Tax exemptions in respect of relief measures under the Anti-epidemic Fund

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Under the Anti-epidemic Fund, an eligible employer will receive a subsidy for paying wages. The maximum subsidy is $9,000 per month per employee for six months. Are these wages received by an employee (funded by subsidy under the Anti-epidemic Fund) subject to salaries tax?

The wage subsidy is paid to the employer for payment of wages. The wages received by the employee (though funded by subsidy under the Anti-epidemic Fund) are income from employment subject to salaries tax.

Under the Employment Support Scheme, an eligible employer will receive a wage subsidy for paying wages. Is the employer exempt from the payment of profits tax in respect of the wage subsidy received? Can the employer claim deduction of the wages financed by the subsidy?

The employer is exempt from the payment of profits tax in respect of the wage subsidy received. Regarding the tax deduction, the employer can claim deduction of employees' wages in accordance with sections 16 and 17 of the Inland Revenue Ordinance, irrespective of whether any portion is funded by the subsidy.

Is an employer required to report payment received by employees under the Anti-epidemic Fund in the employer's returns?

An employer is not required to report those subsidy / grant / allowance that are exempted from salaries tax in the employer's returns.

Is an employee required to report payment received under the Anti-epidemic Fund in the Tax Return – Individuals?

An employee is not required to report those subsidy / grant / allowance that are exempted from salaries tax in Part 4 (Salaries Tax) of the Tax Return – Individuals.

For employers who have already filed their employers' returns for the year of assessment 2020/21 and have reported the payments under the Anti-epidemic Fund for their employees, are they required to make any changes to the employers' returns?

If employers have already filed their employer's returns for the year of assessment 2020/21 and have reported those subsidy / grant / allowance that are exempted from salaries tax for their employees, they are required to furnish replacement IR56 forms to exclude those exempted items.

All employees working in various operating companies (“Op Cos”) of the same group in Hong Kong were centrally hired by another group company ("Employer Co") which then recharged the full amount of wage costs to the Op Cos. When the Employer Co received the wage subsidies under the Employment Support Scheme, it would give back the same amount to the Op Cos. Are the Op Cos exempt from the payment of profits tax in respect of these sums received from the Employer Co?

Only the Employer Co, being the employer of all employees of the group, was eligible to apply for the wage subsidies under the Employment Support Scheme. It is clear that the Employer Co was identified under the Employment Support Scheme as the person to whom the wage subsidies were to be made. As such, only the Employer Co is regarded as a benefitted party of the Employment Support Scheme and is exempt from the payment of profits tax in respect of the wage subsidies. The Op Cos are not regarded as the benefitted parties. Also, any sum received by the Op Cos from the Employer Co, even in the same amount as the wage subsidies, is not regarded as sums received by the Op Cos under the Employment Support Scheme and thus is not exempt from payment of profits tax.