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Independent Contractor for foreign company

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  1. #1

    Join Date
    Jul 2020
    Posts
    2

    Independent Contractor for foreign company

    Hi all,

    I have a question regarding the rules for IC in HK. I tried to do some research but finished more confused than before I started...

    I'm planning to move to HK in the near future (dependent visa, married to HK resident). I'm working as an independent contractor for an American company, which is paying me bi-weekly to my US account.

    As I'm not a US citizen/resident, I don't need to pay tax there.

    Nothing with my work is related to HK, I'm either working remotely or traveling to projects around the world. The reason I'm moving to HK is to be able to spend more time with my wife between my projects.

    Do I need to register myself in anyway in HK? I give invoices to the US company, but they are just for their paper-trail so they can show that they are paying me.

    I don't want to find some time in the future that I'm having issues or did something that is illegal in HK.

    Will appreciate your input


  2. #2

    Join Date
    May 2005
    Location
    Hong Kong, from UK
    Posts
    2,877

    I've never worked out if you actually need to, but it's very easy and fairly cheap (particularly because they often waive most of the fee) to register as a sole trader here. I never took any professional advice, but it always seemed when I was working freelance, if I wasn't an employee I should be registered myself.

    If you are living and working in Hong Kong, even if it's for a foreign company, you do need to pay tax here...

    muzzdang likes this.

  3. #3

    Join Date
    Jul 2020
    Posts
    2

    Thank you for the answer

    I understood that if my income is not due to servicesrendered in HK the situation should be a bit different?

    The website says:

    • the place where the contract of employment was negotiated and entered into, and is enforceable;
    • the employer’s place of residence; and
    • the place of payment of the employee’s remuneration


    Which all of them are the US and not Hong Kong.

    However, it only speaks about employee, but I couldn't find any information on independent contractors.

    I'm traveling about 50% of a calendaric year for projects, isn't it effected by the territorial tax rules?

  4. #4

    Join Date
    Jul 2019
    Location
    Kwai Chung
    Posts
    26
    Hi Kokoi,

    Welcome to Hong Kong and congratulations to your marriage

    I suppose the website you referred to is the same as the below one, correct?
    https://www.gov.hk/en/residents/taxe...f=geoexpat.com

    For your case, if your "independent contractors" is signed under your name (not a company), and you don't own the business yourself, likely you are classified as an employee here in Hong Kong, not a contractor, bottom part of my reply with relevant information for your reference as well, these information bring together should be able to give you a better picture.

    Then, here is the follow up answer for the question you may ask is: "From the tax perspective, which one is better? Contractor or Employee", and you can refer to my answer previously - https://geoexpat.com/forum/145/threa...f=geoexpat.com, cheeers


    Non-Hong Kong Employment

    If your source of employment is outside Hong Kong, e.g. you are assigned to work in Hong Kong for a few years by your non-Hong Kong employer and you have to perform part of your duties in other countries, you are only assessed on the income attributable to the services you rendered in Hong Kong, including leave pay attributable to such services, and generally according to the number of days you were in Hong Kong (day-in-day-out basis) in a year of assessment.
    When calculating leave pay under these circumstances, leave days attributable to services rendered in Hong Kong are computed as follows:
    Leave days attributable to services rendered in Hong Kong =

    Business days in Hong Kong + Business days outside Hong Kong + leave days = 365 or 366

    (B) All Services Were Rendered Outside Hong Kong During the Year (i.e. under section 8(1A)(b)(ii) of the IRO)
    This exemption is generally available to employees irrespective of the locality of their employment. Attending trainings, meetings, or reporting in Hong Kong is regarded as services rendered in Hong Kong for the purpose of the exemption. You are exempt from salaries tax for a year of assessment only if you rendered all services outside Hong Kong in that year of assessment, unless you are a civil servant or a crew member of a ship or an aircraft. Income from services rendered in Hong Kong during visits not exceeding a total of 60 days in the year is also excluded from tax.
    A visit means a short or temporary stay. Whether the nature of a trip to Hong Kong made by a Hong Kong resident is a visit or not depends on the circumstances of each case. In general, if a Hong Kong resident has a work base in a foreign country and is required to render services there as a permanent employee, the person’s occasional return to Hong Kong will be recognised as a visit.
    In deciding whether visits to Hong Kong exceed a total of 60 days, the “days of presence” are counted. A day is counted even though you may be present in Hong Kong for only part of that day. Therefore, the day of departure from Hong Kong and the day of arrival in Hong Kong are counted as two days.

    https://www.labour.gov.hk/eng/faq/ca...f=geoexpat.com

    Q8. How to distinguish an “employee” from a “contractor or self-employed person”?
    A8. In differentiating an “employee” from a “contractor or self-employed person”, all relevant factors of the case should be taken into account. There is no one single conclusive test to distinguish these two identities. Moreover, there is no hard and fast rule as to how important a particular factor should be. The common important factors include:

    • control over work procedures, working time and method
    • ownership and provision of work equipment, tools and materials
    • whether the person is carrying on business on his own account with investment and management responsibilities
    • whether the person is properly regarded as part of the employer’s organisation
    • whether the person is free to hire helpers to assist in the work
    • bearing of financial risk over business (e.g. any prospect of profit or risk of loss)
    • responsibilities in insurance and tax
    • traditional structure and practices of the trade or profession concerned
    • other factors that the court considers as relevant

    It is worth to note that since the actual circumstances in each case are different, the final interpretation will rest with the court in case of a dispute.

    Flapster and Khema like this.

  5. #5

    Join Date
    Mar 2007
    Posts
    297

    The first HKD2 million of net profit (i.e. after deduction of expenses) is taxed at 7.5% anyway (50% of the standard rate of 15%), so the tax payable is really low.

    https://www.pwchk.com/en/budget/2019...figures-en.pdf

    gigglinggal likes this.

  6. #6

    Join Date
    May 2014
    Location
    Hong Kong
    Posts
    401

    Luckily you’re just on the look out now. Who knows whether the heating US/China sanctions may complicate things.