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Go to Other Chinese Cities CalculatorWondering what the numbers in the calculator table really mean? Keep reading to uncover the contents of the Mandatory Provident Fund (MPF) and the Salaries Tax.
Hong Kong salary structure differs significantly from that of Mainland China. It mainly based on two parts: the Mandatory Provident Fund (MPF) and the Salaries Tax system. Understanding how salaries are structured and what deductions apply is essential for both employers and employees to stay compliant and manage income effectively.
In Hong Kong, Net Salary is calculated as
Want to understand the deduction parts more clearly? Let’s start with the first part — the Mandatory Provident Fund (MPF).
In Hong Kong, the Mandatory Provident Fund (MPF) is a compulsory retirement savings scheme established under government legislation. The MPF aims to provide long-term financial security for employees after retirement, reducing reliance on government assistance or family support.
1. Who Must Contribute to the MPF ?
All employees aged 18 to 64 who work in Hong Kong, whether full-time or part-time, are generally required to participate in the MPF system. Employers must register an MPF account for each eligible employee and start making contributions within 60 days of employment.
Exempt categories include:
- Foreign employees working in Hong Kong for not more than 13 months or covered by an overseas retirement scheme
- Domestic workers
- Certain self-employed individuals meeting exemption conditions
2. Contribution Rates and Calculation
Both the employer and the employee contribute 5% of the employee’s relevant income each month. “Relevant income ” includes basic salary, commissions, bonuses, and cash allowances paid by the employer.
| Item | Rate | Description |
|---|---|---|
| Employee Contribution | 5% | Deducted from employee salary and paid by employer. |
| Employer Contribution | 5% | Paid by employer, not deducted from salary. |
| Maximum Cap | HK$1,500 / month | For employees earning HK$30,000 or more per month. |
| Minimum Threshold | HK$7,100 / month | Employees earning below this amount are exempt; employer still contributes. |
After understanding the Mandatory Provident Fund, let’s move on to the second factor affecting net salary — the Salaries Tax.
In Hong Kong, Salaries Tax is a personal income tax levied on income arising from employment, an office, or services rendered in Hong Kong. Only income arising in or derived from Hong Kong is subject to Salaries Tax.
1. Who Needs to Pay Salaries Tax
Salaries Tax applies to anyone working in Hong Kong, regardless of nationality or residency. Typical examples include:
- Full-time or part-time local employees;
- Employees of foreign companies with offices in Hong Kong;
- Expatriates seconded to Hong Kong for part of their duties;
- Directors, consultants, and contractors employed in Hong Kong.
2. What Income Is Taxable
| Income Item | Taxable |
|---|---|
| Basic Salary | ✅ Yes |
| Commissions & Bonuses | ✅ Yes |
| Allowances | ✅ Yes |
| Leave Pay | ✅ Yes |
| Benefits in Kind | ✅ Yes |
| Reimbursements | ❌ No |
3. How Salaries Tax Is Calculated
Hong Kong’s Salaries Tax is calculated based on annual income for each assessment year, which runs from April 1 of the current year to March 31 of the following year.
Hong Kong’s Salaries Tax is calculated under two methods, with the lower payable amount being applied:
(1) Progressive Rates
Tax is charged progressively based on the Net Chargeable Income:
| Income Bracket (HKD) | Tax Rate |
|---|---|
| First 50,000 | 2% |
| Next 50,000 | 6% |
| Next 50,000 | 10% |
| Next 50,000 | 14% |
| Over 200,000 | 17% |
(2) Standard Rate
A flat tax rate of 15% applies to high-income earners.
