Hong Kong Fact-File Part 6:
Individual Business Employment Issues

6.2 Hong Kong Employment vs Self-Employment Tax Issues

The differences between employment and self-employment

Employed persons are subject to salaries tax which ranges between 2% and 15% (being calculated as the smaller of either: Net chargeable income (defined as gross income less deductions and allowances) as charged at the progressive rates (which start at 2% for the first HKD40,000, 7% for the next HKD40,000, 12% for the next HKD40,000 and 17% for any income after that); or net income (gross income less deductions) charged at the standard 15% rate) depending on income and must complete a tax return (BIR60), which is sent to the individual by the Inland Revenue Department after the end of the tax year. Tax is not deducted at source and it is the employee’s responsibility to ensure sufficient funds are available to pay the amount owed.

Self-employed individuals are charged a profits tax on profits derived in Hong Kong at a the standard rate of 15%. The Inland Revenue Department will send a tax return at the end of the tax year. The tax return has to be completed and returned together with all taxes due on the date stipulated on the form.

The territorial nature of Hong Kong’s tax system means that from a taxation point of view, neither employment nor self-employment is a more attractive option.

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