NET SCHEME

THE TEACHING SCHEME


The Native Speaking English Teacher (NET) Scheme was implemented in 1998, with teachers working in the public and private-sector schools. The goal of this scheme is to enhance students’ exposure to English and increase their fluency. Through these years, the pool of NETs in Hong Kong has grown significantly. There is room for improvement for the current level of the English language, which is why there is a constant demand for native English teachers. For more information on NET services, click here.

For full-time primary and secondary teaching positions you will need a degree plus PGCE, or education degree and experience of teaching English. For tertiary full-time teaching, a Masters in Applied Linguistics/TESOL is recommendable. For part-time teaching, you’ll probably need a degree, TEFL Certificate and some teaching experience. The academic year runs from September to June, so most full-time recruitment happens between February and April.

Full-time tertiary English teachers are usually sponsored by an institution, which does the paperwork for work visas. They receive basic health insurance, generous periods of leave . Full-time salaries vary but are usually between HK$20,000 and HK$25,000 a month.

The Mandatory Provident Fund is a retirement protection system. It is a statutory requirement under the Mandatory Provident Fund Schemes Ordinance (MPFSO) (Cap. 485) that all employees in Hong Kong have to enroll in an MPF scheme.

The contribution rate for both the employer and the employee as set out in the current provisions of the MPFSO is 5% of the employee’s income (excluding Special Allowance), subject to the maximum level of income of HK$30,000 per month.

As a non-resident working in Hong Kong, you are liable to salaries tax. Salaries Tax is charged for every person in respect of his/her income arising in or derived from Hong Kong from any office or employment of profit and any pension. Income includes all income, perquisites and fringe benefits from the employer or others.

However, if your income is no more than the basic allowance ($132,000 in 2016/17) in the year of assessment (For example, the year of assessment 2015/16 covers the 12 months from 1/4/2015 to 31/3/2016.), you don’t need to pay salaries tax.

You can refer to this website for the updated basic allowance: 
http://www.ird.gov.hk/eng/pdf/pam61e.pdf

Salaries Tax is chargeable on the smaller of your net chargeable income at progressive rates and your net total income at standard rate. In this regard,

(1) Net Chargeable Income = Total Income – Deductions – Allowances
(2) Net Total Income = Total Income – Deductions.

Tax rates for the year of assessment

Net chargeable income (net of allowances)

On the First 40,0002%
On the Next 40,0007%
On the Next 40,00012%
Remainder17%

Net total income (no allowances)
Standard rate 15%

 

Your employer shall fill in an employer’s return and notification forms (IR56B and IR56M) and return them to the Inland Revenue Department (IRD) before May of this year, therefore IRD will mail Tax Return – Individuals (BIR60) on the first working day of May to you. If it is your first time to pay tax, IRD will set up a new account for you, so your tax return forms mailing date is not fixed.

If you do not receive your tax return forms, you can notify IRD by filling in theIR6167 form (http://www.ird.gov.hk/chs/pdf/ir6167.pdf) within 4 months after a year of assessment (which is before July 31st).

If you receive your tax return forms, you must complete and return the forms to IRD within 1 month from the date the forms were sent.

You can make use of the online taxation calculator to calculate your tax:
http://www.gov.hk/en/residents/taxes/etax/services/tax_computation.htm

You must inform IRD immediately if you change your postal address. Please find the Notification of Change of Postal Address for your use.
http://www.ird.gov.hk/chi/pdf/ir1249.pdf


Provisional Salaries Tax
 of the following year is also required by IRD. Therefore the total salaries tax you need to pay is:

Total Salaries Tax for 2015/16 = Salaries Tax required 2015/16 + Provision Salaries Tax 2016/17 – Provision Salaries Tax 2015/16

Your salaries tax can be paid in 2 installments, in January and April of the following year separately.

Examples

A. I earned a salary of $40,000 and contributed $1,500 to a Mandatory Provident Fund (MPF) Scheme per month as from 1 October 2015. How is Salaries Tax computed for 2015/16?

Year of Assessment 2015/2016
Income ($40000 x 6 months)$240,000
Less: MPF contributions ($1,500 x 6 months)($9000)
Net Total Income$231,000
Less: Basic allowance($120,000)
Net Chargeable Income$111,000
  
Progressive Rate 
Salaries Tax payable – First $80,000 (2-7% progressive)$3,600
Balance $31,000 x 12%$3,720
Salaries Tax payable at progressive rate$7,320
  
Standard Rate 
Salaries Tax at standard rate $231,000 x 15%$34,650
  
Salaries Tax payable (the smaller amount)$7,320
Less: 75% Tax reduction (capped at $20,000*)($5,490)
 $1,830

(*Note – Government Tax Refund) For 2015/16, 75% of the final tax payable under profits tax, salaries tax and tax under personal assessment would be waived, subject to a ceiling of $20,000 per case.

B. Do I have to pay Provisional Salaries Tax (PST) for 2016/17?
Yes, the Salaries Tax demand note for you consists of two components:

2015/16 Salaries Tax$1,830
2016/17 PST$44,100
Total Salaries Tax Payable$45,930

Calculation of PST for 2016/17 is based on the income for 2015/16, but grossed up to 12 months, as follows:

Year of Assessment 2016/2017
Income ($40000 x 12 months)$480,000
Less: MPF contributions ($1,500 x 12 months)($18,000)
Net Total Income$462,000
Less: Basic allowance($132,000)
Net Chargeable Income$330,000
  
Progressive Rate 
Salaries Tax payable – First $120,000 (2-12% progressive)$8,400
Balance $210,000 x 17%$35,700
PST payable at progressive rate$44,100
  
Standard Rate 
Salaries Tax at standard rate $462,000 x 15%$69,300
  
PST payable (the smaller amount)$44,100

 

C. Questions A& B show that my total tax payable is $45,930 (Salaries Tax required 2015/16 [$1,830] + Provision Salaries Tax 2016/17 [$44,100]– Provision Salaries Tax 2015/16 [$0]. When do I pay? Do I pay by two instalments?

Normally you would be asked to pay the sum of $45,930 by 2 instalments as follows:

 Amount PayableDue date
1st instalment$34,905 ($1830 + $44,100 x 75%)Around Jan 2017
2nd instalment$11,025 ($44,100 x 25%)Around April 2017

By 1 January 2017 you would have earned income for 9 months to 31 December 2016 (75% of annual income). By 1 April 2017 you would have earned income for the 12 months to 31 March 2017. Hence, paying provisional tax is not paying tax in advance, nor paying tax on future income.

1 JanuaryNew Year’s Day
8-10 FebruaryLunar New Year
25 MarchGood Friday
26 MarchHoly Saturday
28 MarchEaster Monday
4 AprilQingming Festival
2 MayThe day following Labour Day
14 MayBuddha’s Birthday
9 JuneDragon Boat Festival
1 JulyHong Kong Special Administrative Region Establishment Day
16 SeptemberDay following the Mid-Autumn Festival
1 OctoberNational Day
10 OctoberDay following the Chung Yeung Festival
26 DecemberFirst weekday after Christmas Day