How does Hong Kong payroll tax work in 2026?
Hong Kong salaries tax tops out at 17%. That is one of the lowest top rates in Asia. But the MPF contribution structure and the flat-rate alternative can catch first-time employers by surprise. The numbers are simple. The interaction between them is not.
· Hong Kong guide
Illustration · Hong Kong
Hong Kong employer payroll cost is low by global standards. The mandatory MPF contribution is 5% of relevant income. There is no other employer payroll tax.
The employee also contributes 5% to the MPF. Both rates apply on relevant income up to a monthly ceiling set by the MPFA. Above that ceiling the rates still apply but only on the ceiling amount.
Salaries tax has five bands. The lowest rate is 2% and the top rate is 17%. Employers do not withhold salaries tax from payroll. The employee files and pays directly to the Inland Revenue Department.
Employers file an annual return with the IRD each April. The minimum wage is HK$ 43.10 per hour from 1 May 2026.
What does an employer pay in Hong Kong MPF contributions?
The only mandatory employer payroll contribution in Hong Kong is the MPF. The rate is 5% of the employee relevant income.
Hong Kong has no employer social insurance, no payroll tax on wages, and no apprenticeship levy. The MPF is the full extent of mandatory employer cost beyond gross salary.
| Contribution type | Rate | Applies to |
|---|---|---|
| MPF employer mandatory contribution | 5% | Relevant income up to the monthly ceiling |
| MPF employer voluntary contribution | Employer discretion | Above the mandatory ceiling, or as a top-up |
| Other payroll tax | None | Not applicable |
The MPF relevant income ceiling
Mandatory MPF contributions are capped. The MPFA sets a monthly relevant income ceiling. Employer contributions are calculated at 5% on relevant income up to that ceiling. Income above the ceiling is still covered by the MPF scheme but the mandatory rate applies only to the ceiling amount. Employers can make voluntary contributions above this ceiling and many do, particularly for senior hires.
Casual and part-time employees
The MPF covers most employees under continuous contract in Hong Kong. Domestic employees and employees who are over 65 or under 18 years old are exempt from mandatory contributions. Day workers in certain categories are subject to the industry scheme rather than the master trust scheme.
What does an employee pay in Hong Kong MPF contributions?
The employee mandatory MPF contribution rate mirrors the employer rate at 5% of relevant income.
The same monthly relevant income ceiling applies to employee contributions as to employer contributions. There is no employee social insurance contribution beyond the MPF.
| Relevant income band | Employee MPF rate |
|---|---|
| Below the minimum relevant income level | 0% (exempt employee; employer still contributes) |
| From the minimum relevant income level up to the monthly ceiling | 5% |
| Above the monthly ceiling | MPF rate applies only to the ceiling amount |
Hong Kong uses a minimum relevant income level. Employees earning below this floor in a contribution period are exempt from the employee contribution. The employer must still contribute for those employees.
MPF contributions are deducted from the employee payslip and remitted by the employer. The employer holds responsibility for both the employer portion and the employee deduction. Late or missing remittances attract penalties from the MPFA.
Hong Kong salaries tax bands for 2025 to 2026
Hong Kong taxes employment income under salaries tax. It has five progressive bands starting at 2% and rising to 17%.
A basic personal allowance of HK$ 132,000 a year is deducted before calculating net chargeable income. Employers do not withhold salaries tax. Each employee files and pays directly.
Hong Kong salaries tax is assessed on net chargeable income, which is assessable income minus allowances. The basic personal allowance for a single taxpayer is HK$ 132,000 for the year of assessment 2025 to 2026. Alternatively, taxpayers can elect a flat standard rate on assessable income, whichever results in a lower tax bill.
Source: GovHK / IRD: Tax Rates of Salaries Tax and Personal Assessment
| Net chargeable income (HKD per year) | Rate |
|---|---|
| First HK$ 50,000 | 2% |
| Next HK$ 100,000 (HK$ 50,000 to HK$ 100,000) | 6% |
| Next HK$ 150,000 (HK$ 100,000 to HK$ 150,000) | 10% |
| Next HK$ 200,000 (HK$ 150,000 to HK$ 200,000) | 14% |
| Remainder above HK$ 200,000 | 17% |
The standard rate alternative
A taxpayer can elect to pay salaries tax at the standard rate on total assessable income instead of the progressive bands. The standard rate for the 2025 to 2026 year of assessment is set by the IRD. The IRD automatically applies whichever method results in a lower bill. High earners with large allowances or deductions sometimes benefit from the progressive route. Others benefit from the flat rate. The employer has no role in this election.
No employer withholding of salaries tax
This is the key operational point for international employers. Unlike the UK PAYE system, Hong Kong employers do not deduct salaries tax from payroll. Each employee receives their full salary and is personally assessed by the IRD each year. The employer files an Employer's Return listing each employee's income, and the IRD issues tax bills directly to individuals.
How does the Hong Kong Employer's Return work?
Hong Kong employers file an annual Employer's Return with the IRD. The return covers all employees and their income for the year ended 31 March.
The IRD issues Form BIR56A each April. Employers have 30 days from the issue date to file. There is no monthly payroll filing requirement.
Key forms in the Hong Kong employer filing cycle:
- BIR56A (Employer's Return): annual return listing all employees and their earnings. Filed within 30 days of the April issue date.
- IR56B (Reporting of remuneration paid to employees): accompanies the BIR56A for each employee earning above the reporting threshold.
- IR56F (Employee leaving Hong Kong): filed at least one month before an employee permanently leaves Hong Kong. A notification to the IRD, not a tax payment.
- IR56G (Cessation of employment): filed when an employee ceases employment. Triggers the employee's personal assessment for final salary and any termination payments.
Hong Kong has no monthly PAYE filing. There is no real-time information requirement comparable to the UK RTI system. The employer's primary annual obligation is the Employer's Return in April. The MPF remittance cycle is separate and is administered through the MPF trustee, not the IRD.
Penalties for late filing
Failure to file the Employer's Return on time is an offence under the Inland Revenue Ordinance. The IRD can impose a penalty and issue a summons. In practice, the IRD typically issues a reminder before taking enforcement action. Employers who miss the deadline should request an extension from the IRD before it expires.
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Collect pay data
Gather salary, hours worked, bonuses, and any taxable benefits for the contribution period before the run closes.
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Calculate gross pay
Total all earnings for the period. Confirm any payments that count as relevant income for MPF purposes.
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Deduct employee MPF contribution
Deduct the employee mandatory MPF contribution from gross pay. The deduction appears on the payslip. No salaries tax withholding is required.
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Calculate employer MPF contribution
Calculate the employer mandatory MPF contribution on the same relevant income. Add this to the employer payroll cost for the period.
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Remit MPF contributions to the trustee
Transfer both the employer and employee MPF contributions to the MPF trustee within 10 days after the end of the contribution period.
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Report to the IRD annually
File the Employer's Return (BIR56A) with all employee income details within the required period after the IRD issues the form each April.
MPF contributions in the payroll stack
The MPF is Hong Kong's mandatory provident fund. Both employer and employee contribute 5% each. This is the pension scheme and the social security contribution combined into one.
There is no separate pension scheme alongside the MPF. The MPF is both.
MPF contribution summary for each payroll run:
- Employer mandatory contribution: 5% of the employee relevant income up to the monthly ceiling
- Employee mandatory contribution: 5% of the employee relevant income up to the monthly ceiling, deducted from payslip
- Remittance deadline: within 10 days after the last day of each contribution period (monthly for monthly-paid employees)
The MPF trustee administers the scheme. Employers select a trustee when setting up the scheme and each employee's contributions flow into their individual account with that trustee. The employee owns their MPF balance and takes it when they leave.
MPF offset and termination
Employer mandatory contributions can offset severance payments and long service payments in Hong Kong under the Employment Ordinance. This MPF offset mechanism is being phased out. The government passed legislation in 2022 to remove the employer offset for new MPF contributions from a future appointed date. Until that date takes effect, employers can use accumulated MPF employer contributions to offset the severance or long service payment owed to a departing employee. Employers should monitor the official MPFA announcement for the effective date of the offset abolition.
Minimum wage and payroll
The minimum wage in Hong Kong from 1 May 2026 is HK$ 43.10 per hour. This is the Statutory Minimum Wage rate set under the Minimum Wage Ordinance (Cap. 608). All employees covered by the Employment Ordinance are entitled to this rate. Employers must ensure that total wages in any wage period, when divided by hours worked, meet or exceed this floor.
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Key sources: MPFA: Mandatory Contributions, GovHK IRD: Salaries Tax Rates, and IRD: Employer's Return.
Frequently asked questions
What is the employer MPF contribution rate in Hong Kong?
Employers must contribute 5% of the employee relevant income to the MPF each contribution period. The rate applies up to the monthly relevant income ceiling set by the MPFA. There is no other mandatory employer payroll tax in Hong Kong beyond the MPF contribution.
Does a Hong Kong employer deduct salaries tax from payroll?
No. Hong Kong employers do not withhold salaries tax. Each employee is personally assessed by the Inland Revenue Department and receives a tax bill directly. The employer's role is to file an accurate annual Employer's Return listing all employees and their income. The IRD then issues tax bills to individual employees.
What are the Hong Kong salaries tax bands for 2025 to 2026?
Salaries tax has five progressive bands on net chargeable income: 2% on the first HK$ 50,000, 6% on the next HK$ 100,000, 10% on the next HK$ 150,000, 14% on the next HK$ 200,000, and 17% on the remainder. The basic personal allowance for a single taxpayer is HK$ 132,000 a year.
When must a Hong Kong employer file the annual Employer's Return?
The IRD issues Form BIR56A each April for the year ended 31 March. Employers must file within 30 days of the issue date. Failure to file on time is an offence under the Inland Revenue Ordinance. Employers can request an extension from the IRD before the deadline passes.
What is the Hong Kong minimum wage in 2026?
The Statutory Minimum Wage from 1 May 2026 is HK$ 43.10 per hour. This applies to all employees covered by the Employment Ordinance. Employers must ensure total wages in any wage period, divided by hours worked, meet or exceed this floor.
The biggest payroll surprise in Hong Kong for new employers is that salaries tax is not withheld. You pay the full salary. The employee gets a tax bill later. If you have come from a PAYE jurisdiction, you assume you are responsible for the deduction. You are not. But you are responsible for filing the Employer's Return correctly, and missing it creates problems for both sides.
Hong Kong salaries tax tops out at 17%. The MPF adds 5% employer contribution on top. That is your total mandatory payroll cost beyond salary.
No payroll tax withholding. No monthly government filings. One annual return in April.
Structure the offer. Run the numbers before you send it.
