PwC just published an insightful article uncovering the implications of the ongoing immigration restrictions and Hong Kong salaries tax over the personnel's global mobility.
The outbreak of COVID-19 presents an unprecedented impact on the operations of businesses globally.
Restrictions of cross-border movement, quarantining, and remote work arrangements are becoming the ‘new normal’ yet creating unfamiliar and complex immigration and tax compliance challenges for employers and their internationally mobile employees.
The ‘new normal’ altered the mobile workforce behaviour and businesses in Hong Kong to minimize disruption, mitigate potential risks, and deliver an enhanced employee experience at the same time. Businesses must reimagine the future of work with remote working fast becoming the prevailing work mode in most locations. Companies must reassess and enhance their policy on remote working, as well as tap into technology in establishing a sound process to track employee’s travels and work locations.
Foreign employees working in Hong Kong
Foreigners entering Hong Kong as visitors are permitted to engage only in limited business-related activities stipulated by the visitor policy, such as conducting business meetings. Work activities that fall outside of the visitor policy will require an appropriate visa to be obtained, regardless of whether the work is paid or unpaid, where the individual is being paid from, and/or the duration of stay in Hong Kong.
Moreover, foreigners spending and working for more than 60 days in Hong Kong during a fiscal year will have a Hong Kong tax filing requirement. There is currently no COVID-19 related tax relief announced by the Inland Revenue Department. As such, remote working foreigners should carefully plan and monitor their days in Hong Kong to avoid falling into either immigration or tax pitfalls. Likewise, employers should assess their remote working employees in Hong Kong and have a mechanism in place to identify and track these employees’ movements and their respective days in Hong Kong.
Employees temporarily located outside of Hong Kong
For individuals who departed from Hong Kong temporarily due to COVID-19 (e.g. temporarily returning to their home country), Hong Kong tax filings are still required if they continue to hold Hong Kong employment or on official secondment to Hong Kong. Also, overseas employer’s and employee’s tax filings, tax and social security withholding obligations, as well as tax liabilities, may also be triggered. Consideration should also be given whether the employees have the appropriate work permit to work in overseas locations. Assessment on availability of Double Tax Agreement between Hong Kong and the overseas locations as well as COVID-19 relief measures in these overseas locations should be explored to mitigate tax exposure. Companies should consider any permanent establishment risk associated with the individuals’ unanticipated extensive presence in overseas locations.
The mobility challenges from immigration and tax compliance due to COVID-19 will remain for the foreseeable future.
With proper planning and clear guidance, both employers and employees can avoid potential immigration and tax pitfalls, minimise disruption and risks that may arise, and remain agile in this ever-changing environment. In summary, the following are key actions for companies to consider: