We Offer Pension Services For Businesses

The provision of pension arrangements will increasingly become the responsibility of the individual.

Magentum establishes and administers Private International Personal and Company Pension Schemes in Hong Kong that are recognised as bone fide pension scheme across the globe. They allow flexible contributions (derived from past or present employment or self-employment) and provide income during retirement. They are particularly attractive for internationally mobile clients wherever resident.

Through our Hong Kong Office we offer bespoke pension and retirement planning, operating trust-based Pension Schemes, recognised for tax purposes in accordance with long established laws and pension regulations in Hong Kong, and act as trustee of Occupational Pension Schemes, registered with the pension regulator, the Mandatory Provident Fund Schemes Authority of Hong Kong under the Occupational Retirement Schemes Ordinance.

Hong Kong has signed numerous Double Taxation Treaties with other countries which can lead to beneficial tax treatment for members resident in participating countries who draw retirement benefits. Magentum advises on all aspects of tax associated with making contributions to and receiving benefits from Hong Kong Pension Schemes.

Occupational Retirement Schemes Ordinance (“ORSO”)

An ORSO scheme is a Hong Kong occupational pension established by an employer in respect of its employees registered with and regulated by the Mandatory Provident Fund Schemes Authority in Hong Kong.

There must be an employer/employee relationship for an ORSO scheme to exist.

The minimum benefit age for an ORSO scheme is generally 50, although it is commonplace for scheme benefits to be distributed to members upon ceasing employment before that age, subject to vesting rules.

As tax relief is not given in Hong Kong on contributions paid by a member to the Scheme (i.e. they are made from tax paid income), the entire fund can be withdrawn as a lump sum free of tax in Hong Kong upon retirement, as is the norm with Hong Kong employees.

Full tax relief is available to the employer on contributions of up to 15% of the employee’s total pensionable emoluments which includes benefits and bonuses. Tax relief is also available on extraordinary contributions made by the employer which are amortised at 20% per year over a five-year period rather than being relived in the year of contribution.

For owner managed businesses in Hong Kong, it would be tax efficient for the company to establish an ORSO scheme and to pay an amount equivalent to 15% of the owner’s gross emoluments to the Scheme as a tax deductible expense of the business, and provide for a pension which can be withdrawn as a lump sum after age 50 and upon sale of, or retirement from, the business.

Membership of an ORSO scheme can be a useful staff attraction and retention benefit. There is no tax in Hong Kong on the accumulation of benefits within an ORSO Scheme.

There are strict regulations to follow under ORSO, such as an annual return and statement of particulars of the Scheme to the MPFA and the obligation to file statutory audited accounts within the permitted time limits. For years ending after 30 June 2020, employers are now required to submit an annual written statement together with forms A & B signed off by the employer’s auditor confirming the members’ salaries and contributions for the relevant year.

Historically, where less than 50% of the members of a scheme are not Hong Kong Permanent Identity Card holders, an “ORSO Exempt” scheme could be operated with less onerous regulatory obligations. Note however that, as of June 2020, this type of scheme is being phased out.

If you are an employer in Hong Kong, and you would like to explore providing pension benefits to your employees or maximising the tax benefits for your business, do get in touch with one of our experts.

If you are on secondment in Hong Kong and your employer will agree to contribute for you, or for you to sacrifice up to 15% of your gross emoluments towards a pension, then consider an ORSO pension scheme with the help of one of our experienced team.

For pension schemes members with UK connections, it may be beneficial to structure your ORSO scheme as a QNUPS. If there are UK frozen pensions available, the Scheme can be registered with HMRC in the UK as a QROPS.

Costs 
We will agree an Establishment fee to include the drafting of all relevant documentation, the Certification of the scheme by a Solicitor and the registration of the scheme with the regulator. A separate fee will be agreed for the onboarding and the opening of an investment account for each member.

Annual pension trustee fees are charged on an ad-valorem basis payable quarterly in arrears.