Employee

Section 51(7) of the Hong Kong Inland Revenue Ordinance (“IRO”) states that a person chargeable to tax must notify the Hong Kong Inland Revenue Department (“IRD”) of his imminent departure from Hong Kong if the departure is for more than one month. Such notice must be given at least one month before the expected date of departure, although IRD can accept shorter notice with acceptable reasons. Notification is not required if the person has to frequently travel in and out of Hong Kong in the course of his employment or business or profession. Notification can be done by calling IRD or sending written notification by email, fax or post.

Upon receiving the notification, IRD will issue tax return (BIR60) to the taxpayer. If IRD does not receive completed tax return, or if it is impracticable to issue a tax return because of the expiry of the money-withholding period obliged on the employer or if the expected date of departure is imminent, then IRD might issue an estimated assessment based on the information available with them.

Tax liabilities must be settled before leaving Hong Kong. Upon payment of taxes, IRD will issue the “Letter of Release” to the employer and the taxpayer accordingly.

After tax clearance and departure from Hong Kong, any additional remuneration received or accrued to the taxpayer should be reported to IRD accordingly.

Employer

Meanwhile, section 52(6) of the IRO states that the employer must notify IRD of the employee’s imminent departure from Hong Kong. Notification should be made by filing the relevant form, reporting the date of departure as well as the employee’s income up to the date of departure. Such notice must be given at least one month before the date of departure. After the notification, the employer should immediately withhold all payment of money or money’s worth to the employee for a period of one month from the date on which the relevant form was filed, or until the employer receives the ‘Letter of Release” from IRD, whichever is earlier.

If the employee does not clear his tax liabilities before he leaves Hong Kong, IRD will issue a ‘Garnishee Notice’ to the employer requiring payment of tax from the sum withheld.

After tax clearance and employee’s departure from Hong Kong, any additional remuneration or share awards paid, vested or accrued to the former employee should be reported to IRD submitting additional/revised form.

Share option benefits of persons departing permanently from Hong Kong

If a person has share options not yet exercised, assigned or released prior to departure from Hong Kong, he can elect for a notional exercise for computing the gain on the share options. It assumes that the share options are exercised on a day as chosen by the person within 7 days before the filing of the related tax return for the final assessment applicable to the year of assessment in which he or she permanently departs from Hong Kong. Alternatively, IRD may also accept an election for notional exercise of share option within 3 months from the date of permanent departure from Hong Kong if it has not been made before departure. In this kind of situation, the date of departure will be taken as the date of the notional exercise for purposes of calculating the gain.

Given the above assumptions, the taxable gain is computed for the year of departure, and there will be no further tax liability when the share option is actually exercised or sold afterwards. However, if the gain of the actual exercise, assignment or release is less than the amount assessed in respect of the notional exercise, IRD will favourably consider any application for appropriate amendment and re-assessment.

Share award benefits of persons departing permanently from Hong Kong

For share awards granted to employees but not yet vested, and the vesting of such shares depends on satisfaction of certain conditions (i.e. “Back end” approach), taxpayers may also adopt the same practice the same with share option as above.

Source：Hong Kong Inland Revenue Department’s website

- https://www.ird.gov.hk/eng/pdf/ir6158e.pdf
- https://www.ird.gov.hk/eng/pdf/pam46e.pdf
- https://www.ird.gov.hk/eng/pdf/dipn38.pdf