Certain percentage of eligible carried interest received by or accrued to a qualifying employee on or after 1 April 2020, for any year of assessment commencing on or after that date, is excluded from the calculation of salaries tax under Schedule 16D to the Inland Revenue Ordinance.  At present, such percentage is 100%.

Qualifying employee, as defined in section 8 of Schedule 16D to the Inland Revenue Ordinance, is an individual who is: 

If an employee is temporarily seconded to Hong Kong without entering into a separate contract of employment with a qualifying person or its associated corporation/associated partnership carrying on a business in Hong Kong, the employee is not a qualifying employee and the employee is not eligible for the salaries tax concessions.  In addition, an employee of the qualifying person who does not provide investment management services (e.g. human resource manager, personal secretary, etc.) is not a qualifying employee.

No.  Salaries tax concessions are only available to carried interest which fulfills the following criteria:

If you are not certain whether your carried interest is paid out from your employer’s eligible carried interest to which profits tax concessions under Schedule 16D to the Inland Revenue Ordinance is applicable, you should seek advice from your employer before making application for salaries tax concessions.

You could make use of your Tax Return - Individuals (BIR60) to make an application for salaries tax concessions in respect of carried interest.  You should include the entire amount of carried interest accrued to you during the year in box 29 “Grand total” of Part 4.1(1) of BIR60, include the amount of carried interest for which salaries tax concessions are claimed in box 33 “Amount to be excluded from the grand total” of Part 4.1(2), indicate your intention to apply for salaries tax concessions by ticking the relevant box of section 4 of the Appendix to BIR60 and complete Supplementary Form SP4.   If available, you should attach to your BIR60 a copy of the Notification of Accrual of Carried Interest for Claiming Salaries Tax Concessions (Form IR6177) completed by the relevant qualifying person in respect of you to support the application.

Before a notice of salaries tax assessment is issued, you can make an application for salaries tax concessions by completing Supplementary Form SP4 and submit it together with a copy of the Notification of Accrual of Carried Interest for Claiming Salaries Tax Concessions (Form IR6177) completed by the relevant qualifying person in respect of you to support your application.

If you wish to dispute against the salaries tax assessment in respect of the amount of carried interest assessed, you must lodge an objection in writing within stipulated time stating precisely the grounds of objection, provide particulars of the carried interest in respect of which the salaries tax concessions are applied by completing Supplementary Form SP4 and file a copy of Notification of Accrual of Carried Interest for Claiming Salaries Tax Concessions (Form IR6177) completed by the relevant qualifying person in respect of you to support the objection.

If the objection is accepted, the assessment will be revised and the relevant tax demanded will be discharged.  Any excess tax paid will be refunded.

On tax clearance, carried interest not yet concluded as eligible for salaries tax concessions will be included in the assessable income.  You should lodge an objection to the relevant salaries tax assessment.  The Department will continue to consider the application for salaries tax concessions under the objection.  Upon determining that you are eligible for salaries tax concessions, the relevant salaries tax assessment will be revised and any excess tax paid will be refunded. 

Carried interest accrued to an employee from an employment is chargeable to salaries tax.  As an employer, your company is obliged to report all the carried interest accrued to your employees under your employment in the relevant Form IR56B/F/G.  Your company is obliged to ascertain the amount of carried interest that is accrued to your employees under your employment in consideration of their investment management services rendered for other persons, and specify the nature and amount of carried interest under the item “Any other Rewards, Allowances or Perquisites” in the Form IR56B/F/G.

If an employee has accrued carried interest from a qualifying person in respect of which salaries tax concessions are likely available, the relevant qualifying person should complete a Notification of Accrual of Carried Interest for Claiming Salaries Tax Concessions (Form IR6177) in respect of the prospective qualifying employee and arrange to have such Form IR6177 filed by the employer together with the Form IR56B/F/G reporting the carried interest accrued to that employee for the relevant year.  A copy of the Form IR6177 should be passed by the qualifying person to the employee for record.  As salaries tax concessions are only applicable to carried interest paid or accrued to a qualifying employee out of the eligible carried interest received by or accrued to a qualifying person, if the qualifying person has not completed any Form IR6177 or the employer has not filed the Form IR6177 with the relevant Form IR56B/F/G, no application for salaries tax concessions lodged by the employee could be entertained.