If, under his employment, a Hong Kong resident renders services both in the Mainland and in Hong Kong, and his aggregated periods of stay in the Mainland exceed 183 days, the total income received from the Mainland establishment and the overseas employer (including Hong Kong employer) will be chargeable to individual income tax. Tax will be calculated on the total income and then apportioned on time basis.
Counting of days of stay for calculating tax liabilities
For tax computation purposes, the aggregated periods of stay in a year of assessment is the aggregate of the days in each period of stay where the number of days is counted under the rule of the “days of physical presence” minus one day.
The Mainland and Hong Kong are geographically so close to each other that a taxpayer may travel between the Mainland and Hong Kong on a particular day and provides services in both Sides. As such, it is not appropriate to apply the rule of the “days of physical presence” minus one day. However, serious double taxation could occur if both Sides apply the rule of “days of physical presence”. To address such cases, the State Administration of Taxation and the Hong Kong Inland Revenue Department have reached consensus. If a taxpayer travels between the Mainland and Hong Kong on a particular day and provides services in both Sides, he would be counted as present in the Mainland for half a day and in Hong Kong for half a day. However, if he only provides services either in the Mainland or Hong Kong on that day, he would be counted as having been present for one day in the Mainland or Hong Kong, as the case may be.