Hong Kong

Registration and Establishing an Entity

Hong Kong is one of the top countries for the simplicity of setting up a business. To establish an entity, choosing the name of your business in Hong Kong can be nearly as important as deciding on a legal entity. A company name must be searched at the Hong Kong Companies Registry to find out whether the name of your choice has been taken, thus it must be approved.

The next thing to figure out is the kind of legal entity you would like to select for your business in Hong Kong. The following documents are available online at the CR’s e-Registry with the correct fees:

• Incorporation Form (Form NNC1 for limited company by shares)
• A copy of the Company’s Articles of Association
• A Notice to Business Registration Office (IRBR1)

Online applications for company incorporation and business registration can normally be processed within an hour. If you submit your application in hard-copy form, the Certificate of Incorporation and Business Registration Certificate will normally be issued within four working days.
The next step is opening a bank account, which is straightforward; however, you will need the registration and incorporation certificate for this.

Banking

In Hong Kong, it is not mandatory to make payments to employees from an in-country bank account. Payment can be made on behalf of the client using bank transfers. Bank transfers within the same bank will usually take place within the same day and the next day for any other bank.

International transfers can take between three to seven working days. In the case of payments to the Mandatory Provident Funds (MPF) Trustees for the MPF contributions, this is required to come from a bank account in Hong Kong.

Working Week

The working week in Hong Kong is Monday to Friday from 9:00am to 6:00pm. There are no statutory provisions which prescribe maximum working hours. The Employment Ordinance (EO) does however provide that in addition to paid statutory (public) holidays, an employee is entitled to no less than one rest day in every period of seven days.

Holiday Accrual/Calculations

All employees are entitled to the Statutory Holidays. If the Statutory Holiday falls on any rest day, a holiday should be granted on the day following the rest day, which is not a Statutory Holiday.

An employee having been employed under a continuous contract for not less than three months is entitled to the Holiday Pay, which is equivalent to the daily average wages earned by the employee in the 12-month period preceding the holiday.

An employee is entitled to 7 days' annual leave with pay after serving every period of 12 months under a continuous contract. An employee's entitlement to paid annual leave will increase progressively to a maximum of 14 days according to his length of service.

National Service

There are no national service obligations in Hong Kong.

Maternity Leave 

An employee is eligible for 14* weeks of paid Maternity Leave if -  

1. She has been employed under a continuous contract for NOT less than 40 weeks immediately before the commencement of scheduled Maternity Leave; 

1. She has given notice of Pregnancy and her intention to take Maternity Leave to her employer after the pregnancy has been confirmed, such as by presenting a Medical Certificate confirming her pregnancy to the employer; and 

1. She has produced a Medical Certificate specifying the expected date of Confinement if so required by her employer 

In case the length of employment service under a continuous contract is less than 40 weeks immediately before the commencement of scheduled maternity leave, the employee is eligible for 14* weeks' maternity leave WITHOUT PAY if the employee has given notice of pregnancy and her intention to take maternity leave to her employer after the pregnancy has been confirmed. 

* Eligible employees whose confinement occurs before 11 December 2020 are entitled to a continuous period of 10 weeks’ maternity leave. 

With the agreement of her employer, a pregnant employee may decide to commence her Maternity Leave from two to four weeks before the Expected date of Confinement. 

If the employee does not decide on the date, or fails to secure her employer's agreement, the employee shall commence her maternity leave 4 weeks before the expected date of confinement. 

Maternity leave commences on the date of confinement if it occurs before the scheduled maternity leave. 

The daily rate of maternity leave pay is calculated at four-fifths (4/5) of the average daily wages earned by an employee in the past 12 months preceding the first day of maternity leave (or a shorter period If employed for less than 12 months).   

In calculating the average daily wages, an employer has to exclude- 

1. The periods for which an employee is not paid her wages or full wages, including rest day, statutory holiday, annual leave, sickness day, maternity leave, sick leave due to work injuries or leave taken with the agreement of the employer, and any normal working day on which the employee is not provided by the employer with work;  

1. The sum paid to the employee for such periods. 

Maternity Leave pay should be paid on the normal pay day of the employee. 

Paternity Leave 

According to the Ordinance, male employees with a child born on or after 18 January 2019 are entitled to 5 days’ paternity leave for each confinement of their spouse/partner if they fulfil other requirements as stipulated in law. The employees have to give their employer prior notification as required by law before taking the leave. 

A male employee is entitled to 5 days of paid paternity leave for each confinement if he -  

• has been employed under a continuous contract for NO less than 40 weeks immediately before the day of paid paternity leave; and 

• has provided the required document to the employer within the following period (whichever period expires first) –  

1. 12 months after the first day of paternity leave taken; or  

1. if he ceases to be employed, within 6 months after cessation of employment.  

The daily rate of paternity leave pay is a sum equivalent to four-fifths of the average daily wages earned by an employee in the 12-month period preceding the day of paternity leave. If an employee takes more than one day of paternity leave consecutively, the daily rate of paternity leave pay is a sum equivalent to four-fifths of the average daily wages earned by the employee in the 12-month period preceding the first day of paternity leave. If an employee is employed for less than 12 months, the calculation shall be based on the shorter period. 

Sick Leave 

Any employee employed under a continuous contract is entitled to sickness allowance if:  

1. The sick leave taken is not less than four consecutive days (unless for any day off taken by a female employee for her pregnancy check-ups, post confinement medical treatment or miscarriage, any such day on which she is absent shall be counted as a sickness day and, subject to the following conditions, be paid sickness allowance);  

1. The Sick Leave is supported by an appropriate Medical Certificate*; and 

1. The employee has accumulated sufficient number of Paid Sickness days 

Paid sickness days are divided into two categories - Paid sickness days can first be accumulated up to 36 days in Category 1 and then 84 days in Category 2. 

For taking paid sickness day(s) under Category 1, a Medical Certificate* issued by a registered medical practitioner, registered Chinese medicine practitioner or a registered dentist is required. When the sickness days taken exceed the number of paid sickness days remaining in Category 1, any further sickness day(s) taken will enter in Category 2.   

For taking paid sickness day(s) under Category 2, if so required by the employer, a Medical Certificate* issued by a registered medical practitioner, registered Chinese medicine practitioner or a registered dentist attending the employee as an out-patient or in-patient in a hospital, should be produced. Upon the employer’s request, a brief record of the investigation will be carried out and the treatment prescribed by the issuer of the Medical Certificate should be produced.  

* The Medical Certificate should specify the number of days, the nature of the sickness or injury on account of which the employee is unfit for work. 

The daily rate of sickness allowance is the sum equivalent to 80% of the average daily wage earned by an employee in the 12-month period preceding the sickness day or the first sickness day (if more than one consecutive sickness day). If an employee is employed for less than 12 months, the calculation shall be based on the shorter period. 

Entitlement to sickness leave may be accumulated at the rate of two paid sickness days for each completed month of employment during the first 12 months of employment and at the rate of four paid sickness days for each month thereafter, up to a maximum of 120 paid sickness days.  The entitlement to sickness pay only applies to periods of absence due to sickness of not less than four consecutive days. 

Tax & Social Security

The tax year runs from 1st January to 31st December.

Income Tax

The tax year runs from April 1 to March 31.

In Hong Kong, there is no income tax withholding at source via payroll throughout the tax year. It is the employee’s responsibility to file his/her annual tax declaration and pay directly to the Inland Revenue Department (IRD), the local tax authority.

Companies need to report remuneration paid to employees by submitting an annual employer’s return (BIR56A and IR56B).

The Inland Revenue Ordinance (IRO) requires advance notice and tax clearance for departing employees. Employers must withhold payments until a “letter of release” is issued by the IRD.

Social Security – MPF

Mandatory for all employees under contract of 60+ days and for self-employed persons aged 18–65. Some exemptions apply for foreign employees.

Types of MPF Schemes:

• Master Trust Schemes
• Employer-sponsored Schemes
• Industry Schemes

Contribution Rates:

• Less than $7,100: employer 5%, employee 0%
• $7,100–$30,000: 5% each
• Above $30,000: fixed $1,500 from each party

Reports

Payroll reports must be kept for at least seven years.

Payslip

It is legally acceptable in Hong Kong to provide employees with payslips in either hard copy or online.

MPF Contributions & Reporting

Mandatory contributions must be remitted to MPF trustees by the 10th day of each month. Contribution amounts vary based on salary band. Both employers and employees may also make voluntary contributions.

Monthly

Employers must submit a Remittance Statement and process payment to the approved MPF trustee (e.g., HSBC, Manulife) by the 10th of each month.

Yearly

Employers must submit:

• BIR56A: Annual employer return
• IR56B: Annual remuneration details for each employee

These are typically due one month after issuance (usually 1st April) and can be filed manually or electronically via eTax.

eMPF Platform

From June 2024, administration of MPF schemes will transition to eMPF—a unified digital platform for standardized, streamlined processing.

New Employees

Employers must notify the IRD of a new hire using Form IR56E within 3 months of commencement.

Leavers

• Final payment must be made within 7 days of termination.
• Employers must file either Form IR56F (for leavers staying in HK) or IR56G (for those leaving permanently).
• Filing IR56G triggers a legal obligation to withhold all further payments until a “letter of release” is issued by the IRD.
• The departing employee must obtain tax clearance before final payment is made.

Bonus

Many employers in Hong Kong pay an automatic Annual Bonus of 1 month’s salary at Chinese New Year, although the trend is to replace this with a Performance Related Bonus.

Expenses

• Direct company reimbursements are tax-deductible.
• Mileage is taxable and must be supported by original receipts.
• Company cars are considered a taxable benefit.
• Employer-paid benefits may be exempt from MPF if not duplicated via expense reimbursements.

Occupational Retirement Schemes Ordinance (ORSO)

• Voluntary schemes regulated under the ORSO (since 1993).
• Applies to all employer-operated retirement schemes in or from Hong Kong, including offshore schemes.
• Registration or exemption certificate is required.
• Scheme rules cover enrolment, contributions, vesting, etc.

Employment for Professionals Visa Scheme

A special work permit scheme for skilled foreign workers.

Eligibility

Applicants must:

• Have an employment offer aligned with academic/professional background
• Be filling a role not readily replaceable by a local candidate

Employee documents include:

• Visa form ID 990A with photo
• Passport details
• HKID (if applicable)
• Academic/work credentials

Employer documents include:

• Form ID 990B
• Signed employment contract
• Business registration certificate*
• Company financials*
• Background documents (e.g. brochures, business plan)*

* Waived if employer sponsored a visa in the past 18 months.

Application

Submit to the Hong Kong Immigration Department. Processing time is approximately 4 weeks.

Initial permit is valid for 1 year and can be renewed.

Location-Specific Considerations

• MPF compliance requires a Hong Kong bank account for contributions
• Use of IR56-series forms for reporting leavers, joiners, and tax clearance is unique to Hong Kong
• eMPF platform rollout in 2024 is a territory-wide digitization initiative for all MPF schemes

Further Information

For more information, or assistance with Hong Kong tax enquiries please contact: gi@activpayroll.com

About This Payroll and Tax Overview

Please note that this document gives general guidance only and should not be regarded as an authoritative or complete statement of the law, regulations or tax position in any country. You should always seek specific advice for each specific situation. This document should not be relied upon as professional advice and activpayroll accepts no liability for reliance on its contents.