Hong Kong Salaries Tax: Rates, Allowances and Filing

At a glance

Rates, allowances and the tax reduction follow the IRD’s latest published figures for the relevant year of assessment.

Who pays salaries tax?

Three kinds of income are chargeable: income from employment (salary, commission, bonus, allowances, the rental value of employer-provided accommodation), directors’ fees, and pensions. Under the territorial source principle, only income arising in or derived from Hong Kong is taxed.

Two common misconceptions:

“I’m the owner, so salaries tax doesn’t apply to me.” Wrong. Salary you draw from your own limited company is your employment income and is chargeable to salaries tax — while the company deducts it as an expense. One side pays, the other deducts: making that arrangement efficient is really a question of how the company’s accounts and your personal return line up, and worth an article of its own.

“The company made a profit, so I owe salaries tax.” No. Company profits are charged to profits tax (see the profits tax guide); until you actually pay yourself a salary, salaries tax is not in the picture.

How the tax is calculated: three terms first

Total income
 − Deductions (mandatory MPF contributions, approved charitable
   donations, VHIS premiums, ...)
 = Net income                     ← the standard rate uses this figure
 − Allowances (basic / married person's / child / dependent parent ...)
 = Net chargeable income          ← the progressive rates use this figure

Progressive rates (applied to net chargeable income, 2025/26):

Standard rate (applied to net income, no allowances): 15% on the first HK$5,000,000 and 16% on the balance.

The IRD computes both and automatically charges the lower figure — you do not have to choose. For ordinary employees the progressive computation is almost always far lower; only very high earners (roughly HK$5,000,000 and above) fall into the standard rate.

Common allowances (year of assessment 2025/26)

An additional allowance applies where a dependent parent lives with you, and further items exist for single parents and disabled dependants — the full table is as published by the IRD. Allowances apply only under the progressive computation; there are none under the standard rate.

Worked example: a HK$30,000 monthly salary

Mr Chan earns HK$30,000 a month, single, with no other allowances:

Annual income                       HK$360,000
− Mandatory MPF contributions        HK$18,000  (5%, annual cap HK$18,000)
= Net income                        HK$342,000
− Basic allowance                   HK$132,000
= Net chargeable income             HK$210,000

Progressive rates:
  First HK$50,000 × 2%   =  HK$1,000
  Next  HK$50,000 × 6%   =  HK$3,000
  Next  HK$50,000 × 10%  =  HK$5,000
  Next  HK$50,000 × 14%  =  HK$7,000
  Final HK$10,000 × 17%  =  HK$1,700
  Total                     HK$17,700

Standard rate check: HK$342,000 × 15% = HK$51,300 → lower figure HK$17,700 applies
− 2025/26 tax reduction (100%, capped at HK$3,000)
= Tax payable HK$14,700

So a HK$30,000 salary produces a bill of roughly HK$14,700 for the year — which is why claiming every deduction and allowance matters. Miss a single dependent parent allowance and the number moves by thousands.

When do you file, and when do you pay?

• The return (BIR60) is normally issued in early May; a paper return is due within 1 month, and filing online via eTAX generally adds an automatic one-month extension. Not receiving a return does not let you off — anyone with chargeable income has a duty to notify the IRD.
• Payment usually falls in January and April of the following year, in two instalments. The first bill also collects provisional tax for the next year on the same demand note, so it lands larger than most people expect — plan the cash flow.

What owners and employers must watch separately

From the company’s side you carry an employer’s reporting obligation, which is a separate matter from your personal return:

• File BIR56A + IR56B (the employer’s remuneration return) each April for every employee — including a director drawing a salary from his own company
• New hires, departures and employees leaving Hong Kong each have their own prescribed forms and deadlines
• MPF arrangements for staff must be compliant (see the MPF employer guide)

The employer’s filings and the employee’s own return must reconcile — a mismatch is an easy way to draw an IRD enquiry.

How we can help

AIcountant provides one-stop support for Hong Kong SME owners — profits tax filing, employer’s remuneration returns (BIR56A / IR56B), accounts and audit arrangements, plus the tax efficiency of how you pay yourself, all handled in one place. Not sure where you stand? Talk to us.

This article is general information and does not constitute tax advice. Rates, allowances, deductions and the tax reduction are governed by the Inland Revenue Ordinance and the IRD’s latest published figures for the relevant year of assessment.