Hong Kong 60 Day Rule for Salaries Tax Determination of Employment Income

Hong Kong 60 Day Rule for Salaries Tax Explained

The hong kong 60 day rule exempts an employee’s entire employment income from Hong Kong salaries tax when the employee spends 60 days or fewer in Hong Kong during a year of assessment. It applies to individuals whose employment is partly performed outside Hong Kong. The Inland Revenue Department (IRD) applies the rule strictly. Employers filing returns and employees completing their tax filings must understand exactly how the count works and where the rule does not apply.

The Statutory Test: 60 Days or Fewer

The 60-day rule is set out in the Inland Revenue Ordinance. If an employee visits Hong Kong for no more than 60 days in a year of assessment, the total employment income is treated as not sourced in Hong Kong. The income falls entirely outside the territorial source of Hong Kong salaries tax. The rule applies regardless of where the employer is based or where the services are actually performed. The only condition is the physical presence count.

Counting Methods for Partial Days

The IRD counts each day the employee is present in Hong Kong as a full day. A partial day, arriving in the evening, departing early in the morning, still counts as one day toward the 60-day limit. The IRD considers the calendar day from midnight to midnight. There is no provision for pro-rating partial days. A short business trip of a few hours counts the same as a full working day.

60 Day Rule Hong Kong Employment: Who Is Eligible?

The rule applies to employees who hold an office or employment and receive income that would otherwise be subject to salaries tax. The 60 day rule hong kong employment test is based solely on the employee’s physical presence in Hong Kong. The employer’s location, the nature of the work, and the employee’s residence status are irrelevant. The rule does not apply to directors’ fees or remuneration received by government employees. Directors’ fees are always sourced in Hong Kong. Government employees are always subject to Hong Kong salaries tax regardless of their presence.

Hong Kong Salaries Tax Exemption 60 Days: What Is Exempt?

The hong kong salaries tax exemption 60 days covers the entire employment income for the year of assessment if the 60-day threshold is not exceeded. No time apportionment is needed. The IRD treats the income as having no Hong Kong source. This is a full exemption. An employee who works for a Hong Kong company but spends only 50 days in Hong Kong during the year and performs the rest of the work outside Hong Kong will owe no salaries tax on that employment income.

60 Day Rule Hong Kong IRB: Practical Application

The 60 day rule hong kong irb refers to the IRD’s enforcement of this provision. The IRD verifies the employee’s presence using travel records, visa stamps, employer returns, and other evidence. The employee must declare the number of days spent in Hong Kong on their individual tax return. The employer must also report the employee’s presence on the annual employer’s return and the notification forms for new, departing, or leaving employees.

Filing Requirements: Form BIR60 and Employer Returns

Individuals file Form BIR60 to report their salaries income and claim the 60-day exemption. On the return, the employee states the number of days present in Hong Kong during the year of assessment. The IRD may request supporting documents, passport stamps, travel itineraries. Employers must file Form BIR56A with Forms IR56B for each employee. For new employees, the employer files Form IR56E. For employees about to cease employment, the employer files Form IR56F. For employees about to leave Hong Kong, the employer files Form IR56G. These forms let the IRD track the employee’s presence and ensure compliance.

Contrast with Time Apportionment for Longer Stays

If an employee spends more than 60 days in Hong Kong during a year of assessment, the 60-day rule no longer applies. The employee must then use time apportionment to calculate the portion of income sourced in Hong Kong. Time apportionment allocates income based on the number of working days spent in Hong Kong versus total working days. This method is more complex. It requires detailed records of where services are performed. The IRD provides guidance in Departmental Interpretation and Practice Note 21 (DIPN 21) on how to determine the locality of employment income.

Exclusions: Directors’ Fees and Government Employees

The 60-day rule does not apply to directors’ fees or remuneration from government employment. Directors’ fees are always sourced in Hong Kong, regardless of where the director is physically present. Government employees are always subject to Hong Kong salaries tax, regardless of their presence in Hong Kong. These categories are excluded by statute and cannot benefit from the 60-day exemption.

Year of Assessment and Basis Period

The 60-day count is measured per year of assessment, which runs from 1 April to 31 March. The rule applies to each year independently. An employee who stays 60 days in one year but more than 60 in the next must use time apportionment for the latter year. The basis period for salaries tax is the year of assessment itself, not the employer’s accounting period. Count days during the year of assessment. Not any other period.

Provisional Tax and the 60-Day Rule

If an employee is eligible for the 60-day exemption, the IRD will not charge salaries tax on the employment income for that year. The IRD may still issue a notice of provisional tax for the next year based on the previous year’s income. If the employee expects to meet the 60-day threshold in the following year, they must apply for a holdover of provisional tax. The IRD requires specific grounds for a holdover, a reduction in expected income, a change in circumstances. The holdover application must be made before the due date for payment of the first instalment of provisional tax.

Offshore Claim and the 60-Day Rule

The 60-day rule is a straightforward exemption based on physical presence. It is not an offshore claim under the territorial source principle. An offshore claim for employment income requires proving that the services were performed entirely outside Hong Kong, regardless of the number of days present. The 60-day rule provides an alternative route when the employee has some presence in Hong Kong but stays under the 60-day threshold. The distinction matters for tax planning. An offshore claim requires more evidence and is subject to IRD scrutiny. The 60-day rule is a simple count.

Practical Steps for Employers

Track the number of days each employee spends in Hong Kong during the year of assessment. This is essential for completing the annual employer’s return (Form BIR56A and Forms IR56B) and the notification forms (IR56E, IR56F, IR56G). If an employee is eligible for the 60-day exemption, note this on the return. Maintain records of travel itineraries, visa stamps, and other documents to support the count. Block extension letters from the IRD set later filing deadlines for employer returns, but the 60-day count must still be reported accurately.

Common Pitfalls

Counting partial days incorrectly is a common mistake. Each calendar day of presence, even a few hours, counts as one day. Another mistake is assuming the rule applies to directors’ fees or government employees. It does not. Ensure the count is per year of assessment, not per calendar year or per visit. The 60-day rule does not apply to income from sources other than employment, self-employment, business profits. The rule is not a blanket exemption for all income received in Hong Kong. It only applies to employment income.

Summary of Key Points

The 60-day rule is a clear, statutory exemption for employees who visit Hong Kong for no more than 60 days in a year of assessment. It eliminates the need for time apportionment and offers a full exemption from salaries tax on that employment income. The rule is easy to apply but requires accurate counting of days and proper filing of Form BIR60, Form BIR56A, Forms IR56B, and the notification forms IR56E, IR56F, or IR56G. Directors’ fees and government employees are excluded. Employees who exceed 60 days must use time apportionment instead. The IRD enforces the rule through travel records and employer returns. Maintain accurate records. For further guidance, refer to the Inland Revenue Department’s website or consult a tax professional.