Redundancy & Severance Tax Specialist

Hong Kong Tax on Severance & Termination Payments

Redundancy, retrenchment, and termination payments in HK have complex tax treatment. Some payments are fully exempt; others are partially or fully taxable. Getting this wrong can cost you tens of thousands — our CPAs ensure every dollar of legitimate exemption is claimed.

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0% Tax on statutory severance pay
HKD 390,000 Statutory severance pay cap 2025
1,800+ Termination cases handled

Redundancy & Severance Tax Specialist

Redundancy, retrenchment, and termination payments in HK have complex tax treatment. Some payments are fully exempt; others are partially or fully taxable. Getting this wrong can cost you tens of thousands — our CPAs ensure every dollar of legitimate exemption is claimed.

⚠️

⚠ Ex-Gratia Payments Above Statutory Amounts ARE Taxable

The statutory severance payment under the Employment Ordinance is not assessable to salaries tax. However, any ex-gratia payment above the statutory amount — including "golden handshake" payments, retention bonuses, and notice-in-lieu — may be fully or partially taxable depending on how they are structured and characterised.

よくあるお悩み

以下の税務問題でお困りではありませんか？

Taxable vs Non-Taxable Components

Severance packages often mix statutory (non-taxable) and contractual (potentially taxable) elements. Incorrect classification leads to either over-reporting or IRD assessment.

⚠ Risk: Declaring too much → overpaying tax on exempt amounts

MPF Offset Interaction

Employer MPF contributions offset against severance pay affect the net statutory amount — and therefore the tax-exempt figure. The calculation is complex and error-prone.

⚠ Risk: Incorrect MPF offset calculation → wrong tax-free amount

Notice Pay & Garden Leave

Payment in lieu of notice is treated differently from garden leave salary continuation for tax purposes. The characterisation affects the assessment year in which income is taxed.

⚠ Risk: Wrong year assessment → interest on underpaid provisional tax

Termination While Partly Offshore

If you worked partly outside HK during your employment, your final termination payment may be apportionable — reducing the HK-taxable amount.

⚠ Risk: No apportionment claim → overpaying tax on offshore portion
対象者

対象となるお客様

Employees being made redundant

Workers receiving statutory severance payments plus employer top-ups wanting to understand their tax position.

Executives receiving golden handshake packages

Senior staff with substantial ex-gratia or negotiated departure payments.

Staff on long-service payments

Employees with 5+ years of service receiving long service payments under the Employment Ordinance.

Expats being repatriated

Foreign nationals whose employment in HK is terminating, often with complex multi-component packages.

Employees in business restructurings

Staff affected by mergers, acquisitions, or divisional closures receiving termination packages.

サービス内容

サービス内容

Termination Package Tax Analysis

We dissect your full termination package and determine the tax treatment of each component.

Statutory vs contractual vs ex-gratia vs benefits

MPF Offset Calculation

We calculate the correct MPF offset against your statutory severance/LSP and its impact on taxable amounts.

Based on actual MPF accrued benefits attributed to the employer

Employment Period Apportionment

For employees with offshore work history, we calculate the non-HK portion of terminal payments.

Using day-count apportionment across full employment period

Final Year Tax Return

We file your BIR60 for the final employment year, ensuring correct reporting of all termination payments.

Including timing of assessment year allocation

Tax Clearance Before Departure

For departing expats, we obtain tax clearance from the IRD before your departure from HK.

Employer IR56G/IR56F obligations also managed
ご利用の流れ

シンプル・効率的・プロフェッショナル

1

Package Review & Classification

We review your termination letter and payment schedule, classifying each component for tax.

1 day
2

MPF & Apportionment Calculation

We perform the MPF offset calculation and any offshore apportionment based on employment records.

2 days
3

Taxable vs Exempt Severance Memo

We provide a written memo confirming the taxable and non-taxable amounts with supporting rationale.

2–3 days
4

Final Return Filing & Clearance

We file your final BIR60 and obtain tax clearance if you are leaving HK.

1–2 weeks
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Case Study

Mid-level manager made redundant after 8 years

HKD 56,000 節約額
  • Statutory severance HKD 312,000 (tax-free)
  • Ex-gratia top-up HKD 200,000
  • MPF offset correctly calculated at HKD 68,000
  • Taxable amount reduced from full package to HKD 200,000 only
"My employer's HR told me the whole package was taxable. TAX.hk correctly excluded the statutory portion."
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Case Study

Regional Director — HK + Asia Pacific role

HKD 214,000 節約額
  • Total package HKD 1,800,000
  • 45% HK service / 55% Asia Pacific over 12-year career
  • HK-taxable portion reduced to 45% of ex-gratia
  • Tax clearance obtained for departure within 4 weeks
"The employment period apportionment cut my taxable amount almost in half. Worth every cent of the advisory fee."
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当社の公認会計士は15年以上の香港税務経験を有し、税務局の最新情報を常に把握しています。

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よくある質問

よくある質問

ご質問への迅速な回答

No. Statutory severance payments made under s.31 of the Employment Ordinance are specifically excluded from the definition of "income from employment" under s.9(2A) of the IRO. The statutory amount (2/3 of monthly wages × years of service, capped at HKD 390,000) is tax-free.

Generally yes. Any ex-gratia payment above the statutory severance or long service payment is potentially assessable to salaries tax. However, if the excess payment is characterised as compensation for termination (rather than deferred salary), there may be arguments that part of it is not income from employment. We review the specific documentation.

Yes. Payment in lieu of notice (PILON) is generally treated as assessable income from employment in the assessment year it is received. Unlike a statutory severance payment, PILON does not attract any specific exemption under the IRO.

Under the MPF Schemes Ordinance, employer mandatory contributions accrued in the employee's MPF account can be offset against statutory severance or long service payment. The offset amount reduces the net statutory payment, which in turn reduces the non-taxable exempt amount. Getting this calculation right is important.

Potentially yes. Where a terminal payment relates to an employment spanning both HK and overseas service, the IRD may accept an apportionment based on the proportion of HK service to total service. This can significantly reduce the HK-assessable amount of ex-gratia payments.

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