How to Pay Yourself as a Business Owner / Entrepreneur

by bvs.w Business management

Business owners frequently give themselves a salary, which functions in the same manner as a traditional job. The owner pays personal income tax on the salary, which is recorded as an expense in the company’s books.

How much to pay yourself ?


The tax regulation states that entrepreneurs are permitted to give themselves a “reasonable salary.” However, how can one ascertain what is reasonable?

One of the entrepreneurs said, “I advise paying yourself a modest salary, as modest as you can afford.“

Here are two common methods for figuring out your pay:

  • Make your pay based on your own spending.
  • Distribute profits as a salary.

When can you start paying yourself?

An owner’s salary is frequently the last item on the small business budget when times are tight. Paying yourself, however, becomes possible as your business’s revenue stabilizes.

To decide if you’re ready to begin paying yourself a salary, posing the following three questions to yourself:

  • Do I make a consistent cash flow?
  • Do my projected earnings remain consistent?
  • Is my company profitable?


You can afford to pay yourself if you can say “yes” to all above three questions.

Other payroll obligations for a Hong Kong company


In contrast to the majority of other nations, the employer in Hong Kong does not withhold individual income tax, or salaries tax. Individuals must pay their taxes on their own instead.

As such, employers in Hong Kong are subject to just two administrative requirements.

1. Keeping payroll records

The following details about their employees must be maintained on file by the company/employers:

  • Particulars of the employee;
  • Type of work: either full- or part-time;
  • Working place;
  • The total amount of compensation, including non-cash and other fringe benefits;
  • Contributions to the Mandatory Provident Fund or its equivalent;
  • The employment contract; and
  • Duration of employment.

2. Reporting remuneration paid to an employee

Every year, companies will receive the Employer’s Return from the Hong Kong tax department. Even if the company does not hire any employees, the business has not started, or the business has ceased, it still needs to complete the Employer’s Return and file it with the tax department within a month of receiving it.

Useful link: https://www.gov.hk/en/residents/taxes/salaries/