Located on land extending from the southern coastland into the South China Sea, Hong Kong has long been regarded as a historic gateway to both the Chinese mainland, and continental Asia.

Inhabited by indigenous people since prehistory, and conquered by the Qin dynasty in 214 BC, Hong Kong - which was then a collection of farming and fishing communities - was ceded to Britain after the First Opium War in 1841.

Over the course of the 19th and 20th centuries, the territory became one of the most prosperous and significant commercial trading hubs in the world, and was eventually returned to China in 1997, and became a special administrative region. 

Reflecting its economic success, the city of Hong Kong is highly urbanised, with a high-density population and the highest number of skyscrapers in the world.

The sights and spectacles of Hong Kong attract millions of tourists every year, but beyond the city, the territory is hilly and mountainous, with numerous areas reserved as country parks and nature reserves. Hong Kong’s climate is generally humid and subtropical, with mild winters and hot, dry summers.

General Information

• Full Name: Hong Kong
• Population: 7.49 million (HK Census and Statistics Department, 2023)
• Major Language: Mandarin, English
• Major Religion: Buddhism, Taoism
• Monetary Unit: Hong Kong dollar
• Main Exports: Electrical and electronic goods, clothing
• GNI per Capita: US $54,370 (World Bank, 2022)
• Internet Domain: .hk
• International Dialling Code: +852

How Do I Say in Cantonese?

• Hello: 你好
• Good morning: 早安
• Good evening: 晚上好
• Do you speak English?: 你会讲英语吗？
• Good bye: 再见
• Thank you: 谢谢
• See you later: 再見

Dates

Dates are usually written in the year, month and day sequence. For example: 2015 July 12th.

Investors interested in Hong Kong should consider the following factors:

• Business gateway: Hong Kong acts as an unrivalled business gateway to the markets of China - and its population of over 1.3 billion - and the lucrative wider APAC region, while also offering excellent connections to the rest of the world, including Russia, Europe, the UK and the USA.
• Tax system: Thousands of international organisations choose to set-up in Hong Kong thanks to its easy-to-navigate and business-friendly tax system. The corporate tax rate in Hong Kong is capped at 16.5%, while income tax is charged progressively at a rate of 2%-17% and there is no tax on capital gains.
• Infrastructure: Hong Kong’s infrastructures are amongst the best in the world, offering businesses excellent connection to utilities, communication networks and public transport. Hong Kong’s reputation as a historic trade hub is well-earned: an efficient international port system connects with locations all over the world, while Hong Kong International airport processes over 53.9 million passengers every year.
• Work & lifestyle: As one of the wealthiest and most diverse cities in the world, Hong Kong is a unique and exciting place to live and work. While the city itself is luxurious and modern, with abundant amenities and public transport links, rural and coastal locations nearby represent opportunities to enjoy spectacular natural beauty.
• Skilled employees: Employees in Hong Kong are characteristically dedicated and hard working, with a strong understanding of Asian business culture. Employers draw from a talented labour pool: Hong Kong’s immigration policies are designed to attract skill and talent, and the city is home to four universities ranked among the top 50 in the world.

Hong Kong is one of the world’s most business-friendly cities. Free market policies, the rule of law and free flow of information means a level playing field for all companies. It has a world-class business infrastructure and an easy recruitment of skilled workers. The Government of Hong Kong welcomes inward investment, providing foreign investors with attractive low levels of taxation and political stability. Incentives to invest in certain industries are available from the Economic Analysis and Business Facilitation Unit (EABFU), a department within the Financial Secretary's Office.

In Hong Kong, it is not mandatory to make payments to employees from an in-country bank account. Payment can be made on behalf of the client using bank transfers. Bank transfers within the same bank will usually take place within the same day and the next day for any other bank. International transfers can take between three to seven working days. In the case of payments to the Mandatory Provident Funds (MPF) Trustees for the MPF contributions, this is required to come from a bank account in Hong Kong.

Hong Kong is one of the top countries for the simplicity of setting up a business. To establish an entity, choosing the name of your business in Hong Kong can be nearly as important as deciding on a legal entity. A company name must be searched at the Hong Kong Companies Registry to find out whether the name of your choice has been taken, thus it must be approved.

The next thing to figure out is the kind of legal entity you would like to select for your business in Hong Kong. The following documents are available online at the CR’s e-Registry with the correct fees:

• Incorporation Form (Form NNC1 for limited company by shares)
• A copy of the Company’s Articles of Association
• A Notice to Business Registration Office (IRBR1)

Online applications for company incorporation and business registration can normally be processed within an hour. If you submit your application in hard-copy form, the Certificate of Incorporation and Business Registration Certificate will normally be issued within four working days.

The next step is opening a bank account, which is straightforward; however, you will need the registration and incorporation certificate for this.

Hong Kong has a special Work Permit scheme for hiring skilled foreign employees called ‘Employment for Professionals’.

Eligibility

To be eligible for the ‘Employment for Professionals’ visa the applicant is usually required to have an offer of employment that is relevant to their academic or professional background. The position to be filled must be one that cannot immediately be filled by a local. Technically this is true for in- house transfers as well but in practice the rules are not as strictly applied.

Application Procedure

The employee needs to provide following documentation for the visa application:

1. A completed Employment Visa Application form (ID 990A) – with a recent photograph affixed on page 2
2. A copy of their Passport details page – if currently staying in Hong Kong then a copy of the page containing the most recent arrival/extension in Hong Kong stamp should also be provided.
3. If the applicant has a Hong Kong Identity Card then a copy of this should be provided.
4. A copy of relevant Academic qualifications or Working experience.

The employer needs to provide:

1. Completed Application for Employing Professionals in Hong Kong (ID 990B)
2. A copy of the Employment Contract – this should contain details of the Position, Salary, other Benefits and Employment periods
3. A copy of the Company’s Business Registration Certificate*
4. Evidence of the financial situation of the company – such as their latest audited Financial Report, Trading Profit and Loss Account, or Profit Tax Return)*
5. Documents with details of company background such as Business activities, Mode of Operation, Background/ Connection of company, Product ranges, Sources and Markets, Membership of chamber of commerce (if any), etc. (supported with catalogues, brochures, etc.)*
6. If the company has been set up within the last 12 months then a detailed Business Plan should also be provided. This should contain information on source of Fund, Estimated Capital Injection, Nature/mode of Business Activities, Expected Turnover, Sales volume, Gross and Net Profit in the coming years, and proposed creation of local job posts, etc.*

*Submission of these documents is not required if the employing company has successfully obtained an Employment or Training Visa for a non-local staff in the 18 months preceding the submission of the application.

The documents and applications should be submitted to the Hong Kong Immigration Department. The Visa process usually takes around 4 weeks.

The Work Permit is usually issued for 1 year and renewed thereafter. The application for renewal should be filed at least 4 weeks before the current Visa expires.

Individual Income Tax (Taxes on Employment Income)

 The tax year runs from April 1 to March 31.

 In Hong Kong, there is no income tax withholding at source via payroll throughout the tax year. It is the employee’s responsibility to file his/her annual tax declaration and pay directly to the Inland Revenue Department (IRD), the local tax authority.

Companies need to report remuneration paid to employees by submitting an annual employer’s return (BIR56A and IR56B).

Even though there is no income tax withholding at source, the Inland Revenue Ordinance (IRO) states that any person chargeable to tax and intending to leave Hong Kong shall notify the Inland Revenue Department (IRD) no later than 1 month before the expected date of departure. Upon receipt of the notification, the IRD will decide whether the person leaving is required to settle all tax liabilities prior to departure. The employer of the individual is also required to give notification to the IRD of the impending departure of the employee at least 1 month before the expected departure date. At the same time, the employer must also temporarily withhold payments of salaries and all other moneys to that employee until the IRD issues a “letter of release”.

The Mandatory Provident Fund (MPF) is a compulsory saving scheme (pension fund) designed by the Hong Kong government as a major protection scheme for the aged and retired residents. The system is mandatory for all employees in Hong Kong who have an employment contract of 60 days or more, and applies also to the self-employed between ages 18 and 65. Foreign citizens who work in Hong Kong for periods shorter than 13 months, or who are covered by another country's retirement system may be exempted.

Legislation defines three types of MPF schemes, as follows:

1. Master Trust Schemes - membership is open to the employees of different participating employers, self-employed persons, and persons with accrued benefits to be transferred from other schemes. This type of scheme is especially suitable for small and medium-sized enterprises.
2. Employer-sponsored Schemes - membership is limited to the employees of a single employer and its associated companies, this is only practical for large corporations.
3. Industry Schemes - established for employees of industries where the degree of labour mobility is high, for example, catering and construction (i.e. workers employed on a day-to-day basis or for a fixed period of less than 60 days).

Under the scheme, the choice of MPF provider is the responsibility of the employer and employees are expected to join the MPF provider of their new employers when they change job. An employee's MPF assets are fully vested and are portable when the employee changes employers. Benefits that have accrued under the scheme of a former employer can be transferred to a scheme operated by the new employer. There are strict guidelines on the types of assets in the investment funds. However, MPF providers may offer more than one investment option constituted along the guidelines to its members through different funds, thus employees may build their own investment portfolio out of the funds provided by the provider chosen by their employers. Employees may elect on the asset allocation among different funds available from their providers, but may only do so for their part of the retirement contribution.

According to the Mandatory Provident Fund (MPF) Ordinance, the employee will join the employer's MPF Scheme automatically after completing 60 working days. Employers and employees are each required to make regular mandatory contributions of 5% of the employee’s relevant income to an MPF scheme, subject to the minimum and maximum relevant income levels. For a monthly-paid employee, the current minimum and maximum relevant income levels are $7,100 and $30,000 respectively. The table below shows the amount of mandatory contributions:

"Relevant income" refers to all monetary payments paid or payable by an employer to an employee, including wages, salary, leave pay, fees, commissions, bonuses, gratuities, perquisites or allowances, but excluding severance payments or long service payments under the Employment Ordinance (Chapter 57, Laws of Hong Kong).

Both employees and employers are free to make voluntary contributions in addition to mandatory contributions.

The mandatory contributions for a contribution period should be remitted to the MPF trustee on or before the contribution day. Generally, for monthly-paid employees, the contribution day is the 10^th day of each month. For example, the contributions for the contribution period of September should be paid on or before 10 October.

Note: If the contribution day falls on a Saturday, a public holiday, a gale-warning day or a black rainstorm-warning day, the contribution day is extended to the next following day, which is not a Saturday, a public holiday, a gale warning day or a black rainstorm warning day.

For more information, please click here.

Monthly

On a monthly basis, the Remittance Statement should be completed and submitted either electronically or manually on or before the 10^th of each month. The monthly MPF contribution payment to the approved trustee (e.g. HSBC Provident Fund, Manulife Provident Fund) of a registered scheme should also be made on or before the 10^th of each month either through direct debit or through cheque payment.

Yearly

The forms BIR56A and IR56B should be completed on a yearly basis at the end of the tax year. These forms are submitted by the employer (annual returns) reporting remuneration and pensions to the employees. The Inland Revenue Department (IRD) will send the BIR56A by mail to the employer and should be returned along with the IR56B within one month after the BIR56A has been received. It is usually sent to the company on 1^st April every year.

Form IR56B can be submitted in the following manner:

1. Manually, in paper form or in computerised format (diskette). The signed BIR56A should be submitted along with the IR56Bs.
2. Electronically through the tax portal. This will require the authorised approver to have an eTax account. With eTax account, the BIR56A can also be completed through the portal and physical signature is no longer required.

Notification by an employer of a new employee should be done through IR56E form. This needs to be completed and returned to the Inland Revenue Department (IRD) within three months of commencing the employment.

The final payment of a leaving employee should be made within seven days of the termination.

The employer should notify the authorities of any employee who is about to cease to be employed by either completing an IR56F or IR56G form. The form to be filled in depends on whether the employee plans to leave or continue to stay in HK, and must be submitted to the IRD one month before the employee’s leaving date. The IR56F is completed for leavers who will remain in Hong Kong, while IR56G is completed for leavers who will permanently leave Hong Kong after separation from a company. This will send notification to the IRD about the termination and further actions required to recover any Income Tax owed before the employee’s departure.

An employer who has filed an IR56G is further obligated to withhold all further payments to the employee from the date of the filing of the IR56G. A copy of IR56G should be provided to the departing employee who should in turn approach the IRD to ensure Tax clearance is made. Once the employee has settled any Tax liabilities, he or she will receive a “Letter of Release”. Only upon sight of this letter can an employer make final payment to this departing individual.

Reports

Payroll reports must be kept for at least seven years.

Payslip

It is legally acceptable in Hong Kong to provide employees with payslips in either hard copy or online.

Holiday accrual and calculations

All employees are entitled to the Statutory Holidays. If the Statutory Holiday falls on any rest day, a holiday should be granted on the day following the rest day, which is not a Statutory Holiday.

An employee having been employed under a continuous contract for not less than three months is entitled to the Holiday Pay, which is equivalent to the daily average wages earned by the employee in the 12-month period preceding the holiday.

An employee is entitled to 7 days' annual leave with pay after serving every period of 12 months under a continuous contract. An employee's entitlement to paid annual leave will increase progressively to a maximum of 14 days according to his length of service as follows: 

Maternity Leave

 An employee is eligible for 14* weeks of paid Maternity Leave if -

1. She has been employed under a continuous contract for NOT less than 40 weeks immediately before the commencement of scheduled Maternity Leave;

2. She has given notice of Pregnancy and her intention to take Maternity Leave to her employer after the pregnancy has been confirmed, such as by presenting a Medical Certificate confirming her pregnancy to the employer; and

3. She has produced a Medical Certificate specifying the expected date of Confinement if so required by her employer

In case the length of employment service under a continuous contract is less than 40 weeks immediately before the commencement of scheduled maternity leave, the employee is eligible for 14* weeks' maternity leave WITHOUT PAY if the employee has given notice of pregnancy and her intention to take maternity leave to her employer after the pregnancy has been confirmed.

* Eligible employees whose confinement occurs before 11 December 2020 are entitled to a continuous period of 10 weeks’ maternity leave.

With the agreement of her employer, a pregnant employee may decide to commence her Maternity Leave from two to four weeks before the Expected date of Confinement.

If the employee does not decide on the date, or fails to secure her employer's agreement, the employee shall commence her maternity leave 4 weeks before the expected date of confinement.

Maternity leave commences on the date of confinement if it occurs before the scheduled maternity leave.

The daily rate of maternity leave pay is calculated at four-fifths (4/5) of the average daily wages earned by an employee in the past 12 months preceding the first day of maternity leave (or a shorter period If employed for less than 12 months).

In calculating the average daily wages, an employer has to exclude:

1. The periods for which an employee is not paid her wages or full wages, including rest day, statutory holiday, annual leave, sickness day, maternity leave, sick leave due to work injuries or leave taken with the agreement of the employer, and any normal working day on which the employee is not provided by the employer with work;
2. The sum paid to the employee for such periods.

 Maternity Leave pay should be paid on the normal pay day of the employee.

Paternity Leave

 According to the Ordinance, male employees with a child born on or after 18 January 2019 are entitled to 5 days’ paternity leave for each confinement of their spouse/partner if they fulfil other requirements as stipulated in law. The employees have to give their employer prior notification as required by law before taking the leave.

 A male employee is entitled to 5 days of paid paternity leave for each confinement if he:

1. has been employed under a continuous contract for NO less than 40 weeks immediately before the day of paid paternity leave; and
2. has provided the required document to the employer within the following period (whichever period expires first):
   1. 12 months after the first day of paternity leave taken; or
   2. if he ceases to be employed, within 6 months after cessation of employment.

The daily rate of paternity leave pay is a sum equivalent to four-fifths of the average daily wages earned by an employee in the 12-month period preceding the day of paternity leave. If an employee takes more than one day of paternity leave consecutively, the daily rate of paternity leave pay is a sum equivalent to four-fifths of the average daily wages earned by the employee in the 12-month period preceding the first day of paternity leave. If an employee is employed for less than 12 months, the calculation shall be based on the shorter period.

Sickness

 Any employee employed under a continuous contract is entitled to sickness allowance if:

1. The sick leave taken is not less than four consecutive days (unless for any day off taken by a female employee for her pregnancy check-ups, post confinement medical treatment or miscarriage, any such day on which she is absent shall be counted as a sickness day and, subject to the following conditions, be paid sickness allowance);
2. The Sick Leave is supported by an appropriate Medical Certificate*; and
3. The employee has accumulated sufficient number of Paid Sickness days

Paid sickness days are divided into two categories - Paid sickness days can first be accumulated up to 36 days in Category 1 and then 84 days in Category 2.

For taking paid sickness day(s) under Category 1, a Medical Certificate* issued by a registered medical practitioner, registered Chinese medicine practitioner or a registered dentist is required. When the sickness days taken exceed the number of paid sickness days remaining in Category 1, any further sickness day(s) taken will enter in Category 2.

For taking paid sickness day(s) under Category 2, if so required by the employer, a Medical Certificate* issued by a registered medical practitioner, registered Chinese medicine practitioner or a registered dentist attending the employee as an out-patient or in-patient in a hospital, should be produced. Upon the employer’s request, a brief record of the investigation will be carried out and the treatment prescribed by the issuer of the Medical Certificate should be produced.

* The Medical Certificate should specify the number of days, the nature of the sickness or injury on account of which the employee is unfit for work.

The daily rate of sickness allowance is the sum equivalent to 80% of the average daily wage earned by an employee in the 12-month period preceding the sickness day or the first sickness day (if more than one consecutive sickness day). If an employee is employed for less than 12 months, the calculation shall be based on the shorter period.

Entitlement to sickness leave may be accumulated at the rate of two paid sickness days for each completed month of employment during the first 12 months of employment and at the rate of four paid sickness days for each month thereafter, up to a maximum of 120 paid sickness days. The entitlement to sickness pay only applies to periods of absence due to sickness of not less than four consecutive days.

In calculating the Average Daily Wages, an employer has to exclude:

1. The periods for which an employee is not paid his wages or full wages, including rest day, statutory holiday, annual leave, sickness day, maternity leave, sick leave due to work injuries or leave taken with the agreement of the employer
2. The sum paid to the employee for such periods.

Sickness allowance should be paid to the employee not later than the normal payday.

National service

There are no national service obligations in Hong Kong.

The working week in Hong Kong is Monday to Friday from 9:00am to 6:00pm. There are no statutory provisions which prescribe maximum working hours. The Employment Ordinance (EO) does however provide that in addition to paid statutory (public) holidays, an employee is entitled to no less than one rest day in every period of seven days.

Bonus

Many employers in Hong Kong pay an automatic Annual Bonus of 1 month’s salary at Chinese New Year, although the trend is to replace a Performance Related Bonus.

Expenses

The employer is obliged to maintain records of employee’s Remuneration and Fringe Benefits.

1. All direct company expense reimbursements are Tax deductible.
2. Car mileage is taxable and needs to be accompanied by the original receipts.
3. Company cars are considered company expenses.

According to the law, the part paid by the company may be exempted from social security contributions, but only if the distribution is strictly justified (no double payment with reimbursement of expense report, etc.).

Occupational Retirement Schemes Ordinance

The Occupational Retirement Schemes Ordinance (“ORSO”) came into force on 15 October 1993. It is the governing legislation for the regulation of voluntary occupational retirement schemes operating in or from Hong Kong.

The ORSO aims to regulate the retirement schemes industry through a registration system to ensure that all voluntarily established ORSO schemes are properly administered and funded, and to provide certainty that retirement scheme benefits promised to employees will be paid when they fall due.

The ORSO applies to all ORSO schemes operated in and from Hong Kong. It also covers offshore schemes which provide retirement benefits to members employed in Hong Kong. All ORSO schemes must be registered or granted an exemption certificate by the Registrar in accordance with ORSO.

The rules of individual ORSO schemes such as coverage, enrolment arrangements, contribution rate and vesting scale are specified in the respective governing rules of the schemes.

Please note that this document gives general guidance only and should not be regarded as an authoritative or complete statement of the law, regulations or tax position in any country. You should always seek specific advice for each specific situation. This document should not be relied upon as professional advice and activpayroll accepts no liability for reliance on its contents.

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