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Old employer withholding tax

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  1. #1

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    Old employer withholding tax

    My better half finished work on Friday and starts work shortly with her new employer (who is also in Hong Kong)

    Old employer emailed her today stating that they would withhold a portion of her final salary until she paid her tax and produced I.R. form 58G for her to furnish with the inland revenue.

    I have looked at this form and this form envisages that the employee is leaving HK, which my other half is not.

    Is the old employer entitled to withhold tax where the employee is not leaving hong kong? Wouldn't the tax liability be dealt with at the end of each tax year?

    Any advice would be gratefully received!


  2. #2

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    There are legally required to withhold tax if they believe that the employee may leave Hong Kong, so they are just playing safe.

    If she can't persuade her old employer that she is not in fact leaving Hong Kong then my recommendation would be for your partner to go to the Central Enquiry Counter at the 1st Floor of Revenue Tower in Wanchai ASAP (it's open Monday to Friday 8:15 to 5:30) and explain the situation, with supporting documents. If she has an Employment Visa then obviously she will have applied for a transfer of sponsorship so if that has been granted then showing the approval letter from ImmD should be sufficient. If she is on a Dependant Visa and doesn't need a transfer then I guess the signed employment contract or offer letter from the new employer would be sufficient. I expect that IRD would immediately issue the necessary form/letter to her old employer releasing the last salary.

    luckycat and TheBrit like this.

  3. #3

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    thank you PDLM. the affair has been prickly so I think it is a case of the employer making life difficult.


  4. #4

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    It is not a question of the employer being 'entitled' to withhold tax, it's a question of them being legally 'obliged' to withhold tax. There is no benefit to the employer and it's a responsibility which most employers would much rather not have, but it's the regulation.

    Of course, in reality it is often unclear and the employer has no means of knowing whether the employee plans to leave HK, or indeed whether they plan to stay but might change their mind and leave HK without paying their taxes. It's an annoying and messy area for employers and is a no-win situation for them. If they play it safe and withhold salary to cover taxes they often get grief from the employee and if they don't they get grief from IRD.

    In any case, from the employee's perspective it can be easily sorted out with a quick visit to IRD and either paying the taxes and getting a receipt or getting a letter from IRD agreeing that the employer doesn't need to withhold.

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  5. #5

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    Dipper is 100percent correct on this. As an empolyer its a really annoying quirk of the tax law and one we have ended up on the wrong side off because one of my business partners decided to be "nice" rather than follow the letter of the law. In future we would always err on the side of caution instead.

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  6. #6

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    thanks chaps. thanks for the clarification. well the employer is aware that my partner is starting work at the new gaffe (in her area of work everyone knows everyone) so I suspect it may be a bit of both.

    She'll go to the Revenue Dept tomorrow and I'll let you know what happens.

    Thanks again


  7. #7

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    Quote Originally Posted by PDLM:
    There are legally required to withhold tax if they believe that the employee may leave Hong Kong, so they are just playing safe.

    If she can't persuade her old employer that she is not in fact leaving Hong Kong then my recommendation would be for your partner to go to the Central Enquiry Counter at the 1st Floor of Revenue Tower in Wanchai ASAP (it's open Monday to Friday 8:15 to 5:30) and explain the situation, with supporting documents. If she has an Employment Visa then obviously she will have applied for a transfer of sponsorship so if that has been granted then showing the approval letter from ImmD should be sufficient. If she is on a Dependant Visa and doesn't need a transfer then I guess the signed employment contract or offer letter from the new employer would be sufficient. I expect that IRD would immediately issue the necessary form/letter to her old employer releasing the last salary.
    Just to revive this: She did as you suggested, the Revenue were annoyed that the employer didn't take into consideration her circumstances and said the quickest way to obtain the money from employer would just be to pay the tax. They said to come back a week later (today) to pay the tax liability and they would provide a letter of release to furnish on her old employer.

    She took in all her change of sponsorship forms, employment contract etc, too. Thanks for the help all and hope the follow up will be useful to someone in the future.

    Cheers
    PDLM likes this.

  8. #8

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    Well at the end of the day you still have to pay the tax. Either pay now then pay less at the end of the year, or go through all the hassle you are now only to still have to pay the tax at the end of the year. I know I personally wouldnt fight it and just pay up now.

    Last edited by bdw; 04-04-2011 at 09:50 AM.

  9. #9

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    Quote Originally Posted by bdw:
    Well at the end of the day you still have to pay the tax. Either pay now then pay less at the end of the year, or go through all the hassle you are now only to still have to pay the tax at the end of the year. I know I personally wouldnt fight it and just pay up now.
    Yep. Agreed.

  10. #10

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    My employee is asking the same thing - she wants me fill in an IR56G form to settle my tax so she can give me 'my final paycheque'. I've told her I don't need to as I'm not leaving HK - she knows I'm not. She wrote a letter to release me from my sponsorship, and I've already put this, along with my papers from my new employer, in with Immigration to transfer my work visa. She knows this, and she even knows where I'm working next.

    She hasn't done this to anyone else who worked there - I've asked three of them politely (and one of them is my flatmate). She's pulled financial stunts like this before - others get bonuses but she's counted it differently to make sure I don't qualify, counting Saturday as TWO leave days where everyone else's is one, things like that.
    I've asked her for a copy of the IR56F instead of the IR56G - as it explicitly says, on the top of the IR56G, that it's for employers with employees about to depart HK.

    If she gets arsey, I'll just go to Wan Chai and the IR, and ask, shall I? Show them my documents? If I had the money to cover a tax bill (a month between jobs was the failed part of the changing jobs plan and a real kick in the teeth) I still wouldn't pay it - it's the principle of the thing. --And that the last three years' bills have had a whacking great rebate already lopped off, so I ended up paying about twenty pence and a packet of Polos.

    Anyway. Just diving in. Sorry - carry on.


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