This guide highlights the type of incomes that are classified as chargeable and non-chargeable.

Chargeable Income

Description

Salaries, Wages and Director's fees

Any salary, wages or director’s fees you earn are chargeable to salaries tax, and the gross amounts before the deduction of your contributions to a recognised occupational retirement scheme (ORSO) or mandatory provident fund scheme (MPF) should be reported.

Salaries Tax Paid by Your Employer

The amount, if any, paid by your employer to cover your tax obligations should be reported as assessable income.

Allowances, Perquisites and Fringe Benefits

These forms of income include cash allowances, liability of employees discharged by employers, convertible benefits, education benefits and holiday journey benefits.
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Tips from Any Person

If you have received tips from any person because of your employment, you should report them on your tax return.
Example: 1) those paid by customers to waiters in restaurants.
2) those paid by customers to tour guides.

Value of a Place of Residence

If your employer provides you with a place of residence, you must report it.
The rental value of the residence will normally be calculated at 10% of your income from the employer.

Stock Awards and Share Options

All stock awards granted to you and the gains realised by the exercise of, or assignment or release of share options obtained from holding an office or employment.
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Back Pay, Gratuities, Deferred Pay and Pay in Arrears

Any income that you have received from your employer as back pay, gratuities, deferred pay and arrears of pay during the course of employment or upon or after cessation of employment are assessable.
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Termination Payments and Retirement Benefits

Termination payments (e.g. salary for the last month of service, and payments in lieu of notice accrued on or after 1 April 2012 and payment in lieu of leave) as well as retirement benefits, including accrued benefits received from recognised ORSO or receipt or deemed receipt from MPF.
Example: 1) salary for the last month of service.
2) payments in lieu of notice accrued on or after 1 April 2012.
3) payment in lieu of leave.
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Pensions

All pensions should be reported as assessable income.

Non-Chargeable Income

Description

Severance Payments and Long Service Payments

  • Severance payments and long service payments that are required to be paid under the Employment Ordinance are not assessable to salaries tax.

  • However, any amount in excess of an employee’s entitlement under the Employment Ordinance is assessable to salaries tax and should be reported by you and your employer in your and the employer’s returns.
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Employee Compensation Arising from Injury

  • If you suffer personal injury through an accident arising out of and in the course of your employment, the payments that you receive under the Employees’ Compensation Ordinance are not considered as income.

  • Hence, your employer need not report such payments on Form IR56B, 56F or 56G, and you need not report them on BIR60.

Source: https://www.ird.gov.hk/eng/pdf/pam40e.pdf

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