If cross-border investment returns were taxed twice, growth and expansion around the world would be seriously hampered. Tax treaties between countries aim to prevent this double taxation. Hong Kong has an extensive network of such contracts. These contracts have strengthened its position as the economic centre of Southeast Asia and helped break down tax barriers that hinder cross-border flows of trade, investment, technical know-how and expertise between Hong Kong and the rest of the world. No. At first glance, this represents a theoretical risk of double taxation. However, Australia is likely to allow foreign income tax offsetting for taxes paid on Hong Kong income, and Hong Kong does not tax non-Hong Kong income. Therefore, the real risk of double taxation for Australian residents working in Hong Kong is low. As an exemption from double taxation, a unilateral exemption from income is possible for income from services provided outside the Hong Kong Special Administrative Region and for which a tax similar to that of wages in Hong Kong has been levied and paid in the territory where the services are provided. This applies until the 2017/18 evaluation year.
In most contracts concluded by Hong Kong, double taxation is eliminated by the deduction of a tax credit. Methods of reducing double taxation are prescribed either by a country`s national tax legislation or by the specific DTA. In general, there are four methods to reduce double taxation. Hong Kong`s network of tax treaties aims to remove the obstacle to double taxation of foreign investment by helping to structure transactions at minimal tax costs. Hong Kong has also signed a network double taxation agreement with its trading partners to facilitate double taxation for Hong Kong investors and businesses. For more information, visit the Website of the Tax Department. While no factor determines your tax residency status, a person would likely remain an Australian tax resident if: Should not be required by the Hong Kong employer if:  or a company that has a sufficient connection to Australia. With a low tax rate and a strong financial system, many of the world`s largest financial institutions and multinationals have established their regional headquarters in Hong Kong. If an employee pays relocation costs, no tax deduction is possible. .
If the individual continues to be a tax resident of Australia (resident in Australia) In certain circumstances, where a company has a sufficient connection to Australia, the benefit granted to an employee by a foreign company may not be taxable to the employee. The Hong Kong SAR has not concluded an agreement on inheritance and gift tax, as the inheritance tax was abolished in 2006 and there is no gift tax. If you are an Australian expat working in Hong Kong, here are some tax points you need to consider. The term “Hong Kong resident natural person” refers to: Here is an example of the amount of tax an Australian tax resident could pay A foreign tax credit is available to Hong Kong tax residents with respect to income from a jurisdiction that is taxable in a jurisdiction that has entered into a CDTA with the Hong Kong SAR and the same income is taxable in the Hong Kong SAR. Taxpayers are required to take all reasonable steps to minimize foreign tax payable before claiming a tax credit in the Hong Kong SAR. Residency is a very complex area of international tax law and is determined on a case-by-case basis. You should always seek professional tax advice to understand your tax residency status during a mission abroad. The claim of not being a resident of Australia is not to be taken lightly, and some recent Australian court cases show the complexity of this area: Remember: you can still be a tax resident of Australia even if you haven`t been physically present in Australia all year round. Review your position with a professional advisor. Taxable for employee – An exemption may be available for incidental expenses.  Medicare`s tax rate for the income year ending June 30, 2015 is 2%.
We completed the calculation assuming that the employee has the appropriate private health insurance for the year. A company is considered a Hong Kong resident if: Capital gains tax event at the end of residency A non-resident may have significant adverse tax effects on your self-directed pension fund, including the ability to tax the fund`s assets and income at the highest marginal tax rate. If you have a self-managed pension fund, it is important that you consult a tax advisor before you do not become a resident. – The work visa only allows the employee to stay in Hong Kong for 13 months or less 4 The tax administrations of some Australian entrepreneurs have agreed to create synthesized texts to help the public better understand the impact of MI. The Australian Tax Office is responsible for the creation of synthetic texts on behalf of Australia. The sole purpose of a synthesized text of the MLI and a bilateral tax treaty is to facilitate understanding of the application of the MLI to the respective bilateral tax treaty. A consolidated text is not a source of law. The binding legal texts of the bilateral tax treaty and the MLI prevail and remain the applicable legal texts. Going to work abroad is a great adventure for many professionals. But how earned income is taxed outside of your home country is a complex area, and it`s worth seeking expert advice that can prevent you from paying twice.
In particular, if you have a self-managed pension fund, find out about the consequences of a change of residence before it happens. Technically, this income exemption applies to both employment in Hong Kong and employment outside Hong Kong. However, such an exemption does not apply in practice to taxpayers employed outside Hong Kong, since in the case of employment outside Hong Kong, only income from services provided in Hong Kong is taxable. . Non-Australian residents who earn Australian interest and dividends without dividends are subject to a withholding tax of 10% and 30% respectively. From the 2018/19 assessment year, the application for income exemption is only possible if foreign taxes have been paid in a non-CDTA member country for services provided in that country. To estimate your taxes in Hong Kong and compare them to your home country for total income, read the Hong Kong Tax Calculator. For personal income, you can use the tax calculator here: Online Tax Calculator. Individuals who are no longer residents of Australia can trigger a capital gains tax (CT) event where no choice is made to treat CGT assets as “Australian taxable property” after the end of residency. Professional tax advice should be used. Tax situation in Hong Kong (AUD & HKD amounts given for comparison only) If an employer pays, it is taxable for the employee. For more information on these dates, please refer to the summary texts prepared for each contract (if applicable).
This information was compiled and produced exclusively for intheblack.com by Denise Honey and Angela Bryce at Pitcher Partners. 3 This is the later of the two dates of entry into force of the multilateral instrument for each of the two Contracting Parties. After its entry into force, the multilateral instrument generally enters into force for each Contracting Party as follows: 5 EOI jurisdictions are listed in the Tax Administration Regulations 2017 r 34. – The employee is affiliated to a foreign pension scheme (e.g. B an Australian pension fund); or 1 Australia`s income tax treaties have the force of law under the International Tax Agreements Act 1953. The Agreement between the Australian Office of Trade and Industry and the Taipei Economic and Cultural Board on the Prevention of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income is a treaty-status document issued as Schedule 1 to the International Tax Agreements Act 1953. Australians working in Hong Kong need to be aware of the different complexities that affect their residency, super and tax status. Although each DTA concluded by Hong Kong is negotiated separately and contains specific conditions that may vary from country to country, there are some general aspects that a typical DTA will cover, as described below: This article highlights the importance of Hong Kong tax treaties and describes their main features.
Hong Kong has signed 40 double taxation treaties and these are classified as follows: Make sure you know what`s going on before you leave. Hong Kong has a simple and predictable tax system with one of the lowest tax rates in the world. There are no exchange controls in Hong Kong, so capital enters and leaves Hong Kong freely. Where information is available electronically, hyperlinks to relevant sources have been inserted. To access the relevant English official texts, click once on the information page of the Australian Treaties Database on the official tied title of the contract. Under the DTA, exemption from income tax was available only to Hong Kong residents who did not reside simultaneously in the contracting countries. In the case of companies, only companies registered in Hong Kong and companies managed and controlled in Hong Kong are entitled to relief. 2 The Multilateral Instrument has the force of law under the International Tax Agreements Act 1953. Its entry into force was notified on 10 January 2019 in accordance with § 4A. The justification is contained in the Treasury (OECD Multilateral Instrument) Amendment Bill 2018. . .