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Hong Kong income and tax

First time I've ever posted a question on here, so please be gentle with me!

I have just taken on a tax return client who lives in the UK, has a UK pension but works as long haul cabin crew for a Hong Kong company. The Hong Kong company pays my client gross without any deduction of tax whatsoever. I am told by the client that his colleagues who are in a similar situation tell him that it can take up to two years for the Hong Kong tax authorities to ask for the tax. In the meantime how do I complete the client's UK tax return? I'm assuming there must be a double taxation treaty between the UK and Hong Kong (haven't checked that yet) but if we don't yet know what the HK tax will be what do we put on the tax return? Will an estimate be sufficient and if so what happens if the estimate turns out to be too high or too low? Do we go back and file an amended return in a couple of years time when the actual HK tax is known?
Paul Sherrington

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By simon68
24th Aug 2007 16:32

Hong Kong Salaries Tax
The Hong Kong employer does has obligation to fill out a employers’ return form to inform Hong Kong Inland Revenue about this new employee within 30 days on the commencement of work.

There is no PAYE in Hong Kong. Hong Kong Salaries Tax is charged on the assessable income earned by an employee or an office holder in a year of assessment that runs from 1 April to 31 March. A final assessment will not normally be made before the end of the year of assessment (save the taxpayer is about to leave Hong Kong). Instead, a provisional assessment is made on the basis of the last final assessment. The tax demanded by the provisional assessment is to be paid by two instalments: 75% in January to March within the year of assessment and 25% in the coming April to June. In other words, tax is payable on the earned “provisional income”.

Normally, in the year of assessment with a commencement of employment, the first tax payable will be a final assessment without a deduction for provisional tax plus a provisional tax for the following year of assessment.

I believe there is a 180 days test or something similar for income assessment in UK and I think the double tax treatment will apply in situation where overlap occurs.

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24th Aug 2007 16:48

Thanks for that/supplementary question
Thank you Simon for that, it was very useful. Perhaps you can also confirm, my client tells me that there is a flat rate of tax in HK of 17% - is this correct (before I start incurring outside consultant fees)?
Paul

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By simon68
24th Aug 2007 17:41

HK Salary Tax
Year of Assessment
2006/2007

First $30,000 at 2%
Next $30,000 at 7%
Next $30,000 at 13%
On the remainder 19%

16% is the maximum tax rate applicable to all salary tax computation. If your salary tax calculation as per table above has exceeded 16% then you are only required to pay tax upto 16%.

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04th Sep 2007 21:12

Thanks again
Simon, thank you very much for that, and my apologies for taking so long to respond to your post, I have been away for a week and only just now logged on to AWeb.

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