WITH SO MANY Hong Kong people accepting jobs on the mainland, local human resources professionals have had to add a new string to their bows. They must now be familiar with the regulations on individual income tax in China, how it is paid and why it cannot be ignored.
'In the past, a major issue was often the reluctance to pay tax, but professionals should alert themselves to the legal consequences of not making honest declarations,' said Calvin Lam, co-chairman of the Tax Sub-committee of the Association of Chartered Certified Accountants (ACCA) Hong Kong.
This reluctance stems from the fact that the scale of rates for individual income tax in the mainland ranges from 5 to 45 per cent. When compared with Hong Kong's flat rate of 15 per cent, that can come as something of a shock for middle and senior-level employees who are contemplating a move.
To compensate, employers previously offered packages which included allowances for housing, travel, cost of living, and a fixed sum to cover the differential in income tax. Nowadays, though, the tendency is to offer an extra 20 to 30 per cent on top of a basic Hong Kong salary.
Employers have also had to accept the primary legal responsibility for administering the pay-as-you-earn system, which involves withholding a proportion of all salaries to cover individual income tax liabilities. They must transfer this sum to the local government before paying individual employees.
Transfers must be made to the authorities on a monthly basis into a designated bank account. This is opened in the name of the company, but the tax bureau is allowed to withdraw funds. Subsequent to the filing of a tax return, the bureau will take the accumulated funds from the account and issue a tax receipt to individuals via the company.