FREQUENT business trips and lengthy stays outside the territory could open a tax-saving opportunity for thousands of business people. Hong Kong is becoming increasingly popular as a regional centre for companies and a transit spot for their employees. According to Barry Macdonald, a partner with accounting firm Coopers & Lybrand, this offers potential tax-free opportunities for both locals and expatriates through a method called time apportionment. ''There are significant tax breaks available for people who are either employed by the head office of a multinational or who spend time out of the territory on business trips,'' Mr Macdonald said. ''Many employees are not aware of this and consequently pay too much tax.'' Anyone working for a Hong Kong employer or a foreign employer in the territory is subject to salary tax at up to 15 per cent. However, the Inland Revenue Department allows employees to segment their working days so that they only pay tax on the days spent in the territory. For example, a businessman with an annual income of about $1 million spends 200 days a year in Hong Kong and 165 in another country. He can arrange his affairs so that he pays tax only on the period spent in the territory, thus saving himself about $65,000 a year in tax. To be eligible, employees must satisfy four conditions: They must be employed by a foreign company whose head office is outside the territory. While this rule is specifically designed for expatriates, it also applies to locals. Employees must ensure that they work for the head office and are not employed by the Hong Kong subsidiary. ''Otherwise they will be put on the local subsidiary's books and be liable for full tax treatment,'' Mr Macdonald said. The employment contract must be negotiated and enforceable outside the territory - employment conditions must not be subject to Hong Kong law. Salary must be paid from outside Hong Kong. However, if the first three conditions are satisfied, the Inland Revenue Department is ''not so stringent'' on this point, according to Mr Macdonald. ''Inland Revenue can also ask you to prove that you were outside the country on business, so it is important to keep some evidence. This could simply be visas in your passport,'' he said, adding that those who spent less than 60 days a year in the territory were exempt from any local tax. ''Someone who is working for a Hong Kong employer is not eligible for time apportionment and all their income is subject to salaries tax,'' he said. In this case, employees spending a lot of their working life travelling should consider taking out dual employment contracts with their companies covering their work in the territory and foreign assignments separately. ''With Hong Kong increasingly becoming a regional centre for companies, many employees of local companies find themselves spending an increasing amount of time abroad or on the mainland. For these people we often suggest dual contracts,'' Mr Macdonald said. ''The Hong Kong contract is, of course, subject to tax at the going rate. But the contract for the second job can avoid Hong Kong tax. ''Before considering dividing your work in this way, it is necessary to make sure that your duties are distinct and separate. For example, a Hong Kong salesman has his duties divided between Taiwan, China and Hong Kong. This particular person might have one contract for Hong Kong and a separate one for the other two countries. ''He would not be able to spend one working day in Hong Kong under the second contract. If he did, he would be subject to tax on his entire foreign contract.'' If this person spent less than 90 days a year in Taiwan and China, he would not be liable to pay tax in either country. Anyone trying to exploit the potential loophole by extending their stay but claiming less could easily be traced through their visa applications. ''Alternatively, someone who spends 100 days in China will be subject to mainland tax, which is higher than Hong Kong's,'' Mr Macdonald said. ''If they pay foreign tax for services performed outside Hong Kong, then there is an exemption for salary tax in Hong Kong for that amount.''