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China’s ESG Reporting Standards: Preparing Businesses for 2026 and Beyond

October 15, 2025 by galaxy

October 15, 2025

China’s ESG Reporting Standards: Preparing Businesses for 2026 and Beyond

China is entering a new era of corporate accountability.
For years, sustainability reporting in the country remained voluntary — guided largely by investor expectations rather than regulation. That phase is coming to an end.

With the rollout of the Chinese Sustainability Disclosure Standards (CSDS) and the new stock-exchange ESG disclosure rules, China is establishing one of the most comprehensive sustainability reporting frameworks in Asia. From 2026, large listed and dual-listed companies will be required to release full ESG reports for the 2025 financial year.

These standards, which will become fully operational by 2030, are designed to bring Chinese businesses in line with international norms such as the ISSB (International Sustainability Standards Board) and the EU’s CSRD (Corporate Sustainability Reporting Directive).

For companies — both domestic and international, this signals a major shift:

ESG compliance will no longer be optional or reputation-driven; it will become a formal, regulated part of doing business in China.

This article examines what the CSDS framework entails, how the reporting timeline unfolds, and what steps businesses should take now to stay ahead of the curve.

Table Of Content

China’s ESG Reforms: At a Glance

China is building a comprehensive sustainability reporting system that will fundamentally change how companies disclose non-financial performance. The Chinese Sustainability Disclosure Standards (CSDS) are at the heart of this framework—setting out how organisations must report on governance, environmental impact, and social responsibility in a consistent, verifiable way.

The following table summarises key milestones and what they mean for businesses operating in China:

Item	Status / Timeline	Notes for Businesses
ESG Reporting Guidelines on Stock Exchanges	Effective 1 May 2024	Listed and dual-listed companies must publish their first sustainability reports for the 2025 financial year by April 2026. Smaller firms are encouraged to disclose voluntarily.
CSDS – Basic Standard	Finalised December 2024	Provides the foundation for national sustainability disclosure, establishing general principles and baseline requirements. Voluntary adoption is open ahead of mandatory rollout.
CSDS – Thematic Standards (e.g. Climate)	Drafts issued April 2025	Introduces sector-specific topics such as climate impact, energy transition, and workforce practices. Closely reflects the global IFRS S2 climate reporting framework.
Mandatory Reporting Begins	April 2026, covering FY 2025	Initially applies to roughly 400 large listed companies across China’s major stock exchanges. Compliance will expand gradually.
Full CSDS Implementation	Targeted by 2030	The system will become fully operational across most sectors, including medium-sized enterprises and foreign-invested companies.

These reforms represent a decisive transition from voluntary sustainability statements to legally required ESG disclosures—a development every international business should prepare for.

Structure & Key Principles of the CSDS in China

Three-Tier Framework

The Chinese Sustainability Disclosure Standards (CSDS) have been designed as a layered framework to ensure clarity, flexibility, and progressive adoption.

The three components are:

Basic Standards – The overarching rules governing sustainability reporting. They define key principles around governance, strategic planning, risk management, and measurable performance indicators.
Thematic Standards— Detailed requirements for high-impact topics such as carbon emissions, biodiversity, social welfare, and water stewardship. These standards evolve by industry to reflect material risks and sectoral priorities.
Application Guidance— Practical documents that explain how companies can collect data, verify metrics, and implement reporting efficiently, often including case studies and recommended methodologies.

For example, the Climate Disclosure Standard (CSDS No. 1) — released in draft form in 2025—asks companies to disclose their carbon footprint, adaptation plans, and energy-transition pathways in alignment with global climate reporting norms.

Core Principles

The CSDS framework is guided by several defining principles:

Double Materiality— Firms must assess both how sustainability factors influence financial outcomes and how their activities affect society and the environment.
Alignment with International Frameworks – The structure draws inspiration from the International Sustainability Standards Board (ISSB) to ensure cross-border comparability.
Phased and Proportionate Roll-out – Implementation will be gradual, beginning with major listed companies before expanding to a wider base of enterprises.
Reliability and Verifiability – All reported data should be consistent, traceable, and supported by clear evidence to strengthen stakeholder trust.
Flexibility in Methodology – Organisations may choose reporting methods that suit their operational maturity, provided disclosures remain transparent and auditable.

Four-Pillar Disclosure Framework

China’s ESG system mirrors the familiar four-pillar structure adopted globally, ensuring consistency and comparability:

Governance – Board oversight, accountability structures, and ESG integration into decision-making.
Strategy – Identification of sustainability risks and opportunities and their impact on long-term value.
Risk and Opportunity Management – Processes for assessing, managing, and monitoring ESG-related risks.
Metrics and Targets – Quantifiable indicators to evaluate performance and progress against objectives.

Stock Exchanges and Regulatory Phases in China

Exchange-Level Requirements

In 2024, China’s three major stock exchanges—Shanghai (SSE), Shenzhen (SZSE), and Beijing (BSE)—jointly introduced new sustainability reporting rules.

These require:

Companies within major indices such as the SSE 180, STAR 50, SZSE 100, and ChiNext to issue sustainability reports for the 2025 financial year by 30 April 2026.
Dual-listed firms, trading both domestically and overseas, to comply with the same timeline.
Other listed companies follow these guidelines voluntarily to maintain market credibility.

At present, the Beijing Exchange continues to promote voluntary disclosures but is expected to adopt mandatory rules later in the decade.

Phased Implementation Timeline

Period	Focus Area	Expected Outcome
2024–2026	Pilot phase and voluntary adoption	Companies begin aligning existing reports to CSDS structure and build internal capacity.
2026	Mandatory reporting for major listed firms	First compulsory ESG reports due, covering FY 2025.
2027–2029	Thematic expansion	Industry-specific reporting standards (e.g. climate, water, labour) become binding.
2030	Nationwide compliance	CSDS becomes the standard ESG reporting framework across most sectors and company sizes.

By 2030, China aims to achieve a unified disclosure regime consistent with international ESG practices, creating a level playing field for domestic and multinational companies alike.

Practical Steps for Businesses in china for 2026

To prepare effectively, companies — particularly those with operations or partnerships in China — should take the following actions:

Conduct a Gap Assessment

Evaluate how current sustainability disclosures compare with CSDS expectations. Identify areas where data, governance processes, or controls require strengthening.

Build Data Infrastructure

Create integrated data systems that link operational, environmental, and financial metrics. Automation tools can improve reliability and traceability.

Design a Reporting Framework

Structure ESG disclosures around the four CSDS pillars. Pilot voluntary reporting before the 2026 deadline to test readiness.

Cross-Jurisdiction Alignment

For multinational entities, map the Chinese standards against international frameworks such as the EU CSRD or ISSB to ensure consistent global reporting.

Strengthen Governance and Oversight

Train leadership teams on ESG responsibilities and incorporate sustainability metrics into executive performance reviews.

Monitor Regulatory Updates

Stay informed through regular policy tracking and public consultations. China’s sustainability regulations are evolving rapidly, and early awareness will reduce compliance risk.

Read our guide on: China’s Payroll and Tax Information

Key Risks, Challenges and Mitigation for businesses in China

Challenge	Impact	Recommended Response
Inconsistent or incomplete ESG data	Reduced comparability and credibility.	Implement centralised data management and external verification..
Divergent global standards	Duplication of effort across markets	Harmonise KPIs and reporting templates.
Limited internal capacity	Strain on smaller subsidiaries	Provide training and shared-service ESG support.
Unclear regulatory details	Risk of misinterpretation	Engage local legal and advisory experts.
Supplier compliance gaps	Disruption to the reporting chain.	Incorporate ESG clauses in procurement contracts and monitor suppliers.

Opportunities and Strategic Advantages for Business in China

Although the CSDS brings compliance obligations, it also offers significant upside for early adopters:

Enhanced Investor Confidence – Consistent ESG reporting improves transparency and attracts responsible investment.
Access to Sustainable Finance – Banks are increasingly linking loan rates to ESG performance.
Operational Efficiency – Systematic tracking of resource use and emissions often reveals cost-saving opportunities.
Reputation and Trust – Transparent reporting differentiates brands in a competitive market.
First-Mover Advantage – Companies ready ahead of regulation may qualify for incentives and favourable financing conditions.

What to Watch in 2026 and Beyond

Publication of final thematic CSDS standards on climate, biodiversity, and social factors.
Emergence of third-party assurance requirements for ESG disclosures.
Gradual extension of reporting obligations to SMEs and private enterprises.
Rapid development of green finance instruments, including sustainability-linked bonds and loans.
Ongoing efforts to harmonise CSDS with global standards such as ISSB, CSRD, and the EU taxonomy.
Heightened scrutiny of greenwashing and false sustainability claims.

Stay Compliant with Our Services to Grow Your Team in China.

Conclusion

China’s move towards mandatory ESG reporting marks one of the most significant regulatory shifts in Asia’s corporate landscape.
While compliance will demand new systems, skills, and governance structures, it also presents an opportunity to build stronger, more transparent businesses aligned with global sustainability goals.

Practical next steps for companies:

Commission an ESG readiness review tailored to Chinese regulations.
Begin preparing a pilot sustainability report for FY 2025.
Align internal metrics with both CSDS and home-country standards.
Develop supplier engagement programmes to ensure data consistency.
Establish ongoing policy monitoring to track regulatory developments.

At Galaxy Group, we assist companies in transforming ESG compliance into a source of strategic advantage—from data architecture to disclosure readiness and stakeholder alignment.

Get ESG-Ready with Galaxy Group

Our advisory specialists help multinational and domestic companies build ESG reporting systems, align with CSDS standards, and navigate China’s 2026 sustainability mandates.

FAQ’S

When do China’s ESG reporting rules become mandatory?

The first mandatory reports—covering the 2025 financial year—are due by 30 April 2026.

Who must comply initially?

Large-cap and dual-listed firms on the Shanghai, Shenzhen, and Beijing stock exchanges.

What is “double materiality”?

It refers to assessing both how sustainability risks affect a company’s performance and how that company’s actions affect society and the environment.

Will smaller companies also need to comply?

Yes. While initially voluntary, small and medium-sized enterprises will gradually be included before 2030.

How do these rules align with global ESG standards?

China’s CSDS mirrors international frameworks such as ISSB (IFRS S1/S2) and Europe’s CSRD, promoting cross-border consistency.

What should multinational businesses do now?

Conduct a readiness audit, enhance ESG data systems, and align reporting with both CSDS and home-market standards.

Startup Payroll Simplified: 11 Must-Know Tips for Founders

October 10, 2025 by galaxy

October 10, 2025

Startup Payroll Simplified: 11 Must-Know Tips for Founders

In today’s global business landscape, payroll has evolved into a strategic lever for credibility and growth. For start-ups expanding across Asia-Pacific (APAC), the challenge extends far beyond salary disbursement. It requires navigating diverse labour regulations, cross-border taxation, and benefits administration with precision. A single error can compromise compliance, delay operations, and erode trust among employees and investors.

Establishing a structured, future-ready payroll system is therefore not merely an operational necessity but a defining marker of sound governance and sustainable expansion.

This guide provides a region-specific framework for establishing compliant and scalable payroll dynamics. It highlights current trends in workforce management and the strategic role of Employer of Record (EOR) solutions, offering practical guidance for companies expanding into key APAC jurisdictions.

Table Of Content

Why Payroll Needs a Founder’s Attention from Day One?

A compliant and well-structured payroll system is fundamental to organisational credibility, yet it is frequently overlooked during the early stages of planning. Payroll extends beyond the distribution of salaries; it serves as the foundation for legal compliance, employee confidence, and sustainable growth.

Risks of Poor Payroll Management

Employee dissatisfaction with delayed or inaccurate payments
Regulatory penalties arising from non-compliance
Investor concerns during audits and due diligence processes

Strategic Benefits of Early Payroll Integration

Advantage	Outcome
Seamless onboarding	Compliant hiring from day one
Clean financial reporting	Credibility with investors and regulators
Scalable operations	Quick entry into new markets with built-in compliance
Lower legal exposure	Reduced risk of violations and disputes

In fast-growing markets, particularly across the APAC region, founders must treat payroll management as a strategic priority. Done right, it ensures business continuity, investor confidence, and operational readiness from the start.

Read Our Blog: Should a Small Business Outsource its Payroll Function?

3 Things Founders Must Know About Global Payroll Management in APAC

As start-ups scale into the Asia-Pacific (APAC) region, payroll quickly shifts from a back-office process to a strategic priority. Each market presents unique requirements that, if mishandled, can affect compliance, cash flow, and credibility. Founders should focus on three critical areas:

1. Regulations Vary Widely

Unlike operating within a single domestic framework, payroll in APAC requires navigating multiple tax structures, labour laws, and statutory obligations.

For example, Singapore mandates contributions to the Central Provident Fund (CPF), whereas Hong Kong does not have a mandatory social security system but does enforce the Mandatory Provident Fund (MPF). Vietnam, on the other hand, has strict rules around minimum wage and compulsory insurance. Failing to understand and apply these local requirements can quickly result in fines or regulatory scrutiny.

2. Compliance Drives Credibility

Payroll is directly tied to trust—both from employees and from investors. A missed salary payment, an incorrect tax filing, or non-compliance with local regulations can cause significant reputational damage.

For instance, late or inaccurate contributions in Singapore can lead to penalties, while in markets like the Philippines, the Department of Labour and Employment (DOLE) actively audits companies for payroll violations. Founders who prioritise compliant payroll systems signal professionalism, stability, and readiness for growth.

3. Strategy Matters

Payroll management reactively across different jurisdictions is neither scalable nor sustainable. A unified payroll strategy—supported by reliable systems or Employer of Record (EOR) solutions—ensures consistency, accuracy, and transparency across borders. This not only reduces the risk of human error but also helps founders plan for growth, manage costs effectively, and create a seamless employee experience across diverse markets.

How Does Payroll Complexity Vary Across APAC?

Country	Statutory Components	Payroll Challenges
Singapore	CPF, Income Tax, SDL	CPF accuracy, leave compliance
Hong Kong	MPF, Salaries Tax	MPF limits, annual filings
China	Social Insurance, Housing Fund, IIT	City-level rules, complex thresholds
Taiwan	Labour & Health Insurance, Pension	Dual contributions, monthly reporting
Macau	Social Security, Professional Tax	Foreign worker permits, tax exemptions
Vietnam	Social Insurance, Trade Union Fees	Regional wages, contract classifications
Thailand	Social Security, Personal Income Tax	Tiered tax, expat compliance
Philippines	SSS, PhilHealth, PAG-IBIG, 13th-Month Pay	Regional codes, benefit remittances
Japan	Health, Pension, Unemployment Insurance	Multiple deductions, complex schedules

The Cost of Non-Compliance

Errors in payroll filings or compensation can lead to regulatory penalties, business disruption, and reputational harm. In emerging markets, such missteps also affect employee retention and morale.

Strategic Consideration

Payroll is not just an operational function—it is a critical compliance framework. For companies expanding across APAC, access to local expertise and a market-specific payroll structure is essential to managing risk and supporting long-term growth.

EOR as a Fast-Track Strategy for Market Entry and Workforce Expansion

Operational efficiency, speed, and compliance are essential when entering new markets. The Employer of Record (EOR) model enables businesses to build a local workforce without the time and complexity of setting up a legal entity. As the legal employer, an EOR manages employment contracts, payroll, statutory contributions, social security, and tax compliance, allowing companies to engage talent seamlessly while retaining complete operational control.

When to Consider the EOR Model

Entry into a new market without a registered business entity
Employment in countries with complicated or unclear labour laws
Quick expansion into target markets
International short-term or project-based assignments

Strategic Benefits of the EOR Payroll Model

Benefit	Description
Accelerated Hiring	Talent can be onboarded within 1–2 weeks, enabling faster market activation.
Reduced Overhead	Eliminates the need to establish a legal entity, lowering entry barriers.
Risk Mitigation	Ensures compliance with local tax, labour, and statutory regulations.
Resource Efficiency	Internal teams remain focused on core operations rather than administrative tasks.

The EOR payroll model has become a practical solution for globally minded organisations seeking flexibility, speed, and compliance as they expand into new markets.

11 Must-Know Payroll Practices for Managing Operations

Managing payroll across Asia-Pacific requires strict compliance with local regulations, precise administration, and sensitivity to regional labour standards. The following practices are critical to maintaining legal integrity and operational efficiency.

1. Understand Local Statutory Requirements

Each APAC jurisdiction enforces specific payroll obligations, including deductions, employer contributions, and statutory filings.

Singapore: Central Provident Fund (CPF), Skills Development Levy (SDL), IRAS tax filings
Japan: Health insurance, pension, and unemployment contributions
Philippines: SSS, PhilHealth, PAG-IBIG Fund, 13th-month pay obligations

In-depth local knowledge is essential to ensure accuracy and avoid penalties.

2. Align Payroll with Local Holidays and Pay Cycles

Payroll schedules must reflect public holidays and banking practices.

Vietnam: Tet (Lunar New Year) often causes prolonged closures
Japan: Golden Week impacts payroll operations and remittances

Alignment avoids late payments and contractual breaches.

3. Implement FX-Optimised, Multi-Currency Payroll Systems

Cross-border operations often require salary disbursements in multiple currencies. Use platforms that provide:

Competitive exchange rates
Reduced transaction costs
Timely and traceable transfers

Such systems ensure payroll consistency and financial control.

4. Automate Tax Calculations and Statutory Filings

Automation reduces the risk of manual errors and non-compliance.

Apply jurisdiction-specific tax rates and thresholds
File returns to local authorities on time
Generate compliant records for audit purposes

Automation supports both accuracy and regulatory adherence.

5. Integrate Time and Leave Management

Payroll accuracy relies on real-time attendance and leave tracking.

Sync systems with national calendars and rest day regulations
Record overtime and time-off requests
Calculate entitlements like holiday pay and shift differentials

This integration improves transparency and payroll integrity.

6. Stay Updated on Regulatory Changes

Labour laws in jurisdictions such as China and Indonesia are subject to frequent changes. To remain compliant:

Monitor updates from labour ministries and official gazettes
Engage local advisors to assess policy impact
Update payroll systems and practices regularly

Proactive compliance reduces risk exposure.

7. Offer Statutory and Competitive Benefits

Beyond legal minimums, enhanced benefits support retention and employer brand value.

Group health insurance
Wellness or mobility allowances
Learning and development reimbursements

Market-aligned packages improve workforce satisfaction and reduce attrition.

8. Enforce Data Privacy and Security

Payroll data must comply with local data protection laws and regulations.

Singapore: Personal Data Protection Act (PDPA)
Philippines: Data Privacy Act of 2012
China: Personal Information Protection Law (PIPL)

Use encrypted systems, restrict access, and maintain internal audit trails.

9. Handle Exits and Final Settlements Carefully

Offboarding must comply with jurisdiction-specific rules.

Honour notice periods and severance formulas
Settle unused leave and outstanding dues
Deliver accurate final payslips and required documents promptly

Proper handling mitigates legal and reputational risks.

10. Maintain Payslip Accuracy and Transparency

Payslips should include all mandatory and company-specific components:

Gross pay and fixed allowances
Tax and statutory deductions
Employer contributions
Net payable salary and benefit accruals

Clear payslips foster compliance and trust.

11. Localise Employment Contracts

Standardised templates are insufficient across jurisdictions. Contracts should:

Reflect local wage structures, working hours, and leave laws
Define enforceable terms for termination and dispute resolution
Align with region-specific statutory clauses and employment codes

Tailored contracts ensure legal enforceability and reduce litigation risks.

Streamlined Global Growth with EOR Support

Employer of Record (EOR) solutions enable companies to establish a compliant workforce in new markets without the need to set up a local legal entity. By overseeing all employment obligations in line with local regulations, EORs simplify cross-border operations and ensure seamless compliance.

Key Capabilities

Local Onboarding

Manages recruitment processes, background verifications, and documentation in accordance with local hiring practices.

Use contracts and human resource policies

Prepares jurisdictional agreements and company policy in a legally appropriate format and language.

Grant of Statutory Benefits

Empowers precise registration and continuous fulfilment of compulsory insurance, pension, and social security programs.

Compliant Offboarding

Handles terminations, final payments, and statutory clearances in line with local employment laws, ensuring legal and procedural integrity.

By consolidating these critical functions, EOR services enable companies to scale globally with reduced risk and greater operational efficiency.

Choosing the Right Global Payroll Provider: A Founder’s Checklist

A payroll solutions provider should deliver far more than salary processing. It must safeguard compliance, integrate seamlessly with existing systems, and provide consistency across borders. The checklist below highlights the essential criteria for evaluating and selecting a dependable global payroll provider.

Key Evaluation Criteria

Category	What to Look For
Geographic Coverage	Ensure the provider operates in all the markets you wish to expand into, such as Singapore, Japan, Vietnam, China, and others that align with your plans.
Regulatory Compliance	Ensure they handle payroll tax filings, statutory contributions, employment contract vetting, and country-specific labour laws.
System Integration	Check whether their platform integrates smoothly with your existing HR, finance, and time-tracking systems.
Pricing Transparency	Look over the whole pricing structure ahead of time, paying special attention to the fees for compliance management, onboarding, and foreign exchange.
Employee Support	Assess the level of assistance provided to staff members, including helpdesk services, local HR documentation, and onboarding support.
Exit Handling	Ensure the provider complies with local laws regarding notice periods, final compensation, and statutory clearances when handling offboarding procedures.

conclusion

Payroll is a cornerstone of sound governance, particularly in regions such as the Asia-Pacific, where regulatory frameworks are complex and continually evolving. For founders, building a scalable and compliant payroll system is critical to retaining talent, mitigating risk, and driving sustainable growth.

Employer of Record (EOR) solutions offer a strategic advantage—allowing start-ups to expand into new markets quickly, without the delays and administrative burden of setting up local entities, while remaining fully compliant with employment laws.

At Galaxy Payroll Group, we support start-ups and global organisations with end-to-end global payroll solutions, EOR services, and compliance solutions across nine key markets. With deep local expertise and integrated systems, we empower founders to scale confidently, reduce risk exposure, and focus on growing their businesses.

Ready to Simplify Payroll Across APAC?

With Galaxy Group taking care of compliance, payroll, and onboarding, you’re free to focus on growing your business.

FAQ’S

What does an Employer of Record (EOR) do?

An EOR acts as the legal employer in another country. They handle contracts, payroll, benefits, and compliance so you can expand without setting up a local company.

How does an EOR help with market entry?

An EOR lets you hire local talent quickly and legally. This cuts down on setup time, paperwork, and risks when entering new markets.

How is an EOR different from hiring contractors?

EORs provide full, compliant employment with benefits and taxes managed. Contractors may risk misclassification and are better suited for short-term work.

How fast can I hire through an EOR?

Usually within 1–2 weeks, depending on the country, thanks to the EOR’s ready-made legal and HR setup.

What should I look for in an EOR provider?

Check their global coverage, compliance strength, HR/payroll integration, transparent pricing, and local employee support.

Understanding Hong Kong Salaries Tax for Businesses

October 7, 2025 by galaxy

October 7, 2025

Understanding Hong Kong Salaries Tax for Businesses

Hong Kong is recognised as one of Asia’s most efficient and transparent tax jurisdictions, offering a stable and business-friendly environment for international enterprises. Its straightforward framework is designed to foster growth, minimise administrative burden, and provide clarity for both employers and employees. For multinational organisations, particularly those managing expatriate assignments or cross-border payroll, understanding the salaries tax regime is critical to effective remuneration planning and workforce strategy.

Accurate and timely compliance is not only a legal obligation but also central to operational efficiency and corporate reputation. Missteps can result in penalties and unnecessary costs, while a well-informed approach—often supported by professional accounting & tax service providers—enables companies to optimise compensation packages and remain fully aligned with statutory requirements. This guide provides a detailed overview of Hong Kong’s salaries tax system, including assessment methods, applicable rates, taxable income categories, and key compliance considerations for international employers.

Table Of Content

Why Hong Kong’s Tax System Appeals to Foreign Businesses?

Multinational corporations often establish operations in Asia, with Hong Kong a preferred choice due to its reputation as one of the region’s most stable and efficient tax jurisdictions. Its tax framework is built on clarity and predictability—qualities highly valued by international employers managing regional headquarters or overseeing cross-border payroll.

Territorial Taxation Model

Dividends, capital gains, and income derived from sources outside the country are exempt from taxes.
Tax liability is limited to income that arises in or is derived from Hong Kong.
For businesses with globally mobile employees, this strategy significantly lowers international tax exposure and streamlines administration.

Absence of Indirect Personal Taxes

There is no capital gains tax, estate duty, value-added tax (VAT), or general sales tax.
The resulting tax burden on individuals is limited and predictable.
Employers benefit from streamlined compensation planning and fewer compliance requirements.

Low and Competitive Tax Rates

The maximum salary tax rate is capped at 17%.
Individuals are assessed under both progressive and standard methods, with the Inland Revenue Department applying the calculation that results in the lower tax liability.
This system enhances efficiency across a wide range of income levels.

Stable Legal and Regulatory Framework

Tax legislation in Hong Kong is consistent and rarely subject to sudden amendment.
This predictability enables accurate payroll forecasting, long-term financial planning, and operational stability.
Businesses are better positioned to manage risk and ensure continuity in workforce planning.

Efficient, Employer-Oriented Tax Administration

The Inland Revenue Department provides structured, digital processes for tax filings and documentation.
Employers are supported through clear guidance and procedural transparency.
The system includes automated selection of the most favourable tax computation method for the employee, reducing manual intervention.

Strategic Positioning for Regional Operations

Hong Kong’s tax framework supports organisations managing regional functions, including mobile teams and expatriate personnel.
It enables centralised payroll management and simplifies deployment across Asia-Pacific jurisdictions.

These elements collectively position Hong Kong as one of the most commercially advantageous tax environments for international business. Its well-defined legal structure and administrative efficiency provide the clarity required for strategic growth while supporting compliance and cost control across regional operations.

Overview of Salaries Tax in Hong Kong

In Hong Kong, wage taxation is linked to employment income, office work (including directorships), and pensions earned within the jurisdiction. The taxation is territorial, meaning that only income earned from services rendered in Hong Kong is subject to taxation. Employment income earned outside the jurisdiction is outside taxation, irrespective of whether the taxpayer is a tax resident or not. Territoriality forms the bedrock of Hong Kong as a world-class international business and taxation hub, making it a prime focus area for firms offering accounting & tax services to global businesses.

Categories of Taxable Income

The scope of salaries tax is comprehensive, covering various forms of remuneration and employment-related benefits. Income commonly subject to tax includes:

Salaries, Wages, and Bonuses

Regular pay, performance incentives, commissions, gratuities, and overtime payments fall within this category.

Cash and Non-Cash Benefits

Benefits such as housing, transport, education allowances, and other perks provided as part of the employment package are assessable.

Employer-Provided Housing or Housing Allowance

Where the employer or a housing allowance provides accommodation, a notional rental value is assessed and added to the employee’s taxable income.

Excess Contributions to Retirement Schemes

Employer contributions that exceed statutory limits under the Mandatory Provident Fund (MPF) or the Occupational Retirement Schemes Ordinance (ORSO) are considered taxable income.

Equity-Based Compensation

Share options and stock awards are taxed at the time of vesting or exercise, in accordance with the relevant provisions.

Key Exemptions and Administrative Rules

60-Day Rule

Employees who spend 60 days or fewer in Hong Kong during the assessment year are generally exempt from salaries tax. This exemption does not extend to directors or airline crew, who are taxed regardless of physical presence.

Director’s Fees

Fees paid to directors are taxable if the company is centrally managed or controlled from Hong Kong, regardless of whether the duties are carried out abroad.

Offshore Employment Relief

Employees with offshore employment arrangements may be eligible for partial exemption, depending on the number of days spent working outside Hong Kong. This requires substantiation through employment contracts, travel logs, and payroll records.

Employer Responsibilities

Employers in Hong Kong must ensure accurate classification of income, proper remuneration structuring, and full compliance with tax reporting requirements. Penalties, a reevaluation of tax obligations, or damage to one’s reputation may result from incorrect income classification or failure to maintain proper records.

To meet regulatory standards, it is essential to maintain clearly drafted employment contracts, ensure consistency in payroll processing, and accurately report all forms of employee compensation. Adhering to these requirements supports compliance with the Inland Revenue Department and helps maintain operational and reputational integrity in a competitive business environment.

How Are Salaries Tax Calculated and Applied in Hong Kong for 2025/26?

In Hong Kong, there are two methods for calculating salary tax, and each technique is used in every instance. After calculating the liability under each method, the Inland Revenue Department (IRD) selects the one that results in the lowest tax amount. The purpose of this dual-method structure is to expedite the administrative process and guarantee equity across income levels.

1. Progressive Rate Assessment

This method is based on an individual’s Net Chargeable Income, which is calculated as:

Total Employment Income − Allowable Deductions − Personal Allowances

According to Gov.hk, the official website of the Hong Kong government, the applicable progressive tax bands for the 2025/26 year are as follows:

Net Chargeable Income (HKD)	Tax Rate
First 50,000	2%
Next 50,000	6%
Next 50,000	10%
Next 50,000	14%
Remainder	17%

Our quick guide on : Effective Taxation & Tax Planning Strategies for Businesses in Hong Kong

This method typically benefits individuals who qualify for multiple deductions and personal allowances.

2. Standard Rate Assessment

The standard rate applies to Net Assessable Income, calculated as:

Total Employment Income − Allowable Deductions

Under this method, personal allowances are not deducted. The flat tax rates, as stated by Gov.hk, are as follows:

15% on the first HKD 5 million of net assessable income
16% on any amount exceeding HKD 5 million

This calculation method often applies to high-income earners whose available deductions and allowances are minimal.

Practical Illustration of Tax Calculation

Referencing the official tax guide issued by the IRD, consider an individual earning HKD 800,000 per annum, with allowable deductions of HKD 100,000 and personal allowances amounting to HKD 132,000.

Progressive Rate Method:

Net Chargeable Income = 800,000 − 100,000 − 132,000 = HKD 568,000
The tax would be calculated as follows:

First 50,000 @ 2% = 1,000
Next 50,000 @ 6% = 3,000
Next 50,000 @ 10% = 5,000
Next 50,000 @ 14% = 7,000
Remaining 368,000 @ 17% = 62,560
Total Tax = HKD 78,560

Standard Rate Method:

Net Assessable Income = 800,000 − 100,000 = HKD 700,000
Tax at 15% = HKD 105,000

In this scenario, the progressive rate method results in a lower tax liability and would therefore be applied.

Considerations for Employers

For employers managing local or regional payroll in Hong Kong, it is essential to understand how these tax calculations impact net salary, benefits structuring, and total compensation costs. Proper classification of income and adequate documentation of deductions ensure accurate assessment and compliance with local tax laws.
Engaging reliable tax and accounting services or consulting with a specialised tax and accounting firm can support accurate payroll processing and align operations with the current framework for tax compliance in Hong Kong. This is particularly important for multinational organisations that manage employee assignments across borders or offer equity-based compensation.

What Allowances and Deductions Apply Under Salaries Tax in Hong Kong?

To reduce the tax burden on its residents, Hong Kong’s tax system offers several exemptions and deductions. Employees who have dependents, housing expenses, retirement costs, and educational expenses all benefit from them.

As per the Inland Revenue Department (IRD) in its official reports, i.e., the Personal Allowances Table and Taxpayer Pamphlets, the following reliefs are available in the year of assessment 2025/26:

Personal Allowances (2025/26)

Allowance Type	Amount (HKD)
Basic Allowance	132,000
Married Person’s Allowance	264,000
Child Allowance (per child)	130,000 / 260,000 (year of birth)
Dependent Parent (aged 60+)	100,000 (co-residing) / 50,000 (not)
Disabled Dependant Allowance	75,000
Single Parent Allowance	132,000

These allowances serve to recognise familial responsibilities and provide financial relief to taxpayers supporting immediate or extended family members.

Deductible Expenses

Apart from allowances, individuals are also permitted to claim deductions for specific types of expenses incurred during the tax year. The highest amounts deductible in 2025/26 are:

Deduction Type	Maximum Deduction (HKD)
Home Loan Interest	100,000 – 120,000
Elderly Residential Care Expenses	100,000
Self-Education Expenses	100,000
Mandatory Provident Fund (MPF)	18,000
Voluntary MPF / Deferred Annuities	Up to 60,000 (combined)
Domestic Rent	100,000 – 120,000
Assisted Reproductive Treatment	100,000

All deduction claims must be substantiated with appropriate documentation, such as tenancy agreements, medical receipts, proof of tuition fees, or official MPF contribution statements.

For employers, particularly those managing payroll obligations for diverse employee profiles, it is essential to remain current with the latest IRD guidance. Integrating applicable allowances and deductions into salary structuring ensures complete alignment with local regulations and supports effective tax compliance in Hong Kong.

What Should Multinational Employers Know About Salaries Tax Compliance in Hong Kong?

To ensure full compliance with tax law in Hong Kong, multinational employers need to adopt the following best practices:

1. One must ensure the source of income.

Taxability will be based on where the employment contract is performed, where compensation is paid, and the employer’s principal place of business.

2. Use the 60-Day Exemption.

Workers physically on duty in Hong Kong for no more than 60 days in a year can be exempted. Proper travel records are required.

3. Properly State Director’s Fees

Director’s fees are tax-deductible if the company is centrally controlled in Hong Kong, even if duties are exercised elsewhere.

4. Provide Equity Compensation

Stock awards and stock options are taxed when they vest or when they are exercised. They must be valued appropriately and reported.

5. Keep Documentation

Employees are reminded to keep supporting documents for deductions and allowances, such as lease contracts, MPF statements, and receipts.

6. Track Budget Adjustments

Yearly budgetary adjustments can impact tax bands, allowances, or introduce reliefs. Keeping abreast allows for genuine payroll planning.

Hiring the services of a professional tax and accounting company, or procuring reliable tax and accounting services, is key to ensuring compliance, avoiding risks, and keeping pace with the changing Hong Kong payroll requirements.

Conclusion

Hong Kong has one of the best-articulated and most beneficial tax regimes in the Asia-Pacific. The imposition of salary tax liabilities, however, requires careful operation and comprehensive knowledge of prevailing regulatory conditions. This includes the proper determination of income classification, the accurate application of deductions, and strict compliance with annual legislative changes.

For international businesses managing regional payrolls or expatriate workforces, the complexity of cross-border compliance requires more than internal oversight. It calls for experienced, jurisdiction-specific support.

Galaxy Payroll Group offers integrated payroll, taxation, and compliance solutions designed for companies operating in Hong Kong and across the region. With established local expertise and a practical understanding of tax administration, Galaxy ensures employers remain compliant, well-prepared, and free to focus on their core business objectives.

Streamline Your Hong Kong Payroll Strategy

Avoid penalties and streamline operations with local expertise in salaries tax and employer obligations.

FAQ’S

What income is subject to salaries tax in Hong Kong?

Salaries tax applies to income earned from employment, office (such as directorships), and pensions arising in or derived from Hong Kong. Foreign-sourced income is not taxable.

What are the salaries tax rates in Hong Kong for 2025/26?

Salaries Tax rates in Hong Kong are calculated under two methods, with the lower amount applied:

Progressive rates up to 17% on net chargeable income
Standard rates of 15% (up to HKD 5 million) and 16% (above HKD 5 million)

Who qualifies for the 60-day exemption rule in Hong Kong?

Individuals present in Hong Kong for 60 days or less during the tax year may be exempt, unless they are company directors or members of the airline crew.

What deductions and allowances can reduce salary tax in Hong Kong?

Taxpayers may claim allowances for dependents, housing, and education, as well as deductions for home loan interest, MPF contributions, voluntary annuities, and domestic rent.

Is tax relief available for income taxed overseas?

Yes. A tax credit may be claimed for foreign income taxed in jurisdictions with which Hong Kong has a double tax treaty, provided that proper documentation is submitted.

Managing Payroll in Japan

August 30, 2025 by galaxy

August 30, 2025

Managing Payroll in Japan

Japan’s employment landscape is shifting, driven by labour law changes, an ageing workforce, and rising demand for specialised talent. Payroll here is more than salary processing—it’s a legally regulated system tied to taxes, social insurance, and mandatory bonuses, influenced by factors like residency, role, and working hours.

As workforce dynamics evolve, payroll has become a strategic function requiring legal compliance, cultural awareness, and employee focus. This blog outlines Japan’s payroll framework, key compliance rules, and practical guidance for managing it effectively.

Table Of Content

What Are the Key Components and Legal Requirements of Japan Payroll?

Running payroll in Japan requires precision and strict adherence to regulatory requirements. From accurate tax deductions to meeting tight payment deadlines, every process must comply fully with the law. Beyond fulfilling statutory obligations, effective payroll management demonstrates a company’s commitment to transparency, reliability, and respect for its employees.

Key Components of Payroll in Japan :

1. Basic Salary and Allowances

The employee’s base pay, which is specified in the employment contract and paid regularly, is the main component of every payroll. Furthermore, many businesses provide additional funds for expenses such as housing, transportation, or supporting dependents. These extras are a common way to help employees beyond the necessities, though they can vary depending on the company, industry, and role of the employee.

2. Working Hours and Overtime Pay

Japan has strict guidelines around working hours. A typical workweek is capped at 40 hours, with no more than 8 hours a day. If employees clock in extra hours, they must be compensated—usually at 25% above their usual rate. This rate goes up even further for late-night work or public holiday shifts, reflecting the value placed on work-life balance and fair pay.

3. Bonuses

Bonuses are a big part of Japanese corporate life. While not legally required, it’s customary for companies to pay them twice a year—often in the summer and winter. These payouts can equal one or two months of salary and are seen as a way to reward loyalty and performance.

4. Deductions and Contributions

Every month, employers need to set aside specific amounts from their employees’ salaries. This includes income tax, resident tax, and contributions to Japan’s social insurance programs. These programs help cover health insurance, pension, unemployment benefits, and long-term care. They offer essential support and peace of mind for employees and their families.

5. Payslips and Payroll Reports

Payslips are standard practice in Japan. They give employees a transparent look at how their salary breaks down—what’s been added, what’s been deducted, and what they’re taking home. Behind the scenes, companies must also keep detailed payroll records to stay on top of taxes and social contributions.

Legal Responsibilities Every Employer Must Fulfil

1. Enrolling Employees in Social Insurance

Employers must enrol full-time employees in Japan’s national social insurance program. This ensures that workers can access necessary benefits. The Japan Pension Service and relevant health insurance organisations oversee this program.

2. Handling Withholding Tax

In addition to paying salaries, employers must use official tax tables to determine and withhold the appropriate amount of income tax. By doing this, taxes are paid accurately all year long, preventing unpleasant surprises.

3. Staying Compliant with Labour Laws

From drawing up employment contracts to paying wages on time and respecting working hour rules, businesses must follow the Labour Standards Act. Failing to do so can result in penalties—and damage a company’s reputation with both authorities and employees.

4. Making Year-End Tax Adjustments (Nenmatsu Chosei)

Companies are expected to make a final tax adjustment for every employee at the end of the year. This guarantees that all taxes paid during the year, including any deductions for dependents or insurance, reflect the employee’s actual circumstances. It’s essential to end the payroll year on a positive note.

Choosing the Right Payroll Company in Japan: Local, Global or Regional

Criteria	Local Providers	Regional Providers	Global Providers
Regulatory Expertise	Deep understanding of Japan’s payroll laws, labour codes, and social security norms.	Covers Japan along with broader Asia-Pacific regulations.	Offers compliance at a global level, with coverage of Japanese rules as part of the package.
Language & Local Support	Operates in Japanese, with local teams familiar with cultural and business nuances.	Often, bilingual support teams are familiar with regional expectations.	Centralised, multilingual service—may not always provide native-language assistance.
Technology Platforms	May rely on traditional systems or offer basic digital tools.	Provides mid-level automation and limited integrations.	Uses advanced platforms with automation, analytics, and integrations at scale.
Scalability	Tailored for businesses operating solely in Japan.	Suitable for companies expanding across the Asia-Pacific.	Built for global teams and multi-country payroll management.
Cost Structure	Generally, it is more cost-effective for domestic operations.	Balanced pricing with value-added regional features.	Premium-priced, with broad functionality and enterprise-grade support.
Cultural Fit	High alignment with Japanese work culture and local employee expectations.	Understands a mix of regional cultures and workplace norms.	Standardised service model, which may overlook country-specific nuances.
Best Fit For	Domestic companies with no plans for regional expansion.	Businesses are growing across multiple Asian markets.	Enterprises managing global workforces and international payroll compliance.

Japan Employment Laws That Impact Payroll Operations

Comprehending the legal framework is essential for processing payroll accurately in Japan. Payroll system implementation and management are influenced by a number of crucial labour laws that regulate compensation, deductions, and employee protections.

Labour Standards Act (LSA)

This is the bedrock of all payroll regulations in Japan. It sets the rules every employer must follow when it comes to wages and working hours.

1. Wages must be paid at least once a month, in full, and directly to the employee.

2. Standard working hours are capped at 40 hours per week (or 8 hours per day).

3. Overtime must be compensated with additional pay—higher rates apply for late-night work, weekends, or public holidays.

4. The Act also outlines termination procedures, mandatory rest days, and rules on work breaks.

Minimum Wage Law

Minimum wages aren’t uniform in Japan—they vary by prefecture and are updated annually.

1. Each region sets its minimum hourly wage, and employers must stay updated on the latest rates.

2. Payroll must reflect the local rate based on where the employee works, not where the company’s head office is located.

3. Businesses with multiple locations need to monitor and update wage compliance regularly to avoid penalties.

Social Insurance Laws

Social insurance is non-negotiable in Japan—and it plays a key role in payroll.

1. Employers are legally required to register eligible employees under four main insurance programs:

Health Insurance
Employee Pension Insurance
Unemployment Insurance
Workers’ Compensation Insurance

2. Contributions are shared between the employer and the employee.

3. Deductions must be accurately calculated and withheld every month.

4. Rates vary depending on age, salary, and insurance type, so payroll must be precise and updated.

Income Tax Withholding

Japan follows a Pay-As-You-Earn (PAYE) system, which puts the onus on employers to manage monthly tax deductions.

1. Employers are expected to withhold income tax from salaries every month—it’s a regular part of payroll in Japan.

2. The amount deducted depends on several factors, including the employee’s income, the number of dependents, and their residency status.

3. At the end of the year, there’s a process called nenmatsu chosei, which helps balance out any overpaid or underpaid taxes.

4. Getting tax calculations wrong can create compliance problems, so it’s essential to be precise and double-check everything.

Equal Pay for Equal Work

Recent legal reforms are pushing companies toward fairer pay structures.

1. Non-regular employees—like part-timers, contract workers, or dispatch staff—must be compensated fairly based on the job they do, not their employment status.

2. This includes salaries, bonuses, and benefits.

3. As a result, companies often need to restructure their payroll systems and review internal policies to ensure compliance.

Working Hours and Overtime Regulations

Time tracking isn’t just a good habit—it’s something every employer in Japan is legally required to do.

1. The law limits working hours to 8 hours a day and 40 hours a week.

2. If employees work beyond that, overtime pay kicks in:

125% of their regular rate for standard overtime
135–150% for late-night shifts or work on holidays

To stay compliant, companies need a proper time-tracking system that records working hours accurately and matches up with labour regulations.

Paid Leave Entitlements

Paid leave is a statutory right, and it directly affects payroll records and planning.

1. Employees earn paid leave after six months of continuous employment.

2. The number of leave days increases with years of service.

3. Employers are responsible for:

Tracking leave accruals
Ensuring employees take the leave
Reflecting paid leave accurately in payroll calculations

Termination and Severance Guidelines

When employment ends, employers have a legal and financial responsibility to settle dues properly.

1. Severance isn’t mandated by law, but many companies offer it as part of company policy or contracts.

2. Final payroll must include:

All outstanding wages
Payment for unused paid leave
Any applicable deductions

3. Proper documentation and notice periods must be followed to ensure lawful termination.

Minimum Wage and Average Salary Trends in Japan

Japan’s pay rates are more than just figures on a spreadsheet; they are a reflection of the nation’s changing economic landscape, cost of living, and labour standards. Understanding these standards enables you to make reasonable, competitive offers and maintain compliance when hiring in Japan.

Metric	Value (2025)	What It Means for Employers
National Minimum Wage	~¥1,118 per hour	A historic ¥63/hour increase—the biggest in over 20 years—means payroll budgets need a fresh look.
Regional Wage Variance	¥951–¥1,163 per hour	Big cities like Tokyo sit at the top end, while smaller regions have lower rates. Location matters when setting pay.
Average Annual Salary	~¥5.42 million JPY (~US $37K)	A useful benchmark for full-time roles across most industries.
Median Monthly Salary	¥472,000 (~US $3,300)	Gives a truer sense of what most employees take home.
Entry-Level and Part-Time Pay	~¥290,000/month; ~¥1,597/hour	Handy when planning packages for junior hires, interns, or hourly workers.

Key Takeaways for Payroll Planning

1. Wages are Rising

The most significant minimum wage jump in decades means higher payroll costs for both existing staff and new hires.

2. Location makes a Difference

Pay in Tokyo can be hundreds of yen per hour higher than in regional areas, so one-size-fits-all salaries don’t always work.

3. Look at the Median, not just the Average

This gives a more realistic view of what employees earn and helps keep your offers competitive.

4. Plan for all types of hires

Whether you’re taking on full-time staff, part-timers, or short-term contractors, knowing market rates keeps you ahead of the curve.

Is Payroll Outsourcing in Japan the Right Move for a Business?

Managing payroll in Japan involves more than just cutting paychecks—it’s about staying on top of complex regulations, reporting duties, and social insurance contributions. For many companies, especially those growing or expanding, outsourcing payroll can be a smart way to keep things simple, reduce compliance risk, and free up time to focus on the bigger picture.

Here’s a quick breakdown of the benefits, challenges, and strategic value of payroll outsourcing, based on what matters when making the decision.

Criteria	Pros	Cons	Strategic Value
Compliance with Japanese labour laws	Accurate statutory handling	Limited in-house control	Reduces legal exposure
Resource allocation	Saves time on admin tasks	Initial setup efforts	Frees up internal teams for core work
Payroll accuracy	Minimises calculation errors	Vendor response times may vary	Maintains payroll reliability
Operational costs	Reduces the need for the whole payroll staff	May involve service fees	Predictable and scalable cost structure
Business expansion	Easily scales across locations	Switching providers can be disruptive	Supports multi-site or global growth
Data handling & security	Professional data safeguards	Dashboard access may differ	Protects sensitive employee and financial data

Payroll Dynamics in Japan: What’s Changing and Why It Matters

In Japan, payroll is no longer just an administrative task happening quietly in the background. It’s becoming a strategic function that directly supports business growth. From new regulations to rising employee expectations and rapid digital transformation, several key trends are reshaping how companies manage compensation today.

Automation of Payroll Processes

1. Businesses are adopting automated payroll tools to minimise manual errors and reduce processing time.

2. These systems help stay on top of local tax and insurance requirements by flagging compliance gaps.

3. The result: more accurate, on-time payments and a lighter administrative load for HR and finance teams.

Shift to Digital Payment Methods

1. Digital options like PayPal and mobile wallets are now complementing traditional bank transfers.

2. This offers faster, more flexible payment experiences, especially valued by younger employees and remote talent.

3. It also enables smoother integration with other digital HR systems.

Flexible Compensation Models

1. Employers are experimenting with new pay models like early wage access, remote work allowances, and project-based bonuses.

2. These personalised benefits help companies stand out in a competitive hiring market.

3. They also reflect a shift toward employee-centric payroll practices.

Enhanced Focus on Compliance and Risk Management

1. With labour laws and tax codes frequently updated, staying compliant is more complex than ever.

2. Payroll platforms with built-in alerts and audit logs help mitigate legal risks.

3. Taking a proactive approach helps protect your company’s reputation while showing your team that you’ve got their back.

Integration with Global Payroll Systems

1. Companies operating across borders are moving toward unified payroll platforms.

2. This supports better handling of expat salaries, multi-currency payments, and localised reporting.

3. The outcome is greater visibility and control over workforce costs globally.

How Can You Manage Payroll Across Borders While Staying Compliant in Japan?

Managing payroll across countries isn’t just about paying people on time. It’s about giving your team a smooth, consistent experience—no matter where they are. If operating in Japan or expanding into it, here are some practical ways to build a strong and scalable payroll setup:

1. Build a Consistent Payroll Framework

It helps to create standard processes across all regions. When the structure is consistent, onboarding new countries becomes much easier. Everyone knows what to expect, and it cuts down on confusion when scaling up.

2. Put Local Compliance First

Japanese labour laws, tax systems, and social insurance rules are unique—and they change often. You don’t need to track everything yourself, but you do need local expertise. Partnering with people who know the terrain helps you avoid missteps.

3. Centralise Your Payroll

Using a unified system means you’re not juggling spreadsheets or regional tools. You get a clear view of payroll activity in every location, can generate reports easily, and ensure each country follows the same baseline of accuracy.

4. Stay Adaptable with Currency and Tax Rules

Exchange rates fluctuate. Tax slabs shift. Payroll software that can handle real-time changes takes the stress out of these variables and keeps salary calculations on point. That’s key to maintaining high trust and minimising errors.

5. Make Data Security a Priority

More countries, including Japan, are tightening data privacy regulations. Your payroll system should be equipped to keep sensitive information safe. This isn’t just about compliance—it’s about protecting your team and your brand.

6. Cover All Types of Workers

Whether someone is full-time, on a contract, or working remotely from another country, your payroll should accommodate different setups. Japan’s employment categories have specific rules, so flexibility is essential.

7. Run Regular Payroll Reviews

Set time aside to audit your payroll system. Even minor inconsistencies can turn into larger compliance risks over time. Routine check-ins keep things clean and show regulators that you’re being proactive.

8. Connect Payroll with HR and Finance

Your payroll doesn’t exist in a vacuum. When it talks to your HR and finance systems, you get better visibility on headcount, costs, and projections. It also reduces redundant work and accelerates internal processes.

What Should You Look for When Selecting a Payroll Company in Japan

Picking a payroll partner in Japan isn’t just about checking off requirements. It’s about finding someone who understands the way things work here and can make payroll simple for your team. Here’s what to keep in mind:

1. Deep Understanding of Local Rules

Japan has specific laws around payroll, taxes, and social insurance. You’ll want a provider who knows these inside out so you don’t have to worry about compliance.

2. Handles Both Local and International Teams

If you’re managing employees in different countries, choose someone who can support global operations without missing local details.

3. Clear Communication (in English and Japanese)

Communication should be easy. It helps if your provider can explain everything in plain English and also handle local discussions in Japanese.

4. Smart and Secure Tech

Look for a platform that’s easy to use, automates routine tasks, and protects your team’s data according to Japanese standards.

5. Flexible Support That Scales With You

Whether you’re growing or adjusting your operations, your payroll setup should keep up—not hold you back.

6. Transparent Pricing

No one likes surprise fees. Make sure the pricing is straightforward and clearly outlined from the start.

7. Proven Experience

It helps to work with a provider who’s done this before. Ask for examples or case studies to see how they’ve supported similar businesses.

conclusion

Running payroll in Japan isn’t just about paying people on time. It’s about navigating local rules, earning employee trust, and staying on the right side of compliance. From tax to social insurance to reporting, Japan’s regulations don’t always follow global norms. That’s why having the proper support can make your life a lot easier and your operations a lot smoother.

At Galaxy Group, we work with businesses to simplify payroll operations in Japan. From hiring your first employee and exploring EOR solutions for quicker market entry to fine-tuning existing payroll processes, our team offers local knowledge and hands-on support. We help you stay compliant, reduce manual effort, and create a smoother experience as you grow your team in Japan.

Our Quick Guide on : A Guide to Attaining Work Visas in Japan: Eligibility, Essentials and Key Insights

Need help running payroll in Japan?

Let’s simplify your setup and keep you compliant.

FAQ’S

Is it hard to run payroll in Japan as a foreign company?

It can be tricky without local expertise. Japan has unique labour laws, tax rules, and reporting standards. That’s why many businesses prefer to partner with a local payroll company to get it right from day one.

What do I need to know about taxes and social insurance in Japan?

Employers in Japan are responsible for withholding income tax and contributing to health insurance, pension, and unemployment insurance. These rules change often, so staying up to date is essential.

Can I outsource payroll in Japan completely?

Yes, most companies do. Outsourcing your payroll means a local partner handles everything—from salary calculations and payslips to tax filings and social insurance submissions.

How are salaries typically paid in Japan?

Salaries are usually paid monthly via bank transfer. It’s also common to provide bonuses twice a year. Timeliness and accuracy are highly valued by employees here.

What’s the best way to stay compliant while scaling in Japan?

The easiest way is to work with a payroll provider who understands Japanese regulations. They’ll help you manage payroll, reporting, and contributions, even as your team grows or changes.

Guide to Corporate Tax Filing in Singapore 2025

August 30, 2025 by galaxy

August 30, 2025

Guide to Corporate Tax Filing in Singapore 2025

As we enter the second half of 2025, businesses in Singapore must begin preparing for corporate tax filing for the Year of Assessment (YA) 2025. Compliance with IRAS is more than a legal obligation—it is central to sound business governance for both start-ups and established enterprises.

This year brings key changes, including enhancements to the filing process and new digital tools from IRAS that simplify compliance. By preparing early, businesses can ease the pressures of tax season and manage their obligations with confidence.

In this blog, we outline essential deadlines, required forms, recent IRAS updates, and common mistakes to avoid. We also consider how partnering with a professional tax and accounting firm can streamline filing and provide valuable strategic insights.

Table Of Content

Overview of Corporate Tax Filing in Singapore

In Singapore, corporate tax filing is a statutory obligation for all registered companies. Businesses are required to file their income tax returns with the Inland Revenue Authority of Singapore (IRAS), declaring chargeable income—profits after deducting allowable business expenses.

Although the corporate tax rate is fixed at 17%, many organisations benefit from partial exemptions, rebates, and government incentives that effectively reduce their overall tax liability. This favourable tax framework continues to position Singapore as an attractive destination for regional headquarters and international investors.

The process typically includes three key steps:

1. Submitting Estimated Chargeable Income (ECI)

An early estimate of taxable income, usually due within three months after the financial year ends, unless exempted.

2. Choosing the Correct Tax Form

Companies must file either Form C-S, Form C-S (Lite), or Form C based on their revenue and business type to ensure proper submission.

3. Meeting Filing Deadlines

Timely filing is crucial to avoid penalties and maintain compliance.

Making tax filing part of regular financial management not only simplifies the process but also helps businesses optimise cash flow and access government benefits. Seeing tax filing as a strategic concern instead of a mundane task can enhance your business’s financial well-being and bolster its position in Singapore’s corporate ecosystem.

Key Updates from IRAS for Year of Assessment (YA) 2025

The Inland Revenue Authority of Singapore (IRAS) implements changes every Year of Assessment (YA) that may have an impact on how businesses handle deductions, file taxes, and apply for reliefs. It’s critical to stay up to date on these changes to maximise your tax position, prevent surprises, and stay in compliance.

The following summarises the key changes for YA 2025 that companies need to know about:

Revised Income Tax Treatment

1. Capital Allowances: Low-value assets (under S$5,000) can now be fully expensed in the year of purchase, simplifying capital allowance claims.

2. FSIE Regime: Foreign-sourced dividends, branch profits, and service income must meet enhanced economic substance criteria to qualify for tax exemption.

3. Documentation Requirements: Stricter rules on documentation and classification for asset purchases and expense claims are now in effect to ensure compliance.

Enhanced Digital Filing Requirements

1. From this year, IRAS requires all companies to submit corporate tax returns exclusively through the myTax Portal.

2. Paper submissions are no longer accepted, streamlining the filing process.

3. Digital filing reduces errors and enhances accuracy.

4. Online submissions enable faster processing, improving overall tax administration efficiency.

New Guidance and Clarifications

1. IRAS has updated its e-Tax Guides to make it easier to identify deductible expenses.

2. Employee benefits, entertainment, and R&D expenses are a key focus.

3. These updates help businesses stay compliant and claim all eligible deductions.

4. Clarifications on start-up tax exemptions now cover mergers, acquisitions, and restructuring.

5. Understanding these changes helps businesses plan taxes better and avoid compliance issues.

As Singapore’s government adjusts to new policies and the economy, tax laws frequently change. Maintaining IRAS updates enables your company to maximise tax benefits, stay in compliance, and steer clear of expensive mistakes.

Simply put, being informed offers you the opportunity to save money, expedite your procedures, and feel secure knowing that your tax returns are accurate—it’s not just about fulfilling regulations.

What Are the Key Corporate Tax Filing Deadlines for 2025?

Timely corporate tax filing in Singapore is more than a procedural requirement; it is a fundamental aspect of sound corporate governance. Missing a deadline can disrupt financial operations and expose businesses to penalties, interest charges, or enforcement action from the Inland Revenue Authority of Singapore (IRAS). For the Year of Assessment (YA) 2025, the first step towards compliance is a clear understanding of the filing timeline.

Filing Item	Deadline
Estimated Chargeable Income (ECI)	Within 3 months of the end of the financial year
Form C, Form C-S, or C-S (Lite)	30 November 2025

Understanding the Deadlines

1. Estimate Chargeable Income(ECI)

Non-exempt companies must submit their ECI within three months of the end of their fiscal year (FYE).

IRAS receives an early indication of your company’s taxable income for the year from this estimate. Unless your business is eligible for an administrative waiver, the ECI must be submitted even if your estimated income is zero.

2. Form C, C-S, or C-S (Lite)

This is the yearly income tax return for your business. After your financial statements are finalised, they need to be filed.

Larger or more complex businesses may need to use the complete Form C, but the majority of companies are eligible to file the simplified versions, Form C-S or C-S (Lite).

The submission deadline is November 30th, regardless of your FYE.

Managing Your Filing Timeline and Staying Compliant

On-time corporate tax filing keeps your company in compliance and helps you avoid needless fines.

The tax year is determined by your Financial Year-End (FYE). For instance, your income is assessed in YA 2025 if your FYE is December 31, 2024. Planning makes filing go more smoothly.

You can update your Estimated Chargeable Income (ECI) within IRAS’s timeframe if your income projections change after you’ve submitted it. By doing this, overpayment or underpayment can be prevented.

A Notice of Assessment (NOA) will be sent by IRAS following filing. Usually, you have one month to pay. GIRO is widely used by businesses to distribute payments and control cash flow.

Missing deadlines can trigger estimated assessments, penalties of up to $1,000, and in severe cases, legal action. Staying organised and filing on time protects your business and keeps things running smoothly.

Choosing the Right Tax Form

IRAS provides three distinct tax return forms, each tailored to different business profiles. Choosing the appropriate form streamlines compliance, minimises administrative burden, and reduces the likelihood of unnecessary correspondence with the tax authority.

A Quick Breakdown of the Tax Forms

Form	Who It’s For	What It Involves
Form C	Any company, regardless of size	The most detailed option. You’ll need to submit full financials and supporting documents.
Form C-S	Companies earning SGD 5 million or less	A simpler version. Financial statements are only required if IRAS asks.
Form C-S (Lite)	Smaller companies earning SGD 200,000 or less	The easiest form. Minimal reporting. Great for tiny, straightforward businesses.

How to Choose the One That Fits?

Here’s what to think about when deciding which form to use:

1. How much revenue you’re making: This helps determine if you qualify for the simplified options.

2. How complex your business is: If you’ve got overseas income, multiple entities, or a group structure, you’ll likely need to file the complete Form C.

3. How ready your documents are: If your financials aren’t finalised, a simplified form may be more practical (as long as you qualify).

Getting the form right from the start helps avoid delays, extra paperwork, or questions from IRAS later on. It’s a small but essential step toward an easier tax season.

How to Avoid Common Corporate Tax Filing Pitfalls in Singapore?

Pitfall	Why It Matters	How to Stay on Track
Disorganised Records	Incomplete or inaccurate records can lead to filing mistakes and missed deductions.	Maintain up-to-date accounts and reconcile them regularly.
Missed Deadlines	Late ECI or Form C/C-S submissions can lead to penalties and compliance issues.	Follow a clear filing calendar and prepare documents ahead of time.
Incorrect Tax Form	Using the wrong form can delay processing and require resubmission.	Review the IRAS criteria each year to ensure the correct form is used.
Ineligible Claims	Claiming deductions you don’t qualify for may trigger audits or repayments.	Verify all claims against the latest IRAS guidelines before filing.
Skipping Final Review	Unchecked submissions may contain avoidable mistakes.	Always conduct a thorough pre-submission review.

How does a Tax and Accounting Firm Adds Value Beyond Compliance?

For many organisations, working with a tax or accounting firm is often viewed as a procedural necessity—ensuring returns are filed accurately and compliance requirements are met. However, the right firm can serve as a genuine strategic partner, delivering far more than regulatory assurance.

1. Strategic Tax Planning That Looks Ahead

Advisors go beyond preparing returns by identifying opportunities to minimise tax liabilities while remaining fully compliant with IRAS guidelines. Examples include:

Research and Development (R&D) tax benefits to encourage innovation
Productivity and Innovation Credit (PIC) schemes to enhance efficiency
Double Tax Deduction for Internationalisation (DTDi) for expanding into overseas markets

Proactive tax planning ensures decisions are integrated into the broader business strategy rather than addressed only at filing time.

2. Staying Ahead of Regulatory Changes

Singapore’s tax laws are still changing. A professional firm ensures compliance while optimising available benefits by staying up to date on legislative updates, including modifications to filing requirements and new incentives.

3. Expertise in Structuring and Complex Transactions

Corporate restructuring, inter-company dealings, and cross-border taxation require careful planning. Experienced advisors design tax-efficient, compliant structures that minimise risks and optimise financial outcomes.

4. Enhancing Operational Efficiency

Time and effort are frequently required for tax management, particularly during hectic filing seasons. By collaborating with a capable company, internal teams can concentrate on long-term growth and key business priorities. These businesses can increase accuracy, streamline submissions, and produce reports more quickly and clearly with the help of contemporary digital tools.

5. Supporting Growth and Transformation

During expansion, restructuring, or entry into new markets, having access to specialised expertise provides clarity and confidence in decision-making. Advisors assist in foreseeing difficulties, coordinating plans with corporate objectives, and laying the groundwork for sustained success.

Filing taxes is just the starting point. The real value comes from having a partner who is proactive, insightful, and committed to helping your business thrive.

Also Read : Effective Taxation & Tax Planning Strategies for Businesses in Hong Kong Tax and Accounting Support to help your Business Achieve Unmatched Growth

Corporate Tax Filing Checklist

There is no need for a last-minute, hectic rush when filing corporate taxes. The entire process becomes more accurate, less stressful, and more seamless with a well-defined procedure and consistent preparation. To help tax teams stay on course from beginning to end, this checklist divides the procedure into manageable steps.

Stage	Key Actions	Deadline / Notes
Pre-Filing Preparation	✅ Finalise audited or unaudited financial statements in accordance with reporting standards. ✅ Verify that revenue, expenses, and adjustments are accurate and complete. ✅ Calculate Estimated Chargeable Income (ECI) using the most recent financial data. ✅ Prepare supporting schedules for capital allowances, donations, and other relevant deductions.	Submit ECI via myTax Portal within 3 months after the financial year-end.
Form Selection	✅ Determine eligibility for Form C-S or C-S Lite, based on revenue and qualifying conditions. ✅ Select Form C for businesses with complex income sources, overseas operations, or group structures.	Review IRAS eligibility criteria annually to ensure correct form selection.
During Filing	✅ File the corporate tax return exclusively via myTax Portal. ✅ Include all required schedules, declarations, and documentation in a single submission to prevent delays.	Filing deadline: 30 November 2025.
Avoiding Common Pitfalls	❌ Delaying preparation until the last minute. ❌ Submitting the wrong form and requiring resubmission. ❌ Omitting necessary supporting documents.	These errors can lead to penalties, processing delays, and additional compliance scrutiny.
Post-Filing Follow-Up	✅ Monitor IRAS communications and respond promptly to any clarifications requested. ✅ Archive all submission confirmations, computations, and schedules for reference or audit purposes. ✅ Arrange timely payment within one month of the Notice of Assessment to avoid late payment penalties.	Payment is due within 1 month of receiving the NOA.

conclusion

A well-managed tax filing process in Singapore does more than ensure compliance—it supports financial clarity and builds confidence with stakeholders.

To prepare for YA 2025, businesses should stay updated on IRAS requirements, keep records in order throughout the year, and choose the correct return form well in advance. Early preparation reduces the risk of errors and helps ease the pressures of tax season.

With its expertise in corporate tax and cross-border compliance, Galaxy Group guides businesses through every stage, from planning and filing to follow-up. By offering tailored strategies, detailed reviews, and practical support, the team helps organisations meet their obligations smoothly while keeping future growth in focus.

A structured, forward-looking approach not only ensures compliance but also strengthens financial resilience and long-term sustainability.

Stay Ahead This Tax Season

Get expert tax and accounting support to ensure timely, accurate, and hassle-free corporate tax filing in 2025.

FAQ’S

Which companies are required to file corporate income tax in Singapore?

All companies incorporated in Singapore, both private and public, as well as foreign company branches with operations in Singapore, must file corporate income tax. Sole proprietors and partnerships are taxed under personal income tax instead of corporate tax.

What are the essential filing deadlines for 2025?

The Estimated Chargeable Income (ECI) must be filed within three months after the company’s financial year-end.

The final corporate tax return, whether it is Form C, Form C-S, or Form C-S Lite, needs to be filed by 30 November 2025.

Are there any tax rebates available for the Year of Assessment (YA) 2025?

Yes. Companies can receive a 50% corporate tax rebate, capped at S$40,000. In addition, qualifying companies with at least one local employee may receive an extra S$2,000 cash grant.

What is Singapore’s current corporate tax rate?

The standard corporate tax rate is 17% on chargeable income. However, many companies pay less in effective tax due to exemptions and incentives, such as startup tax relief or partial tax exemptions.

What tools or guidance does IRAS provide for businesses?

The Inland Revenue Authority of Singapore (IRAS) offers updated resources, including step-by-step guides, FAQ pages, and basic tax calculators to help companies prepare and file their returns accurately.

Boots On the Ground in 48 hours: How EOR Helps You Hire Without a Local Entity in Hong Kong

June 30, 2025 by galaxy

June 30, 2025

Boots On the Ground in 48 hours: How EOR Helps You Hire Without a Local Entity in Hong Kong

Looking to expand into Hong Kong’s fast-paced market without the long lead time?
As a global financial hub with high English proficiency and a strategic location in Asia, Hong Kong is a magnet for international businesses. But setting up a local entity and navigating employment regulations can be time-consuming and complex—especially for companies unfamiliar with the region.

That’s where an Employer of Record in Hong Kong becomes your growth partner. By legally employing talent on your behalf, EORs enable rapid recruitment in Hong Kong, handling everything from compliant contracts to local payroll services. For example, employers are only required to contribute 5% to the Mandatory Provident Fund (MPF)—making payroll services hong kong relatively straightforward.

In a competitive talent market where top candidates expect generous compensation and smooth onboarding, partnering with an EOR ensures you can hire quickly, compliantly, and confidently—without establishing a legal entity. This infographic breaks down how EOR solutions accelerate your hiring strategy and simplify cross-border expansion into Hong Kong.

Want to Build Your Dream Team in Hong Kong?

Let our EOR experts help you hire top-tier talent without setting up a local entity.

Expert Guide

Expert Guide

Expert Guide

Expert Guide

Expert Guide

Expert Guide

Expert Guide

Expert Guide

Expert Guide

galaxy

China’s ESG Reporting Standards: Preparing Businesses for 2026 and Beyond

Table Of Content

China’s ESG Reforms: At a Glance

Structure & Key Principles of the CSDS in China

Three-Tier Framework

Core Principles

Four-Pillar Disclosure Framework

Stock Exchanges and Regulatory Phases in China

Exchange-Level Requirements

Phased Implementation Timeline

Practical Steps for Businesses in china for 2026

Conduct a Gap Assessment

Build Data Infrastructure

Design a Reporting Framework

Cross-Jurisdiction Alignment

Strengthen Governance and Oversight

Monitor Regulatory Updates

Key Risks, Challenges and Mitigation for businesses in China

Opportunities and Strategic Advantages for Business in China

What to Watch in 2026 and Beyond

Conclusion

Get ESG-Ready with Galaxy Group

FAQ’S

Startup Payroll Simplified: 11 Must-Know Tips for Founders

Table Of Content

Why Payroll Needs a Founder’s Attention from Day One?

Risks of Poor Payroll Management

Strategic Benefits of Early Payroll Integration

3 Things Founders Must Know About Global Payroll Management in APAC

1. Regulations Vary Widely

2. Compliance Drives Credibility

3. Strategy Matters

How Does Payroll Complexity Vary Across APAC?

The Cost of Non-Compliance

Strategic Consideration

EOR as a Fast-Track Strategy for Market Entry and Workforce Expansion

When to Consider the EOR Model

Strategic Benefits of the EOR Payroll Model

11 Must-Know Payroll Practices for Managing Operations

1. Understand Local Statutory Requirements

2. Align Payroll with Local Holidays and Pay Cycles

3. Implement FX-Optimised, Multi-Currency Payroll Systems

4. Automate Tax Calculations and Statutory Filings

5. Integrate Time and Leave Management

6. Stay Updated on Regulatory Changes

7. Offer Statutory and Competitive Benefits

8. Enforce Data Privacy and Security

9. Handle Exits and Final Settlements Carefully

10. Maintain Payslip Accuracy and Transparency

11. Localise Employment Contracts

Streamlined Global Growth with EOR Support

Key Capabilities

Local Onboarding

Use contracts and human resource policies

Grant of Statutory Benefits

Compliant Offboarding

Choosing the Right Global Payroll Provider: A Founder’s Checklist

Key Evaluation Criteria

conclusion

Ready to Simplify Payroll Across APAC?

FAQ’S

Understanding Hong Kong Salaries Tax for Businesses

Table Of Content

Why Hong Kong’s Tax System Appeals to Foreign Businesses?

Territorial Taxation Model

Absence of Indirect Personal Taxes

Low and Competitive Tax Rates

Stable Legal and Regulatory Framework

Efficient, Employer-Oriented Tax Administration

Strategic Positioning for Regional Operations