Hong Kong: The IRD’s recent comments on various salaries tax issues

Mar 2017

In the 2016 annual meeting between the Hong Kong Inland Revenue Department (IRD) and the Hong Kong Institute of Certified Public Accountants (HKICPA), the IRD commented on a number of salaries tax issues that may be of interests to taxpayers. The more important issues discussed include: (1) an employer’s filing obligations in a group restructuring; (2) the taxation of vested but not yet withdrawn benefits under schemes registered or exempt from registration under the Occupational Retirement Schemes Ordinance (ORSO schemes); (3) application of the ‘proportionate benefit rule’ for mandatory provident fund schemes (MPF schemes) and recognized occupational retirement schemes (ROR schemes) and (4) the tax treatment of termination payments.

While the meeting minutes are not law and are not legally binding, they serve as a good reference of the IRD’s stance on various salaries tax issues. Companies with employees working in Hong Kong should take into account the views expressed by the IRD when discharging their reporting obligations and formulating their employee compensation policies. Employers should also seek professional advice to understand the possible approaches in managing these complex tax issues.

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