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  • 3 Post By TheBrit
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  • 1 Post By UK/HKboy

Tax on bonus

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  1. #1
    bdw
    bdw is offline

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    Tax on bonus

    I've just received now in May a bonus from my HK company for work related to the 2019 calendar year. But I don't work for the HK branch anymore, I work for the Australian branch of same company. So now HK branch has notified the HK IRD, IRD told them to withhold my bonus and recalculated my income from previous year (after I already settled my taxes last December), and now issued me a new tax demand notice trying to rip a bit more money out of me before they issue a release letter to my company who will then pay my bonus.

    Does this sound right? A bonus paid in May 2020 would normally be taxed in 2020/21 financial year, right? But since I left company last year they backdate it to 2019/20 year?

    If I could have this bonus assesed in 2020/21 year I would be laughing. Since I dont have income in HK anymore, this would be my only income for the year and tax payable would be low. But the way it is now, backdating it to last year, means I lose around 15% of it in taxes.

    I guesss this is just the way it works? I've got to do an online bank transfer now to IRD for 15% of my bonus before my company will pay out.


  2. #2

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    The usual way the tax is assessed is you are liable for HK tax on the portion of the tax year you worked in Hong Kong. So, if you worked 9 months in then 75% is liable for HK tax and 25% for Australian tax. It is irrelevant when the bonus is paid, it is related to the period of time when it was earned.

    I left Hong Kong almost three years ago and still get a fresh HK tax bill every year as I have vested income that pays out each year, and HK IRD then add that to their original assessment and I get a new bill to pay.. I am unsure why IRD seem to treat you differently. I also was fine to leave Hong Kong without settling my tax affairs first (both times I left)

    It is really wierd how your company does not trust you on this though. Mine just pays the whole thing to me and lets me sort out my personal tax affairs.

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  3. #3
    bdw
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    Quote Originally Posted by TheBrit
    It is really wierd how your company does not trust you on this though. Mine just pays the whole thing to me and lets me sort out my personal tax affairs.
    I think we just have a HR guy who is one of those infuriating types that loves to do everything the hard/long way.

  4. #4

    Join Date
    Aug 2017
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    So coming up on my 3yr end bonus how will tax be calculated? As it pertains to having worked 3 years not just the last 1.

    Anything that can be done to avoid being overtaxed for next year?


  5. #5

    Join Date
    Feb 2020
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    If you go to the IRD's tax calculator, there's a section at the bottom that will assist you in calculating whether relating that payment back over the last 36 months would be advantageous. The interface is a bit junky, and you'll need your tax info from the past few years, but it should give you a sense of what the best option is.

    https://www.ird.gov.hk/eng/ese/st_co...get/stcfrm.htm

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  6. #6

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    Quote Originally Posted by bdw
    I think we just have a HR guy who is one of those infuriating types that loves to do everything the hard/long way.
    He probably has to. Since you are not technically an employee for them in Hong Kong (I am not sure if this is the case for you since you are in the same company, but they normally have to inform IRD if an employee has left). So i guess it gets pretty complicated if they are now seen to be paying an employee who is no longer there and no longer in HK. I'm sure this will alert some sort of money laundering or tax avoidance bell at the IRD.
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  7. #7

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    Quote Originally Posted by UK/HKboy
    He probably has to. Since you are not technically an employee for them in Hong Kong (I am not sure if this is the case for you since you are in the same company, but they normally have to inform IRD if an employee has left). So i guess it gets pretty complicated if they are now seen to be paying an employee who is no longer there and no longer in HK. I'm sure this will alert some sort of money laundering or tax avoidance bell at the IRD.
    This is nonsense, it happens all the time and plenty of Hong Kong companies will employ staff outside of Hong Kong