In
There are sound reasons for this distinction which is to be maintained under the proposal. any event, seafarers and aircrew are at present, and will continue to be, exempt from Salaries Tax if they are physically present in Hong Kong on less than 60 days in one year or 120 days in two years.
17
The proposal also retains the existing provision which exempts from tax income derived from services rendered by persons on visits to Hong Kong not exceeding 60 days in a year.
Conclusion
18
The aim of the proposal is to give certainty to an area of taxation law which is at present uncertain and leads to disputes. . Moreover, the change in the source rule for employment income from place of employment to place where services are rendered should not be taken as a fundamental change in Hong Kong's taxation law or philosophy. Rather, it merely recognises that the present test is. uncertain and administratively difficult to apply. In this context, the total collection from Salaries Tax in 1987-88 is estimated at $7 600 million. The estimated cost to the revenue of this change would be $35 million in a full year.
19
The change to the place of services rendered as the test of source is not seen as opening any loophole. In order to come within the new provision it will be necessary to render services outside Hong Kong on more than 60 days in a year While this may lead employees to more carefully plan the timing of their overseas visits to fit with the tax year, it is unlikely that employers will sanction overseas trips merely to enable employees to build up a total of days outside Hong Kong which will
ensure entitlement to time apportionment. The proposal was introduced following consultation with a number of professional bodies and organisations, including the Taxation Institute of Hong Kong and the Hong Kong General Chamber of Commerce. In the event that the time apportionment concession proposed is exploited, or the cost to the revenue in
in significantly higher than estimated, consideration will be given to increasing the 60 day limit to a higher level. In the coming year, the Commissioner of Inland Revenue will closely monitor these two aspects.
20
Finally, time apportionment as proposed will give some relief to those employees who are presently being double taxed in any year as a result of their working both in and
G.F. 324