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How to Do Tax Clearance in Hong Kong

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tax clearance hong kong

Before leaving a city, several things need to be put into place. Pertaining to business in Hong Kong, employers and employees chargeable to taxation must clear all tax liabilities before departure.

This directive from the Inland Revenue Department (IRD) applies to taxpayers intending to migrate to another country beyond a month for any reason. Being tax compliant is beneficial not just to you but also to your company’s tax situation and your employees.

This post has all the information on how to do tax clearance Hong Kong. We’ll also examine what an employee must do before leaving Hong Kong.

Tax Clearance Hong Kong: What Is Tax Clearance?

A tax clearance Hong Kong is a process of obtaining a confirmatory tax clearance certificate that shows a taxpayer does not owe any unpaid tax. A tax clearance Hong Kong certificate is a document issued by the Inland Revenue Department concerning a person’s tax affairs in Hong Kong.

This can be used as evidence for “good standing” in foreign investment and emigration. Apart from when travelling out of the country, businesses frequently need a tax clearance Hong Kong as tender to provide certain services from time to time.

The tax clearance Hong Kong has a validity period of one year from when it is issued. 

Tax Clearance Hong Kong: When Will You Need To Do Tax Clearance?

All outbound employees and employers who intend to leave Hong Kong will need to process their tax clearance Hong Kong certificate as early as a month before leaving the country.

This notification of one month earlier will allow the Inland Revenue Department (IRD) enough time to decide if the person or company has any outstanding tax payment that needs to be paid before leaving.

There are exceptions for employees who would need to leave Hong Kong from time to time. Such persons do not have to notify the IRD for tax clearance as they can file returns to pay taxes annually.

Tax Clearance Hong Kong: Procedures for Tax Clearance in Hong Kong

Both the employer and employee have a role to play in tax clearance Hong Kong. First, the employee wishing to move out of the country will have to inform the company or employer, and then process the tax clearance Hong Kong.

Tax Clearance Hong Kong: What To Do If Your Employees Are Leaving Hong Kong?

To apply for tax clearance Hong Kong, the employer needs to notify the Inland Revenue Department through a Notification of an Employee About to Depart from Hong Kong of an intended date of departure.

This should be done one month earlier than the time of scheduled departure. You can reach IRD through call, email, written letter, or email.

The notification letter should contain your employee name, company name, telephone number, Hong Kong identity card number, and contact address in Hong Kong. The IRD will send you a tax return form (BIR60) to the provided address.

The employer can withhold the salary of the worker who intends to leave Hong Kong. If the employee does not clear all pending tax dues, the IRD will issue a notice IR113 to the employer. The employer will then be obliged to clear the tax dues with the amount of the employee’s withheld salary.

Tax Clearance Hong Kong: What Is Required Of An Employee When Leaving Hong Kong?

As an employee planning to go out of Hong Kong, you must notify the employer or company of the intended departure at least a month before departure time. Your employer will fill out an IR56G form and hand a copy over to you.

Next, the individual will fill out the tax returns and send them to the IRD within a specified time limit. The IRD assesses all your tax returns and supporting documents. It then issues you a notice of tax payment. You can make the payable amount through any payment means.

During this period, if the individual encounters an overestimated amount from the IRD, you can dispute the overestimation by filling in an objection. To speed up the duration of the tax clearance review, the employee can visit the IRD in person with evidence of previous tax payments.

Finally, after all tax bills have been settled, a letter of release will be sent down to both you and your employer. Once the letter of release has been issued, any withdrawn salary by the employee will now be released. The cleared individual will also be free to leave the country.

Tax Clearance Hong Kong: How Can We Help?

Premia TNC can assist individuals and business owners with their taxation needs, which includes the tax clearance Hong Kong. In addition, our knowledgeable tax consultants will assist you in determining your tax status in foreign tax jurisdictions in and around Hong Kong.

As a company incorporation agency in Hong Kong, we can help you with tax representative services, providing you with professional assistance on Hong Kong tax issues, so you can move out of Hong Kong with ease.

Tax Clearance Hong Kong – Frequently Asked Questions

1. What if I don't get my tax clearance Hong Kong?

Failure to get a tax clearance Hong Kong certificate when attempting to leave the country can result in penalties which results in a level 3 fine of HKD10,000.

The Inland Revenue Department can also get a court order to stop offenders who have not cleared their taxes by obtaining a tax clearance before leaving Hong Kong.

Such persons might be held up at the airport and prohibited from boarding an international flight. To avoid unnecessary trouble, ensure to get your tax clearance certificate before attempting to leave.

2. If I receive a wage after leaving Hong Kong, do I still need to pay a liable tax?

Yes, received remuneration is subject to taxation even after tax clearance Hong Kong. You and your (former) employer must go through the tax clearance Hong Kong process again if you are yet to leave the country.

Your company must file an additional or revised IR56G form to report the incentive. After filing the IR56G, the additional tax must be paid, and a new Letter of Release will be issued.

3. What if you are exempted from tax payment or have already cleared your tax?

Suppose you are exempted from paying tax, you still need to do a tax clearance Hong Kong with the IRD.

The same applies to individuals who have already cleared their tax beforehand or work in a company with a specialized structural system of removing tax before paying salaries.