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There is a difference between wage earners and freelance workers

According to Hong Kong tax regulations, all income of wage earners from employment positions in Hong Kong is required to be paid in full to salaries tax. The job market has changed dramatically due to the spread of COVID-19 and rapid technological development. In order to reduce costs and increase flexibility, employers will reduce the number of permanent employees and hire more temporary, part-time or freelance workers. Some so-called “Fried Kings” have different rights, positions and tax status than regular employees. If “Fried Kings” is regarded as an employee by the employer, according to the employee contract signed by them, the regulations will show that “Fried Kings” enjoys the rights and interests stipulated in the Employment Ordinance. However, some dismissed kings will also be regarded as self-employed by their employers, and self-employed persons are not protected by the Employment Ordinance.

  • When wage earners are hired, they should find out whether there is an employment relationship with their employers to avoid disputes when problems arise. The employment relationship is primarily based on several factors:

     • Will wage earners be supervised or controlled by their employers in performing their services?

• Is it up to the wage earners to decide the way of service process, do they need to bring their own tools or equipment?

• Will the employer provide local jobs and materials?

• Will wage earners hire helpers to assist in the work?

• Can wage earners share the profit brought by the service or do they need to bear the risk of loss?

• Does the wage earner pay regularly? Who pays and how is it calculated?

• Can the wage earner or the employer give notice or pay in lieu of notice to terminate the employment contract?

• Can wage earners enjoy benefits in the employment relationship, such as annual leave, sick leave or pension, etc…

• Relevant industry practices of peers.

Whether a wage earner is defined as an employee directly affects his tax status. If the employment relationship has been established, the wage earner must report all the wages paid by the employer in the salaries tax section, and then claim the relevant allowances and deductions on the statement, and the tax bureau can calculate the actual taxable income. If the employment relationship is determined not to exist, the wage earners are self-employed persons who are operating businesses to earn income, so they should apply for a business registration certificate. Self-employed persons should prepare a profit and loss statement and a balance sheet every year, and report their assessable profits. Fill in the profits tax section, and then self-employed people need to claim the relevant allowances and deductions by selecting personal assessment. The tax bureau will calculate whether the choice of personal assessment will really reduce the overall tax for the self-employed person, otherwise The Inland Revenue Department will collect the tax by way of profits tax assessment

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