Hong Kong Ordinances

INLAND REVENUE ORDINANCE - SECT 8

Charge of salaries tax

(Past version on 01/07/1997).
(Past version on 30/06/1997).

PART III

SALARIES TAX (Amended 36 of 1955 s. 10)

(1) Salaries tax shall, subject to the provisions of this Ordinance, be
charged for each year of assessment on every person in respect of his income
arising in or derived from Hong Kong from the following sources-

   (a)  any office or employment of profit; and

   (b)  any pension.

(1A) For the purposes of this Part, income arising in or derived from Hong
Kong from any employment-

   (a)  includes, without in any way limiting the meaning of the expression
        and subject to paragraph (b), all income derived from services
        rendered in Hong Kong including leave pay attributable to such
        services; (Amended 69 of 1987 s. 2)

   (b)  excludes income derived from services rendered by a person who-

        (i)    is not employed by the Government or as master or member of the
               crew of a ship or as commander or member of the crew of an
               aircraft; and

        (ii)   renders outside Hong Kong all the services in connection with
               his employment; and (Added 2 of 1971 s. 5. Amended 69 of 1987
               s. 2)

   (c)  excludes income derived by a person from services rendered by him in
        any territory outside Hong Kong where-

        (i)    by the laws of the territory where the services are rendered,
               the income is chargeable to tax of substantially the same
               nature as salaries tax under this Ordinance; and

        (ii)   the Commissioner is satisfied that that person has, by
               deduction or otherwise, paid tax of that nature in that
               territory in respect of the income. (Added 69 of 1987 s. 2)

(1B) In determining whether or not all services are rendered outside Hong Kong
for the purposes of subsection (1A) no account shall be taken of services
rendered in Hong Kong during visits not exceeding a total of 60 days in the
basis period for the year of assessment. (Added 2 of 1971 s. 5)

(2) In computing the income of any person for the purposes of subsection (1)
there shall be excluded the following-

   (a)  (Repealed 130 of 1997 s. 2)

   (b)  the official emoluments of consuls, vice-consuls and persons employed
        on the staff of any consulate, who are subjects or citizens of the
        state which they represent;

   (c)  subject to subsection (4) any sum received by way of commutation of
        pension under-

        (i)    a recognized occupational retirement scheme upon
               termination of  service, death, incapacity or retirement;

        (ii)   the Pensions Ordinance ( Cap 89);

        (iii)  the Pension Benefits Ordinance ( Cap 99); or

        (iv)   the Pension Benefits (Judicial Officers) Ordinance ( Cap 401);
               (Replaced 76 of 1993 s. 3)

   (ca) in the case of a pension attributable to services rendered in any
        office or employment, other than employment by the Government, so much
        of the pension as is not attributable to services rendered in Hong
        Kong; (Added 2 of 1971 s. 5)

   (cb) so much of accrued benefits received from the approved trustee of a
        mandatory provident fund scheme on a person's retirement from
        employment, death or incapacity or permanent departure from Hong Kong
        as is attributable to mandatory contributions; (Replaced 4 of 1998 s.
        6)

   (cc) subject to subsections (4) and (5)-

        (i)    any sum (not being a pension) withdrawn from a recognized 
               occupational retirement scheme on retirement, death, incapacity
               or termination of service; and

        (ii)   a sum equal to so much of the accrued benefit received from the
               approved trustee of a mandatory provident fund scheme on
               retirement, death, incapacity, termination of service, or taken
               to have been received from the approved trustee of such a
               scheme as provided by subsection (9), as is attributable to
               voluntary contributions paid to the scheme by an employer;
               (Added 4 of 1998 s. 6)

   (d)  the emoluments payable by the Governments of the members of the
        Commonwealth, other than the Government of Hong Kong, to members of
        Her Majesty's forces and to persons in the permanent service of those
        Governments in Hong Kong in respect of their offices under those
        Governments;

   (e)  wound and disability pensions granted to members of Her Majesty's
        forces;

   (f)  gratuities granted to members of Her Majesty's forces in respect of
        services rendered during war;

   (fa) the Hong Kong War Memorial Pensions and additional benefits paid under
        the Hong Kong War Memorial Pensions Ordinance ( Cap 386); (Added 51 of
        1991 s. 24)

   (g)  any amount arising from a scholarship, exhibition, bursary, or other
        similar educational endowment held by that person where he is
        receiving full time instruction at a university, college, school, or
        other similar educational establishment; (Replaced 26 of 1969 s. 9.
        Amended 1 of 1991 s. 2)

   (h)  the emoluments payable by the Central People's Government to persons
        in the temporary service of that Government who are in the opinion of
        the Commissioner serving in Hong Kong on Mainland of China based terms
        whereby they are normally employed in the Mainland of China but are
        liable for service elsewhere or are recruited in the Mainland of China
        specially for service in Hong Kong; (Added 26 of 1969 s. 9. Amended 23
        of 1998 s. 2; 12 of 1999 s. 3)

   (i)  any amount received by way of periodical payments in the nature of
        alimony or maintenance by a person from his or her spouse or former
        spouse; (Added 35 of 1965 s. 5. Amended 2 of 1971 s. 5; 19 of 1991 s.
        2)

   (j)  income derived from services rendered as master or member of the crew
        of a ship or as commander or member of the crew of an aircraft by a
        person who was present in Hong Kong on not more than-

        (i)    a total of 60 days in the basis period for that year of 
               assessment; and

        (ii)   a total of 120 days falling partly within each of the basis 
               periods for 2 consecutive years of assessment, one of which is
               that year  of assessment; (Added 2 of 1971 s. 5. Amended 7 of
               1986 s. 3)

   (k)  any salary or other remuneration paid by another person who is
        chargeable to profits tax under Part IV which, but for section 17(2),
        would be deductible in computing the profits or losses of such other
        person for the purposes of that Part. (Added 7 of 1986 s. 3)

(3) For the purposes of subsection (2)(c) and (cc)- (Amended 4 of 1998 s. 6)

"retirement" (退休) means-

   (a)  a retirement from the service of the employer at some specified age of
        not less than 45 years; or

   (b)  a retirement after some specified period of service with the employer
        of not less than 10 years; or

   (c)  the attainment of the age of 60 years or some specified age of
        retirement, whichever is the later;

"termination of service" (服務終止) means a termination of employment with
the employer other than upon retirement, death or incapacity. (Added 76 of
1993 s. 3)

(4) For the purposes of paragraphs (c) and (cc) of subsection (2), an amount
that a person-

   (a)  has received from a recognized occupational retirement scheme on the
        person's termination of service; or

   (b)  has received, or is taken to have received, from a mandatory 
        provident fund scheme on termination of service, may be excluded under
        those paragraphs to the extent that it is attributable to
        voluntary contributions made by the person's employer and does not
        exceed the proportionate benefit calculated in accordance with
        subsection (5). However, where, in the case of a
        recognized occupational  retirement scheme approved by the
        Commissioner under section 87A before its repeal by the Inland Revenue
        (Amendment) (No. 5) Ordinance 1993 (76 of 1993), an amount payable on
        termination of service in accordance with the rules of the scheme (as
        approved by the Commissioner before that repeal) exceeds the
        proportionate benefit so calculated, that amount is to be taken to be
        the proportionate benefit. (Replaced 4 of 1998 s. 6)

(5) For the purposes of subsection (4), the formula for calculating the
proportionate benefit is-
CMS
PB =           x AB

120 where- PB is the proportionate benefit to be calculated; CMS is the number
of completed months of service that the person has completed with the
employer; and AB the amount of the person's accrued benefit. (Added 4 of 1998
s. 6)

(6) In subsection (5), "accrued benefit" (累算權益), in relation to a
person, means-

   (a)  if the person is a member of a recognized occupational 
        retirement scheme, the maximum benefit that the person would have been
        entitled to receive from the scheme for the person's service
        recognized for the purposes of the scheme if, at the date on which the
        person's employment was terminated, the person had retired (within the
        meaning of subsection (3)); and

   (b)  if the person is a member of a mandatory provident fund scheme, the
        person's accrued benefits attributable to voluntary contributions paid
        to the scheme in respect of the person for that service. (Added 4 of
        1998 s. 6)

(7) If-

   (a)  the recognized occupational retirement scheme referred to in
        subsection (2)(cc)(i) is established by an employer who is not
        chargeable to tax under Part IV; or

   (b)  the employer who contributes to the mandatory provident fund  scheme
        referred to in subsection (2)(cc)(ii) is not so chargeable, the sum
        excluded by subsection (2)(cc) must not, with respect to the part of
        the sum that is attributable to the employer's voluntary contributions
        to the scheme, exceed the amount calculated in accordance with
        subsection

(8). (Added 4 of 1998 s. 6)

(8) For the purposes of subsection (7), the formula is- A = (EI x 15 ) x YCS]
- RAB
	[	(       100)	]	
where- A is the amount to be calculated; EI is the employee's income from the
employee's office or employment for the period of 12 months preceding the date
on which the relevant benefit is received or taken to have been received; YCS
is the employee's completed years of service with the employee's employer; RAB
is-

   (a)  in the case of a recognized occupational retirement scheme, zero; or

   (b)  in the case of a mandatory provident fund scheme, so much of the
        relevant accrued benefit that the employee has received from the
        scheme as is attributable to mandatory contributions paid to the
        scheme by the person's employer. (Added 4 of 1998 s. 6)

(9) If-

   (a)  the service of a person in respect of whom an employer has paid
        voluntary contributions to a mandatory provident fund scheme is
        terminated; and

   (b)  the accrued benefit attributable to those contributions is retained
        within the scheme or is transferred to another
        mandatory provident fund  scheme, the person is, for the purposes of
        subsection (2)(cc), taken to have received from the scheme on the date
        of termination of service such part of the person's accrued benefit as
        is attributable to those contributions. (Added 4 of 1998 s. 6)

(10) Subsection (4) does not apply to a part of a person's accrued benefit in
a mandatory provident fund scheme that has previously been taken to have been
paid to the person because of the operation of subsection (9). (Added 4 of
1998 s. 6) (Replaced 36 of 1955 s. 11. Amended 15 of 1966 s. 2; 7 of 1986 s.
12)

"retirement" (退休)

"termination of service" (服務終止)

"accrued benefit" (累算權益)