Optimise Your Director's Remuneration in HK

Yes, provided it is a genuine salary for services rendered, at arm's length, and not a disguised dividend or excessive payment. IRD may challenge director salaries that are disproportionate to services rendered, particularly in owner-managed companies where the director also receives dividends.

No. Hong Kong does not impose withholding tax on dividends paid to any shareholder — individual or corporate, resident or non-resident. This makes dividend extraction very tax-efficient compared to other jurisdictions.

Personal assessment allows a HK resident individual to combine all sources of income (salaries, profits from sole proprietorship, rental) and be assessed under a single tax computation, applying personal allowances and deductions. It's beneficial when deductions (e.g., mortgage interest, personal allowances) exceed what is available under individual source taxes.

IRD examines director's loan accounts closely. If the company charges no interest or interest below a commercial rate, IRD may argue the interest waiver is a benefit from employment. If drawings are excessive relative to equity, they may be assessed as disguised salary. Document all loans with board resolutions and charge at least the HIBOR rate.

Only if the spouse genuinely works for the company and is paid for real services at an arm's length rate. IRD scrutinises spouse salaries in owner-managed companies. A properly documented employment contract, timesheet records, and payment history are essential.

At least annually — before your company's year-end — so you can adjust salary and dividend mix based on actual year-to-date profits. Major life events (buying property, having children, planning exit) also trigger a review. The optimal mix shifts as profits and personal circumstances change.