Raymond Yeung Tax Consultant * former IRD Assessor

飛鴻稅務顧問 * 前稅務局評稅主任楊輝洪

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Salaries Tax - Chargeable income 

Section 8(1) of the Inland Revenue Ordinance imposes the basic charge : to tax all the income from  employment or pension which are arising in or derived from Hong Kong.

In deciding the charge concerning employment, it is necessary to establish the place where the employment (that is the source of the income) is located.

The general rule  of how to  determine the  source  is  laid down in the court case CIR v. George Andrew Goefert:  the chief factors to be considered are: (1) whether the employment contract was made in Hong Kong (2) whether the employer has  a residence in Hong Kong,  and (3) whether the employee's remuneration was paid in Hong Kong.

Click here for my summary of CIR v George Andrew Goefert

If the employment is established as a Hong Kong employment, the whole income from the employment,  even though part  of it is   for services outside Hong Kong,  is taxable.

In addition to the basic charge, an extension of charge is imposed by Section 8(1A) of Inland Revenue Ordinance to assess all the income in respect of the services rendered in Hong Kong. This  charge,  frequently called "time-apportionment," is used for taxing non-Hong Kong employments. The time-apportionment is usually done by multiplying the total income from the employment by a fraction:  number of days in Hong Kong / number of days of employment period in the year of assessment

The "number of days in Hong Kong"  includes "the leave periods outside Hong Kong attributable to Hong Kong services." Normally, all the days in Hong Kong, irrespective of whether they are related to services or not, are counted. But in special cases, for example an employee resides in Hong Kong and he frequently leaves Hong Kong to work at a Shengzhen factory at 9:00 a.m. and then return to Hong Kong on the same day at 7:00 p.m. => in such circumstances, his stay in Hong Kong on that day was purely for residential purpose => he can claim to have that day in Hong Kong to be completely excluded from the  "number of days in Hong Kong" for the time apportionment. But in general, part of a day in Hong Kong (e.g. the day of arrival in or the day of departure from Hong Kong) is counted as half day (that is 0.5). Press here for an illustration showing how to do time apportionment of income for foreign employments.

For an employment covering the whole year of assessment, the "number of days in employment period in the year of assessment" is normally 365.      

Caution: If IRD suspects that the three factors of Goefert case are artificial measures to avoid tax, then it will look behind the three factors to find out the true source of employment. An example of a suspicious case is that the overseas employer has a permanent establishment in Hong Kong and the taxpayer has been working with this permanent establishment for several years and the taxpayer still claims the source of employment outside Hong Kong.  To find out the true source of employment --- whether the taxpayer is employed by the overseas employer or the local establishment, the IRD may ask the Immigration Department to supply all the documents (particularly the company's declaration and all employment agreements) in relation to the taxpayer's application for working visa in Hong Kong.   

Click here to read IRD's query: Where a taxpayer claims time-apportionment on the ground of foreign employment

However, if an employee (other than a government servant), irrespective of whether he is under a Hong Kong employment or not, performs all his services outside Hong Kong, he will be exempt from Salaries Tax. Press here for more.

Furthermore, if a person visits Hong Kong for not more than 60 days during the year of assessment, he will be exempt from Salaries Tax. In counting the days of visit, all days in Hong Kong are counted, irrespective of whether they are in relation to services or not and part of a day is counted as one whole day --- see CIR v So Chak-kwong Jack 2 HKTC 174. Click here for more about the 60-day visit rule.


From case law, the location of a director office depends on the management and control of the company. In practice, the director office of a company incorporated in Hong Kong is treated as locating in Hong Kong unless the contrary is proved. Read Board of Review Case D123/02

Section 8(1A)(c) relief is to exempt the income attributable to services outside Hong Kong  if non-Hong Kong income tax (e.g. mainland China's Individual Income Tax) has been paid on that income. So, you had better keep all your overseas tax bills to support your claim.

Click here to read IRD's usual query: Where a taxpayer claims exemption on the grounds of payment of foreign income tax.

Besides, according to the Double Taxation Agreement signed with mainland China, a taxpayer who is a Hong Kong resident and has paid mainland China's Individual Income Tax on an income also taxed in Hong Kong, he can apply for a tax credit to set off his Hong Kong's salaries tax. Furthermore, a Hong Kong resident works in China for not less than 183 days in China may apply for full exemption of the China's tax. Click here for more.

People working across the border: please read tax tip: Working in China  

Read my tax guide on: Basis Period   What are taxable emoluments   Tax analysis programs


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