According to the Mandatory Provident Fund Schemes Ordinance (hereinafter referred to as the Mandatory Provident Fund Ordinance), every employee working in Hong Kong must participate in the Mandatory Provident Fund Scheme. Sexual Contributions. Although you may already have a certain level of understanding of MPF schemes, the rising proportion of start-ups and slashers in Hong Kong in recent years has made many people pay more attention to MPF matters for self-employed persons. What exactly is a “self-employed person” and do they have to join an MPF scheme? This article will discuss in detail:
How does the MPF Ordinance define “self-employed person”?
According to the definition of “self-employed person” on the MPFA website: all persons between the age of 18 and under 65, if you are not an employee (a person who has entered into an employment contract in accordance with the Employment Ordinance and provides services) and has Earning income by producing or trading goods, providing services, etc., is basically a self-employed person. Further classification, general self-employed persons can be divided into sole proprietors and partners of partnership companies.
In other words, self-employment does not only represent all business owners, but may also include all “work for yourself” statuses that require self-financing, such as private tutors, private doctors, and so on. Also, if you have a service contract with a company but are not an employee of that company, you may be considered self-employed.
Do self-employed people have to join MPF scheme?
After identifying the self-employed, you may ask, is it mandatory for all self-employed people to participate in the MPF scheme? The answer is correct. As stated in the MPF Ordinance, all self-employed persons aged 18 to 64 are required to join the MPF scheme.
Regardless of the income of the self-employed person, even if the relevant income is lower than the current minimum income level for contributions (i.e. $7,100 per month or $85,200 per year, as long as he is not an exempt person, he is required to join the MPF scheme. Generally and The Ordinance requires all self-employed persons to join an MPF scheme within 60 days of commencing business.
What are the MPF contributions for self-employed persons?
In terms of mandatory contributions, self-employed persons are required to contribute 5% of their monthly income just like ordinary wage earners. In other words, if the monthly income is $20,000, $1,000 of it will be MPF contributions, and the actual “pocketed” amount will be $19,000.
If a self-employed person earns more than $30,000 a month, the maximum mandatory contribution is also $1,500, or an optional annual contribution of $18,000. Also, note that if you earn more than $30,000, you can also choose to make voluntary contributions. For example, if you want to make a monthly contribution of $3,000, it is also feasible.
If the limited company has a boss who is responsible for the operation of the company, both the employer and the employee’s contributions must be fully paid. Both employers and employees can choose to make voluntary contributions. For example, a self-employed person earning $28,000, an individual contributes $2,000, and a company contributes $2,000 for a total of $4,000. (Income does not necessarily need to exceed $30,000 to contribute more than $1,500, as long as the contribution is at least 5% of monthly income)
What are the consequences if self-employed persons do not participate in MPF?
It should be noted that because the situation of self-employed persons is different from that of ordinary employees, if they do not participate in the MPF scheme, they may face legal consequences. The decision to ignore MPF-related contributions cannot be made on the grounds of “unprofitability”. Once it is proved that a self-employed person has committed the following MPF Ordinance:
“Not Enrolled in MPF Scheme”:
The penalty for first offense is a maximum fine of $50,000 and six months’ imprisonment, and for each subsequent conviction, a maximum fine of $100,000 and one year’s imprisonment;
“No Mandatory Contributions to Trustee”:
The penalty for a first-time offense is a maximum fine of $50,000 and six months’ imprisonment; for each subsequent conviction, the maximum penalty is a $100,000 fine and one year’s imprisonment.
The above information is for reference only. If you have any questions about tax declaration and accounting, we welcome your inquiries.