1. Can I get some examples of taxation issues relating to “cross-broader” workers?

Example 1 (wholly working in Mainland China)

Mr. C, a Hong Kong resident employed by a Hong Kong company, was assigned to his employer's Mainland factory to do quality control work. His monthly salary was $30,000. He did not render any services in Hong Kong . He only returned to Hong Kong to spend his leave and on Sundays and public holidays. He stayed in the Mainland for an aggregate of 250 days.

Hong Kong : As he did not provide any service in Hong Kong, all his income was exempt from Salaries Tax in Hong Kong .

Mainland : As he was required to perform duties in the Mainland only and stayed in the Mainland over 183 days, his salary of $30,000 a month was all chargeable to Mainland tax.

Example 2 (working in Mainland China for most of the time)

Mr. L, a Hong Kong resident employed by a Hong Kong company, was assigned to be the manager of a company invested in by his employer on the Mainland. His monthly salary was $30,000, of which $10,000 was paid or borne by the Mainland entity. Apart from returning to Hong Kong on holidays, he was required to render service in Hong Kong . He stayed in the Mainland for an aggregate of 250 days.

Hong Kong : As he had a Hong Kong employment and rendered services in Hong Kong , his salary, $30,000 a month, was fully assessable. However, as he had to pay Mainland Individual Income Tax on the income attributable to services rendered in the Mainland, he could apply for exemption from Hong Kong Salaries Tax on that part of income or claim a tax credit. Such an application would be made on his Hong Kong tax return, by completing the relevant section and submitting the evidence of the payment of the Mainland tax.

Mainland: As he was required to provide services both in the Mainland and in Hong Kong under his employment and he stayed in the Mainland for over 183 days, his entire salary was chargeable to Individual Income Tax, but subject to adjustment to reflect the services rendered outside the Mainland. In order to compute his Mainland tax liability he should first add up his salary payments on both Sides as his total taxable salary, calculate the tax thereon according to the Mainland tax rate, and then apportion the tax by time basis to arrive at the tax payable.

Example 3 (working in Hong Kong for most of the time)

Mr. C, is a Hong Kong resident employed by a Hong Kong company as Marketing Manager (China-Hong Kong Trade). He was required to provide services both on the Mainland and in Hong Kong . His monthly salary was $30,000, of which $10,000 was paid or borne by a Mainland entity. He stayed in the Mainland for an aggregate of 100 days.

Hong Kong : Same as Example 2

Mainland: As he was required to provide services both in the Mainland and in Hong Kong but stayed in the Mainland for less than 183 days, only that part of his salary paid or borne by the Mainland entity were chargeable to Individual Income Tax. Tax would be calculated on the chargeable income and then apportioned on a time basis. That part of his salary paid by the Hong Kong employer was not chargeable to Mainland Individual Income Tax.

Example 4 (working in both Hong Kong and China everyday)

Mr. W, a Hong Kong resident employed by a Hong Kong company, was responsible to manage the company in Hong Kong and the factory in the Mainland. Every day, he had to travel between the Mainland and Hong Kong and provide services on both sides of the border. His monthly salary was $30,000, of which $10,000 was paid or borne by the Mainland entity.

Hong Kong : Same as Example 2

Mainland: As he was required to provide services both in the Mainland and in Hong Kong and he stayed in the Mainland for over 183 days, both the Mainland and Hong Kong salaries were chargeable to Individual Income Tax. He should first add up his salary payments on both sides as his total taxable income, calculate the tax thereon according to the Mainland tax rate, and then apportion the tax by time basis to arrive at the tax payable (generally the Mainland tax authority will adopt a "half-day rule" for any date where services are rendered both in the Mainland and in Hong Kong [i.e. to count any day where services are rendered both in the Mainland and in Hong Kong as only half a day]).

For more details concerning cross-broader taxation matters regarding remuneration for employment, please read the publications from the Inland Revenue Department listed below: