Hong Kong Personal Tax for Company Directors

Partially. Dividends paid by a HK company to individual shareholders are not subject to any further HK tax at the individual level — there is no dividend withholding tax in HK. However, to fund those dividends, the company must have after-tax profits. The company will have already paid profits tax at 8.25% (first HKD 2M) or 16.5% (above HKD 2M). The combined effective tax on salary vs dividend depends on your personal salaries tax rate vs the company's profits tax rate.

All directors' fees from employment directorships are assessed together as salaries tax income in your BIR60. Each company files an IR56B reporting their fees. The IRD consolidates all fees and applies progressive rates to the combined total. If any directorships are non-executive and the fees relate to services performed outside HK, a source-of-income analysis may reduce the assessable amount.

The annual benefit value of a company car under the IRO is HKD 30,000 or the actual depreciation plus running costs (if you can demonstrate lower), whichever is higher. Where a car is provided with a driver, the driver's costs are also assessable. Fuel costs for private use are a separate assessable benefit. We advise directors on whether keeping a car in the company name is tax-efficient.

Paying a genuine salary to a spouse who performs real work as a director can be tax-efficient — it shifts income to a potentially lower-bracket taxpayer and creates a deductible cost for the company. However, the IRD may challenge arrangements where the salary does not reflect market rates for the services rendered. We advise on appropriate salary levels and ensuring proper employment documentation.

Directors' fees are sourced to where the directorial services are performed. If you attend board meetings physically in HK, fees attributable to those meeting days may be HK-sourced and assessable. For two meetings of 2 days each (4 days out of 365), only 4/365 of your annual fee would typically be assessable. The amount is usually small but should be correctly reported.