Hong Kong Salaries Tax Guide 2026 for Directors and Business Owners: Rates, Allowances, Deadlines and Planning

"Salaries tax is charged on income arising in or derived from Hong Kong from any office, employment or pension." That single sentence from the Inland Revenue Department (IRD) covers far more people than most company owners expect. If you are a director of a Hong Kong limited company, you hold an office under the Inland Revenue Ordinance (Cap. 112) — and your director's fees are chargeable to salaries tax even if you never signed an employment contract and never set foot in a payroll system.

Many directors assume that because their company pays profits tax, the money they personally draw is somehow covered. It is not. Profits tax is the company's liability; salaries tax is yours. Understanding how Hong Kong salaries tax works — the rates, allowances, provisional tax mechanics and filing deadlines — can legitimately save a five-figure sum each year and keep you clear of the IRD's penalty regime. This guide walks through the 2026 rules that matter to directors, owner-managers and entrepreneurs, with worked numbers, statutory references and practical planning points.

What Is Hong Kong Salaries Tax? (Clear Definition)

Salaries tax in Hong Kong is a tax charged on income arising in or derived from Hong Kong from an office, employment or pension, computed on a progressive scale of 2% to 17% on net chargeable income, and capped at the standard rate of 15% (16% on net income above HK$5 million under the two-tiered standard rate from the year of assessment 2024/25 onwards). Taxpayers pay whichever amount is lower. (Source: Inland Revenue Ordinance (Cap. 112) sections 8, 10, 11B and 12A; IRD, ird.gov.hk)

The year of assessment runs from 1 April to 31 March of the following year. Salaries tax is computed on a two-year basis: you first pay provisional tax for the current year based on the previous year's income, and the charge is finalized one year later when actual income is known (IRD, "Provisional Salaries Tax", ird.gov.hk).

What income is chargeable?

Chargeable income is broad. For a director or business owner it typically includes:

• Director's fees — chargeable in full under section 9(1)(a) of the IRO. If you perform director duties partly outside Hong Kong, an apportionment under section 8(1A) may apply, but the burden of proof is on you.
• Salary, bonus and commissions paid by your own company.
• Benefits in kind — housing (notional value up to 10% of income, less rent paid), share awards and share options under section 9(1).
• Pensions from Hong Kong sources.

Two categories of money are not taxed in your hands: dividends received from a Hong Kong company are exempt under section 26(a) of the IRO, and capital receipts are outside the scope of tax. This distinction between salary and dividends is the backbone of most owner-remuneration planning.

Who Must File a BIR60 Return?

Every individual with income chargeable to salaries tax must file the BIR60 individuals' return. In addition, your company has its own duty: it must report your director's fees and staff remuneration on form BIR56B/IR56B within one month of the end of the year of assessment (IRD, Employers' Returns guide). This is how the IRD knows about your fees — the company's filing and yours are cross-checked automatically.

You must file BIR60 even if:

• you receive only director's fees and no salary;
• your income was fully offset by allowances (a "nil" charge still requires the return);
• you left Hong Kong during the year (a special rule under section 70 applies to charge you before departure).

Filing deadlines for 2025/26 (BIR60 issued in early May 2026):

• Solely salaries income, no late filing in the previous year: grouped by month of birth — 1 June, 4 July, 1 September, 4 October or 1 January (IRD, "Time Limits for Lodging Returns").
• Individuals carrying on a sole-proprietorship business: 1 November 2026.
• Other individuals (e.g. with rental or partnership income): three months from the date of issue of the return.
• e-TAX filing extends the deadline by one month.

How Salaries Tax Is Calculated: 2026 Rates and Allowances

Step 1: From gross income to net chargeable income

• Deductible expenses incurred in producing the income (section 12(1)) — rarely large for directors.
• Mandatory MPF contributions, capped at HK$18,000 per year.
• Home loan interest on your principal residence, capped at HK$100,000 per year (raised from HK$80,000 from 2023/24).
• Charitable donations, capped at 35% of assessable income (raised from 25% from 2024/25, per the 2024-25 Budget).
• Taxable voluntary contributions (TVC) to MPF, up to HK$60,000 per year.

Step 2: Deduct allowances

• Basic allowance: HK$132,000 (married person's allowance HK$264,000 in place of two basic allowances).
• Child allowance: HK$130,000 per child, shareable between parents.
• Dependent parent/grandparent allowance: HK$50,000 each, plus an additional HK$50,000 for those aged 60 or above or eligible for Government disability allowance.
• Disabled dependant allowance: HK$75,000.

Step 3: Apply the lower of two computations

Progressive rates on net chargeable income:

Net chargeable income	Rate
First HK$50,000	2%
Next HK$50,000	6%
Next HK$50,000	10%
Next HK$50,000	14%
Remainder	17%

Standard rate on net income: 15% (16% on the portion above HK$5 million from 2024/25). You are taxed at whichever of the two produces the lower amount — this statutory cap is why Hong Kong salaries tax never reaches 17% of total income.

Worked example: a director earning HK$960,000

Consider a director with a HK$1.14 million annual package — HK$960,000 salary plus HK$180,000 director's fees — no spouse, one child, MPF contributions of HK$18,000 and home loan interest of HK$80,000:

• Assessable income: HK$1,140,000
• Less deductions (MPF + interest): HK$98,000 → net income HK$1,042,000
• Less allowances (basic + child): HK$262,000 → net chargeable income HK$780,000
• Progressive tax: HK$16,000 on the first HK$200,000 + 17% × HK$580,000 = HK$114,600
• Standard rate: 15% × HK$1,042,000 = HK$156,300 — higher, so not used
• Salaries tax payable: about HK$114,600, an effective rate of roughly 10% on gross income — with the child allowance and mortgage interest doing real work.

Provisional Salaries Tax: The Two-Instalment System

Salaries tax is collected on a "pay as you earn" logic using the previous year's assessment. Your 2025/26 tax is based on 2024/25 income; provisional tax for 2026/27 is collected alongside it, payable in two instalments: 75% around January and 25% around April (IRD, "Payment of Provisional Tax"). Two points directors should note:

• Fluctuating income: if your income for 2026/27 will be more than 10% lower than 2025/26, you can apply for a holdover of provisional tax under section 63C within 28 days of the notice of assessment, or before the due date, whichever is later. The 10% threshold is the IRD's hard floor.
• New directors: the IRD may issue a provisional assessment even for a partial year of fees, so a first-time director's fee in, say, October can trigger a tax bill within months.

Five Pitfalls That Catch Hong Kong Directors

1. Not reporting director's fees at all because no payroll exists. The company's BIR56B filing exposes the omission, and the IRD can raise additional assessments for up to six years (10 years in fraud cases) under section 60.
2. Misreading source of employment. An employment with a Hong Kong company is generally Hong Kong-sourced; a genuinely non-Hong Kong contract with all duties performed abroad may be excluded, but the 60-day rule only applies to visitors with non-Hong Kong employments — never to directors' fees for Hong Kong companies.
3. Late payment. A 5% surcharge is added immediately after the due date, followed by a further 10% on amounts still unpaid six months later (section 71). A HK$100,000 tax bill can grow to HK$115,000 through inaction alone.
4. Ignoring benefits in kind. Company-paid housing, a car for private use and share awards are all taxable; the housing concession (notional value capped at 10% of income) is one of the most valuable reliefs in the system when structured correctly.
5. Forgetting joint assessment or personal assessment. A spouse with little or no income is a wasted HK$132,000 allowance; electing joint assessment or personal assessment can materially cut the household bill — especially when the owner also pays profits tax and cannot fully deduct business losses under salaries tax.

Tax Planning Points for Owner-Directors

• Balance salary and dividends. Salary generates salaries tax but is a deductible expense for the company's profits tax; dividends are tax-free to you but non-deductible to the company. The right mix depends on the company's profitability and your other income.
• Use MPF fully. Mandatory contributions (deductible, HK$18,000 cap) and TVC (extra HK$60,000 deduction) are the simplest legitimate shelters available to owner-managers.
• Time allowances and elections. Marriage, a first child, or supporting a parent aged 60+ in the relevant year changes the arithmetic immediately.
• File on time, every time. Consistent punctuality qualifies you for the grouped deadlines (up to one month by birth-month) and avoids section 82A penalties of up to three times the undercharged tax.
• Keep records for seven years. Section 51C requires every person to keep business and employment records for at least seven years.

Key Takeaways

• Director's fees are salaries income under section 9(1)(a) of the IRO — filing BIR60 is mandatory even without a payroll or employment contract.
• For 2025/26, the basic allowance is HK$132,000 and child allowance HK$130,000; tax is the lower of progressive (2%-17%) or the 15% standard rate, so the effective rate rarely exceeds 15% of net income.
• Provisional tax is paid in two instalments (75%/25%); section 63C holdover is available if income will fall by more than 10%.
• Late filing and late payment are expensive: surcharges of 5% plus 10%, and penalties of up to three times the tax undercharged.
• Salary-versus-dividend structure, MPF deductions and family allowances are the three levers every owner-director should review annually — ideally with a licensed professional before the year of assessment closes.

Salaries tax is one of the most predictable costs of running a Hong Kong company — and one of the most avoidable sources of penalties. If you want your remuneration structure, filings and deadlines handled by a team that has done this for over two decades, contact vOffice for a consultation on company secretarial, tax filing and employer compliance services. You can also get instant answers to company and compliance questions from our AI assistant at any time.

References

1. Inland Revenue Department, "Salaries Tax — Charge and Scope", www.ird.gov.hk/eng/tax/sal.htm
2. Inland Revenue Ordinance (Cap. 112), sections 8, 9, 12, 26(a), 60, 63C and 82A, www.elegislation.gov.hk/hk/cap112
3. Inland Revenue Department, "Time Limits for Lodging Tax Returns and Supplementary Forms", www.ird.gov.hk/eng/tax/b60.htm
4. Inland Revenue Department, "Payment of Salaries Tax and Provisional Salaries Tax", www.ird.gov.hk/eng/tax/pment.htm
5. The Government of the Hong Kong Special Administrative Region, "The 2024-25 Budget: Measures Relating to Taxation" (allowance and standard-rate changes), www.budget.gov.hk
6. Inland Revenue Department, "Employers' Return (BIR56B/IR56B) Guide", www.ird.gov.hk/eng/tax/er.htm

About the author: vOffice is a Hong Kong licensed TCSP (Trust or Company Service Provider) with over 23 years of experience in company registration, company secretarial services, tax filing support and corporate compliance for local and overseas entrepreneurs.