Due to the impact of the COVID-19 outbreak, the ease of movement between Mainland China and the Hong Kong Special Administrative Region (HKSAR) has been limited for almost three years, however, with boarder reopening policies in place since 8 January 2023, and the full resumption of travel between Mainland China and Hong Kong since 6 February 2023, cross-border movement has quickly resumed, especially within the GBA. As a result of the resumption of cross-border travel together with the recent introduction of GBA "opening-up polices", there has been a notable increase in demand from companies for flexible cross-border deployment of their employees. This article aims to provide an overview of the recent regulations and preferential policies across the GBA which have been implemented to facilitate the flow of business and talent for enterprises that are investing in, or have employment needs across the GBA.
Visa requirements
Pilot implementation of endorsement policy for talents travelling to and from Hong Kong and Macau
Launched on a pilot basis in February 2023, a new talent endorsement scheme for talents travelling to and from Hong Kong and Macau has been implemented covering the Mainland cities of the GBA. The initiative has been launched with a view to facilitate GBA Mainland talents to travel to Hong Kong for exchanges and visits in the fields of scientific research, education, healthcare, law and business as well as other specified industry sectors.
Under the talent endorsement scheme, six types of mainland talents working in the GBA are able to apply for a 5-year, 3-year or 1-year endorsement to travel to and from Hong Kong and Macau. Within the validity period, the talent endorsement holder is able to travel to and from Hong Kong and Macau multiple times, but is not allowed to stay in Hong Kong and Macau for more than 30 days on each occasion.
Compared with the previous talent endorsement scheme - valid for no more than one year (except for family visit and stay endorsement) and permission to stay limited to no more than 7 days - the launch of the new talent endorsement policy will greatly enhance the convenience for high-end Mainland talents to visit Hong Kong.
Facilitation Measures under the Admission Scheme for Mainland Talents and Professionals (ASMTP) and the General Employment Policy (GEP)
Any person who does not have a right of abode in Hong Kong is not legally permitted to perform any work, whether paid or unpaid, within Hong Kong, unless such person is holding a valid Hong Kong employment visa (or holding a valid dependent visa or the relevant business activity falls within one of the limited business visitor exemptions). People's Republic of China nationals from Mainland China can apply for an employment visa under the ASMTP.
To simplify the application procedures and significantly shorten the application time, to encourage outstanding talents to come to Hong Kong for employment, in 2022, the Hong Kong Immigration Department launched a number of facilitation measures for the ASMTP. For example, effective from 28 December 2022, employers are not required to provide proof to substantiate their difficulties in local recruitment when making applications for talent admission if the posts offered fall under the 13 professions with a shortage of local talent supply as listed in the Talent List or the vacancies to be filled offer an annual salary of HK$2 million or above. The initial duration of stay upon entry for successful applicants under the GEP or ASMTP have also been relaxed from 2 years to 3 years on employment condition, or in accordance with the duration of the employment contract (whichever is shorter).
Social Benefits
Working in Guangdong
Since 2020, Hong Kong residents legally employed by Mainland enterprises should participate in all five categories of social insurance, including basic pension insurance for employees, basic medical insurance for employees, work-related injury insurance, unemployment insurance, and maternity insurance, which are consistent with those available for Mainland residents. To avoid double payment of premiums, Hong Kong residents who have participated in social insurance schemes, and who have retained aforesaid social insurance may choose not to participate in the basic pension insurance and unemployment insurance in Mainland China by presenting certification materials issued by an authorised agency.
However, it should be noted that the employer’s obligation of making housing fund contributions for Hong Kong residents varies in Guangdong province. In Guangzhou, employers are obliged to pay the housing fund contributions for holders of Residence Permits but can refuse the payment request from employees without a Residence Permit. In Shenzhen, however, employers are not obligated to pay the housing fund contributions for employees who are Hong Kong residents, regardless of having a Residence Permit or not.
Working in Hong Kong
There are no statutory social benefits specifically for employees in Hong Kong, save in relation to an employment-based pension requirement, under which employers and employees, when the relevant criteria are met, are required to make mandatory contributions to a privately funded retirement scheme, either through the Mandatory Provident Fund or Occupational Retirement Scheme.
Tax
Preferential policies in Guangdong
For the period from 1 January 2019 to 31 December 2023, subsidies will be granted to “Overseas High-end Talent and “Urgently-needed Talent” in the 9 cities of the GBA, namely Guangzhou; Shenzhen; Zhuhai; Foshan; Huizhou; Dongguan; Zhongshan; Jiangmen and Zhaoqing, each city referred to hereinafter as the “City”, and collectively as “Cities”, to compensate the difference between the Individual Income Tax (IIT) levied by the Mainland and by Hong Kong. These subsidiaries are intended to reduce the IIT burden of recognised overseas talent, to the effect that their actual IIT burden in Guangdong will be reduced to a level similar to Hong Kong.
Public announcements and application guides have subsequently been published by the Cities to provide clearer implementation rules on identification of qualified applicants, calculation of subsidies, and the application procedure. While there are some differences in each City’s application rules, their key features are generally consistent.
It is not known whether this preferential policy will be extended after year end 2023.
Preferential policies in Hong Kong
To date, Hong Kong has not yet introduced any preferential tax policies. Where an individual from the GBA’s provides services both in Mainland China and in Hong Kong, the income derived from the individual’s Hong Kong employment will be wholly assessable unless he or she has paid Mainland China’s individual income tax in respect of the income attributable to services rendered by him or her in Mainland China. If so, he/she may apply for a tax exemption for that part of income under the Inland Revenue Ordinance or for a tax credit under the Mainland China-Hong Kong double taxation agreement. On the Mainland side, non-Mainland China sourced income may be claimed as a credit on the Mainland China tax return to the extent of the individual income tax payable on the same category of income derived from the same country.
Additional preferential policies
Supporting Employment and Entrepreneurship of Hong Kong and Macao Youth in the Greater Bay Area
In April 2022, four Mainland China local government departments including the Human Resources and Social Security Department of Guangdong province jointly issued the "Implementation Rules for Supporting Hong Kong and Macao Youths to Employ and Entrepreneurship in the Greater Bay Area". Valid for five years, the implementation of preferential measures came into effect on 1 May 2022.
The Implementation Rules apply to Hong Kong and Macau youths who are employed or start businesses in any of the GBA's nine cities and covers various preferential measures. For example, according to the implementation rules, small and micro enterprises that recruit Hong Kong and Macau college graduates within two years of graduation, sign an employment contract that extends beyond one year and pay social insurance for them, can apply for social security subsidies. Where certain circumstances are met, Hong Kong and Macau youths who set up start-ups in any of the nine cities can apply for start-up funding, rent subsidies, start-up training subsidies, start-up guarantee loans and additional preferential support measures.
Greater Bay Area youth employment scheme
To encourage and support young people from Hong Kong to work and develop their careers in Mainland GBA cities, in 2021, the Hong Kong Government launched a trail run of the "Greater Bay Area Youth Employment Scheme ". Since early 2023, the initiative has been made a regularised scheme. Under the scheme, any Hong Kong resident who is awarded a bachelor's degree or above by universities/ tertiary institutions locally or outside of Hong Kong in 2021 to 2023, and are lawfully employable in Hong Kong, are eligible to join the scheme. Participating enterprises are required to engage eligible graduates under Hong Kong Law and required to offer them a monthly salary of not less than HK$18,000. Employers are also required to station graduates in Mainland GBA cities where they are to work and receive on-the-job training. For its part, the Hong Kong Government will provide eligible participating enterprises a monthly allowance of HK$10,000 for each hired graduate for up to 18 months.
Takeaway points to be noted by employers
While these preferential policies make it easier for companies to relocate their staff across the GBA, there are various potential legal risks that employers need to be aware of. For example, in practice, some employees may request to sign an employment contract with the employing company's Hong Kong entity so as to obtain permanent residence in Hong Kong, but meanwhile live mainly in Mainland China and actually serve the employer's Mainland entity. In such a case, on the one hand, this may lead to dual employment, i.e. the employee may claim employment relationship with both the Hong Kong entity and the Mainland entity, and therefore benefit from employee entitlements in both places; on the other hand, it could be possible for Mainland tax authorities to treat such an arrangement as creating a permanent establishment (PE) of the Hong Kong entity, and impose enterprise income tax on the profits generated by the PE. In addition, if an employee stays in the Mainland for 183 days a year, he or she faces the consequences of having to pay personal income tax in the Mainland. It is recommended that employers review their current GBA cross-border employment arrangements to identify and mitigate any possible risks.
Residence Permits: Hong Kong, Macao and Taiwan residents who reside for more than 6 months and have a stable job in Mainland China can apply for residence permits in Mainland China.
