TAXATION

10. If I own two dwellings, both of which are used as my place of residence, am I entitled to a deduction of loan interest paid for both dwellings?

As a taxpayer, you are not entitled to a deduction of interest paid on both dwellings. You will only be allowed a deduction of interest paid for the acquisition of the dwelling that you regard as your principal place of residence.

E. Allowances relating to Salaries Tax

1. Who are eligible to claim the “married person's allowance”? What is the amount of that allowance?

Under section 29 of the Inland Revenue Ordinance, a taxpayer is eligible to claim the married person's allowance if he/she was, at any time during a year of assessment, 

• married and not living apart from his/her spouse; or
• living apart from his/her spouse but was maintaining or supporting him/her.

The following conditions must also be fulfilled: 

• the spouse of the taxpayer did not have any income chargeable to Salaries Tax and has not elected for Personal Assessment separately for the year; or
• the taxpayer and his/her spouse have elected joint assessment under salaries tax; or the taxpayer and his/her spouse have elected Personal Assessment jointly for the year.

For instance, a taxpayer can claim married person's allowance if his/her spouse does not have any taxable salary income.  If his/her spouse has taxable salary income (i.e. both the taxpayer and his/her spouse are chargeable to Salaries Tax), both the taxpayer and his/her spouse will be entitled to claim basic allowance, in which case married person's allowance will not be available unless both spouses have elected for joint assessment.  Note that the taxpayer will not be entitled to both the basic allowance and married person's allowance at the same time.

If you are married at any point in a given assessment year, regardless of the fact that your spouse is not a resident of Hong Kong, you are eligible to apply for the married person's allowance, provided you meet the aforementioned criteria. 

“Marriage” is defined in section 2 of the Inland Revenue Ordinance as meaning: 

1. any marriage recognized by the law of Hong Kong; or
2. any marriage, whether or not so recognized, entered into outside Hong Kong according to the law of the place where it was entered into and between persons having the capacity to marry,

Same-sex marriage would be regarded as a valid marriage for the purposes of the Inland Revenue Ordinance. However, marriage shall not include, in the case of a marriage which is both potentially and actually polygamous, include marriage between a man and any wife other than the principal wife. 

The amount of the married person's allowance (for a married couple) from the year of assessment 2023/24 onwards is $264,000. Taxpayers cannot claim an individual basic allowance if they have already claimed the married person's allowance.

2. I am married. How do I claim the "Married Person's Allowance", choose either "Joint Assessment" or "Personal Assessment", or nominate my spouse to claim the deduction for "Home Loan Interest"?

a) Claiming the "Married Person's Allowance" 

• If you are married for the full year or part of the year and your spouse does not have any income chargeable to Salaries Tax during the year, you should complete Part 11.1 in order to get the "Married Person's Allowance" under Salaries Tax assessment. There is no need for you to complete either Part 4.4 to elect "Joint Assessment" or Part 7 to elect "Personal Assessment".
• If you have chosen "Joint Assessment" under Salaries Tax in Part 4.4 and/or "Personal Assessment" in Part 7of your Tax Return –Individuals, you should also complete Part 11.1 in order to get the "Married Person's Allowance".

b) Choosing "Joint Assessment"? 

Generally speaking, if both husband and wife have income from salaries and one of them has an assessable income lower than his/her entitlements to allowances and concessionary deductions, choosing Joint Assessment will be advantageous. In order to choose the “Joint Assessment” option, both husband and wife have to complete their own Tax Returns, choose joint assessment in part 4.4, and sign part 12 of each Tax Return –Individuals. The choice has to be made once a year.

If only one spouse has income from salaries and the other does not, there is no need to choose "Joint Assessment". Under Salaries Tax, so long as the salary-earning spouse has completed Part 11.1 of the Tax Return properly, the "Married Person's Allowance" will be granted.

c) Choosing "Personal Assessment"? 

There is no need to choose "Personal Assessment" if you ONLY have salary income. You may still claim allowances and deductions under Salaries Tax assessment. However, if you earn rental income (on which you may be required to pay Property Tax) or have business profits, you should consider if the choice of "Personal Assessment" can reduce your overall tax liability. For instance, if you have borrowed money to purchase a property for letting out, deduction of mortgage interest from your rental income can only be claimed when you choose "Personal Assessment". 

For married taxpayers, their spouse must sign Part 12 of the Tax Return to confirm their agreement to choose either the "Joint Assessment" or the "Personal Assessment".

3. How is eligibility for claiming the “child allowance” determined? What is the current amount of that allowance?

Under section 31 of the Inland Revenue Ordinance, a taxpayer is eligible to claim child allowance if, at any time during a year of assessment, he/she maintains an unmarried child, who was:

• under the age of 18; or
• of or over the age of 18 but under 25, and was receiving full time education at a university, college, school or other similar educational establishment; or
• of or over the age of 18, and was, by reason of physical or mental disability, incapacitated for work.

"Child" refers to:

• the child of the taxpayer or his/her spouse or former spouse; or
• the adopted child of the taxpayer or his/her spouse or former spouse; or
• the step-child of the taxpayer or his/her spouse or former spouse.

Regardless of whether they are legally married or not, the father or mother may claim child allowance on behalf of their child if he/she satisfies all other requirements. 

If a married couple, not being a husband and wife living apart, have more than one child for whom child allowance is claimed, all child allowances must be claimed by either the husband or the wife (but not both). They must decide who shall claim the allowance.

The allowance for each child is $130,000 for each of the 1st to 9th child from the year of assessment 2023/24 onwards. 

4. I have a brother and a sister whose living expenses are fully supported by me. Can I claim the "dependent brother/sister allowance" under this circumstance?

According to section 30B of the Inland Revenue Ordinance, you are eligible to claim dependent brother/sister allowance if you or your spouse, not being a spouse living apart, maintains your (or your spouse's) unmarried brother or sister, who was at any time in the year of assessment,

• under the age of 18; or
• of or over the age of 18 but under 25, and was receiving full time education at a university, college, school or other similar educational establishment; or
• of or over the age of 18 and was, by reason of physical or mental disability, incapacitated for work.

"Brother/Sister" refers to: 

• a brother / sister of full or half blood of you or your spouse;
• an adopted brother / sister of you or your spouse;
• a stepbrother / sister of you or your spouse;
• a natural child of your or your spouse's adoptive parent; or
• a brother / sister of your deceased spouse. 

A brother/sister is only treated as maintained by the taxpayer or the taxpayer's spouse if at any time during the year, the taxpayer or his/her spouse had sole or predominant care of the brother/sister.

If your brother and sister meet the above requirements, you could claim a dependant brother/sister allowance of $37,500 from the year of assessment 2023/24 onwards for each dependent.

The taxpayers must come to an agreement among themselves over who will make the allowance claim if there is another person who has a right to make the allowance for the same brother or sister for the same assessment year as the taxpayer. If no agreement is reached, no allowance will be made. 

5. I have to maintain my two parents. Under what circumstances can I claim the “dependent parent allowance” or the additional dependent parent allowance”?

Under section 30 and section 30A of the Inland Revenue Ordinance, a taxpayer is eligible to claim a dependent parent/grandparent allowance if the taxpayer or his/her spouse (not being a spouse living apart) maintain his/her own parents/grandparents or the spouse's parents/grandparents, who at any time in the year of assessment: 

• were ordinarily resident in Hong Kong; and
• were aged 55 or more, or eligible to claim an allowance under the Government's Disability Allowance Scheme; and
• had either resided with the taxpayer and his/her spouse, otherwise than for full valuable consideration, for a continuous period of not less than 6 months, or had received from the taxpayer or his/her spouse not less than $12,000 in money towards the maintenance.

Taxpayers are eligible to claim an additional dependent parent/grandparent allowance in respect of each dependent parent/grandparent who resided with them, otherwise than for full valuable consideration (i.e. without any payment or compensation), continuously throughout the year of assessment.

"Parent" refers to: 

• the natural father/mother of the taxpayer or his/her spouse; or
• a parent by whom the taxpayer or his/her spouse was legally adopted; or
• a step-parent of the taxpayer or his/her spouse; or
• a parent of the deceased spouse of the taxpayer.

"Grandparent" refers to: 

• a natural grandfather/grandmother of the taxpayer or his/her spouse; or
• an adoptive grandparent of the taxpayer or his/her spouse; or
• a step-grandparent of the taxpayer or his/her spouse; or
• a grandparent of the deceased spouse of the taxpayer.

Only one person can be granted an allowance in respect of any one parent or grandparent. If more than one person is entitled to the allowance in respect of the same parent or grandparent, they must agree among themselves as to who shall claim the allowance.

In respect of the same dependant, you can claim either the dependent parent allowance or the elderly residential care expenses, but not both.

From the year of assessment 2023/2024onwards, the allowance is $50,000 for each dependant for parents or grandparents who are 60 years of age or older or who qualify for a payment under the government’s disability allowance programme. The allowance for each dependant is $25,000 for grandparents and parents who are 55 years of age or older but under 60. 

6. How to determine whether or not a dependent parent ordinarily resides in Hong Kong ?

To determine whether or not the dependent parents ordinarily reside in Hong Kong, the Inland Revenue Department will consider their social and economic ties with the territory. Objective factors taken into consideration include: 

1. the number of days they stayed in Hong Kong;
2. whether or not they have a permanent dwelling in Hong Kong;
3. whether or not they own a property for residence outside Hong Kong;
4. whether or not they work or carry out a business in Hong Kong or outside Hong Kong;
5. whether or not their relatives are mainly residing in Hong Kong or outside Hong Kong.

Generally speaking, the Inland Revenue Department does not consider a dependent parent, who possesses a Hong Kong identity card, as ordinarily resident in Hong Kong if he/she lives outside Hong Kong continuously and stays in Hong Kong for a limited number of days just for paying a visit to relatives.

7. We maintain my wife's stepfather who is over 60 years old this year but he has not registered a marriage with my mother-in-law. Can we claim the dependent parent allowance in respect of my wife's stepfather?

Without a registration of marriage, your wife's stepfather does not satisfy the definition of “parent” under the Inland Revenue Ordinance. You are not entitled to a dependent parent allowance unless your wife ' s stepfather married your mother-in-law according to traditional Chinese custom before amendment of the matrimonial law on 7 October 1971.

8. I am eligible to obtain a “child allowance”, but I was divorced 2 years ago. Can I claim the “single parent allowance”?

With reference to section 32 of the Inland Revenue Ordinance, a taxpayer is eligible to claim the single parent allowance if he/she was single throughout the year of assessment and had at any time during that year the sole or predominant care (provide the daily care and supervision on on-going basis for the child) of a child in respect of whom he/she is granted child allowance. In other words:

1. Throughout the year of the claim the claimant must be single, divorced, or widowed, or living apart from the spouse. Therefore, no allowance can be claimed for the year of marriage, divorce, death of spouse or separation with the spouse. The earliest opportunity will be the year following these events.
2. The claimant is granted child allowance for the year of the claim. (Please note that partial child allowance may be granted when both parents have contributed money towards the child's maintenance and education. Under the law the Commissioner is empowered, in case of dispute, to split the allowance according to the amount of contribution made by each parent during the year of assessment concerned.)

Whilst the child allowance is granted on account of financial contributions to maintenance and education; the single parent allowance is granted on account of time spent on the provision of daily care and supervision.

The law also specifies that no parent can claim the single parent allowance on the grounds that he/she had made contributions to the maintenance and education of the child during the year of assessment. Moreover, no allowance is permitted in respect of any second or subsequent child.

The single parent allowance from the year of assessment 2023/24 onwards is $132,000.