries.