Limited company-hiring employees and pay them a salary

In many cases, taxpayers will set up limited companies and then hire employees to help run the company. In order to avoid taxation, the company will hire the director’s spouse, children, relatives or a large number of part-time employees to take care of the company’s business, help the company run, and then pay them a salary. The deduction of the company’s total expenditure has therefore become quite large. As an employer, the company will report the salary paid to the Inland Revenue Department as usual. However, the salaries of these employees are usually lower than the tax allowances they claim, and as a result, they do not have to pay salaries tax. But in fact, these employees may not work much in the company, and their salaries are not all incurred to generate company profits at all, so they should not be deducted. The Inland Revenue Department will check the files regularly, and if the above-mentioned situation is found, the company will be required to provide all employees’ information, salary evidence and work rules to infer whether the salary paid is reasonable. In this regard, the tax regulations stipulate that the salaries paid to the spouse of a sole proprietor or partnership business partner are not deductible. The above information is for reference only. If in doubt, we welcome your tax inquiries