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3. I was laid off. I received from my employer (a) payment in lieu of notice and (b) severance/long service payment. Are these taxable?

Payment in lieu of notice accrued on or after 1 April 2012, if paid under the Employment Ordinance (“EO”) or the employment contract, is taxable.


Severance/long service payment, if computed in accordance with the formula laid down in the EO, is non-taxable. However, if the sum paid to you exceeds the amount so calculated, the excess is an extra award for your services and is part of your assessable income.




After working for 8 years, an employee left his employment. By applying the formula in the EO, his entitlement to severance payment was $80,000, but his employer paid him $100,000. His tax position is as follows:


Severance payment


(This part is exempt.)

Extra award


(This part is taxable.)

Total amount received




Note: For more information about the statutory calculations of payment in lieu of notice, severance payment and long service payment, please click here.