Workforce Payments Guide Hong Kong

Papaya offers Virtual IBAN accounts (or “wallets”) to hold your funds segregated and safeguarded until payments are ready to be processed. Opening and managing corporate bank accounts can often be complex and time-consuming, requiring extensive checks and due diligence.

Papaya’s Virtual IBAN solution, built on the trusted infrastructure of JPMorgan, streamlines this process-making it faster, easier, and more cost-effective while ensuring your funds are secured.

Delivery Timeline

Supported payment types

Salary payments, authorities payments, contractor payments.

3rd Party Payments

Contractor payments

Papaya Global supports payments to contractors in Hong Kong. The payout currency may vary, depending on the receiver bank account setup when receiving foreign currencies. It is advised for contractors to reach out to their bank to confirm how foreign currencies are handled.

Payroll payment Frequency

Monthly

Banking Regulations

Cross-border workforce payments in Hong Kong are impacted by several banking laws and regulations. Here are some key points:

• Hong Kong Monetary Authority (HKMA): The HKMA has been proactive in building the local financial infrastructure to provide a multi-currency, multi-dimensional platform that links up Hong Kong’s payment systems with those of the neighboring regions and international systems to facilitate faster and safer cross-border payments.
• Payment Remittance Regulation: There are several parties involved in a typical payment remittance process, each taking on a different responsibility and function. Each party needs to assess whether its activity triggers the licensing requirements under Hong Kong’s Money Services Operator (MSO) regime. The main purpose of the MSO licensing regime is to safeguard against the risk of MSOs being used as a conduit for laundering proceeds from crimes committed outside Hong Kong.
• Central Bank Digital Currencies (CBDCs): Hong Kong has extended international collaboration on CBDCs for cross-border payments.

KYC

In Hong Kong, the Know Your Customer (KYC) process is part of the Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) procedures. It involves gathering and verifying a customer’s personal data.

The Hong Kong government has released several regulations for KYC, including the 2018 Guideline on Anti-Money Laundering (AML) and Counter Financing of Terrorism (CFT) by the Hong Kong Monetary Authority (HKMA) and the Cap. 615 Anti-Money Laundering and Counter-Terrorist Financing Ordinance.

The required ID data for identifying a person includes:

• Full Name
• Date of Birth
• Nationality
• Unique Identification Number
• Identity verification
• Proof of address

Documents such as the National Identity Card (HKID), Driver’s Licence, and Passports can be used for identity verification. As proof of address, a current utility bill, bank statement, or government-issued document showing the applicant’s name and address can be used.

Financial institutions apply customer due diligence (CDD) measures such as a risk-based approach, ongoing monitoring, and record-keeping. They are required to carry out beneficial ownership due diligence verification on any individual that owns 25% or more of a target company. For higher-risk entities, the threshold may drop to as low as 10%.

The KYC process also has provisions for remote onboarding, where individuals can meet government overseers via a video-conference meeting or by sending in a recorded video. The KYC process includes ongoing monitoring where financial institutions review existing CDD records of customers regularly and/or upon certain trigger events. Record keeping is essential to detect, investigate, and confiscate criminal property or funds.

Hong Kong has been making strides towards electronic KYC (eKYC), with all eight of its virtual banks successfully launching services that allow rapid customer onboarding via web and mobile using minimal information.

International Banks

Local banks in Hong Kong

Payment Methods

The B2C payment tools available in Hong Kong include:

• Stripe
• PayPal
• Adyen
• AliPay
• WeChat Pay
• Octopus App for Business
• Checkout.com
• AsiaPay
• eWay
• JETCO Pay
• Braintree
• 2Checkout
• Payment Asia
• Faster Payment System (FPS)
• Mobile QR
• Credit Cards
• Mobile Wallets such as Alipay, PayMe, Octopus Card , FPS (Faster Payment System), Apple Pay, WeChat Pay, PayPal HK.
• Cash
• Debit Cards
• Digital Wallets

Cryptocurrency

In Hong Kong, it is possible for employers to pay their employees in cryptocurrency, but it is not fully regulated and there are several legal implications to consider. The Securities and Futures Commission (SFC) treats cryptocurrency not as a virtual currency but as a virtual commodity, meaning it is not completely regulated by any financial regulatory authorities in Hong Kong.

It remains unclear whether the Labour Department or Hong Kong courts will classify cryptocurrency as “wages under the Employment Ordinance. Due to the volatility of cryptocurrency, employers may find it challenging to comply with the Minimum Wage Ordinance if they choose to pay wages in cryptocurrency.

As for taxation, the Inland Revenue Department (IRD) has stated that remuneration received in cryptocurrency is subject to income tax in Hong Kong. Both employers and employees have reporting obligations to declare the amount of income received in cryptocurrency. The reported amount should correspond to the market value of the cryptocurrency at the time of accrual.

Employers interested in paying salaries in cryptocurrency can consider options such as a combination of payment in traditional currency and cryptocurrency, employee bonus schemes paid in cryptocurrencies, or immediate conversion to cryptocurrency after salary payment.

Compliance with Hong Kong law and regular review of the risks and contractual terms of remuneration payments in cryptocurrency is advised. Despite the current uncertainties, it is anticipated that future use of digital currencies will be facilitated by amendments to the currency and securities regulations.