Quote:
Originally Posted by Gurubhai  Thanks (in HK) for your reply
Regarding taxes somebody was telling me that you have to pay advance taxes for the second year and hence you have to budget that in your 1st year salary itself?
By the way what is the concept of service apartments?I thought that it is provided by company for free but your post suggests that we are supposed to pay rent for that as well.Can you throw some more light on this? |
In my opinion the way the tax payment is designed in first two years of one's stay in HK is absolutely perfect but may seem a little complicated in the beginning.
Please note than there is normally no advance tax payment is required here.
The fact is, an employee does not file his tax return in the first tax year (april to march), but in the middle of the second year (most probably around aug-sep) he files the return for the first year i.e., april to march (which he has already earned) and the estimated income for the whole of second year too (thus in aug-sep he is just filing what he would earn till march of the following year).
After that he gets the tax demand note in november and would be required to pay the first instalment in January (which is 100% of first year tax that he has already earned and 75% of second year's tax which he has already earned by then too because its January and tax year is from april to march, thus exact 75%- so NO advance tax payment is required). The second and last instalment which is 25% of second year's tax has to be paid in April, and please note that he pays it very much after he had earned it i.e., after march salary.
So if a person just puts aside no more than 16% (its the maximum rate currently) of his income every month starting from his first month in HK , he is pretty much settled.
Having said this, I must admit that in some cases (not all) one has to pay advance tax on his annual bonus specially if he works for an european i-bank where bonus is paid in feb-march unlike US banks where its nov-dec. So the problem here is, an emloyee has to pay 75% tax on second year bonus in January which he has not earned by then. So in this case you are absolutely correct, you have to budget for you second year bonus in the first year itself.
As for the serviced apartment, the first month is paid by the company but if you decide to live a few more months there before moving to a rented apartment you have to pay the rent the second month onwards and then has to make a deposit of one month's rent too.
