TAXATION

9. I have separated from my spouse recently and I have to solely maintain my children. Can I claim the “single parent allowance”?

Not immediately, as the allowance will not be granted for the year during which the separation or divorce takes place. For example, a couple divorced in August 2020. They will not be entitled for single parent allowance in the year 2020/21. Such allowance will only be considered as from the year 2021/2022.

10. Under what circumstances can I claim the “disabled dependent allowance”?

Under section 31A of the Inland Revenue Ordinance, taxpayers are eligible to claim the disabled dependant allowance if they or their spouses, not being a spouse living apart, maintain a dependant who is eligible to claim an allowance under the Government's Disability Allowance Scheme .

The dependant may be:

• the spouse of the taxpayer; or
• a child of the taxpayer; or
• a parent or grandparent of the taxpayer or his/her spouse; or
• the brother or sister of the taxpayer or his/her spouse.

This allowance is granted in addition to the following allowances or deductions in respect of the disabled person:

• married person's allowance; or
• child allowance; or
• dependent parent/grandparent allowance or elderly residential care expenses; or
• dependent brother/sister allowance.

The disabled dependent allowance from the year of assessment 2023/24 onwards is $75,000 for each dependent. 

11. What evidence is required from applicants for the “disabled dependant allowance” when a review is made?

On reviewing applications, the Inland Revenue Department may require the applicants to submit evidence showing that the dependants are eligible to claim an allowance under the Government's Disability Allowance Scheme.

If the dependant has applied to the Social Welfare Department (SWD) for the disability allowance, the taxpayer can provide the file number the dependant used in making the application. For dependants that have not claimed the disability allowance, a Medical Assessment Report issued by a public hospital or a registered medical practitioner is required to substantiate the dependant's eligibility for disability allowance in the relevant year. This Medical Report should be in the same format as that required by the SWD in assessing the prescribed disability under the Comprehensive Social Security Assistance Scheme or Social Security Allowance Scheme. The Inland Revenue Department will accept this Medical Assessment Report as evidence for the purpose of the Disabled Dependant Allowance under the Inland Revenue Ordinance.

F. Taxpayer who has recently become chargeable to tax 

You must notify the Inland Revenue Department whenever you start to incur tax obligations in Hong Kong, such as when you start your first job. 

According to section 51(2) of the Inland Revenue Ordinance, unless you have  already been required to furnish a Tax Return, you must notify the Inland Revenue Department  in writing that you are so liable no later than four months after the end of the basis period for that year of assessment.

What should I do if I haven’t received a tax return?

If you are liable to tax and have not received a return, you must request one in writing from the Inland Revenue Department within 4 months of the end of the basis period for the relevant year of assessment (i.e., by the 31st of July for Salaries Tax).

G. Taxpayer who has change his/her address 

Any change of address of a taxpayer must be reported to the Inland Revenue Department within a month of the change. However, in practice, you should notify the Inland Revenue Department as soon as your postal address changes. Any of the methods listed below may be used to inform the Inland Revenue Department of your address change:

• By completing the Form IR1249
• By writing a letter to the Inland Revenue Department 
• By completing the Tax Return – Individuals
• By notification through GovHK
• By logging in the eTAX Account

H. Taxpayer who is about to leave Hong Kong

For taxpayers who are getting ready to depart Hong Kong for over a month, there are additional requirements. 

The Inland Revenue Ordinance mandates that taxpayers who intend to migrate for the purpose of studying or working abroad must give the Inland Revenue Department written notice at least 1 month prior to the anticipated departure date. Failing to do so may result in a fine at level 3 (currently $10,000). However, this does not apply to individuals who travel frequently during their course of employment. 

What the taxpayer should do: 

1. Notify your employer of your anticipated departure date.
2. Provide the Inland Revenue Department 1 months’ notice of your planned departure date. You may call or write to the Inland Revenue Department by email, fax or mail. Include your Hong Kong postal address, contact phone number, and an international address for ease of future correspondence.
3. Submit a Tax Return - Individual (BIR60) (which would be issued to you by the Inland Revenue Department upon notification of paragraph (1)). 
4. The taxpayer may approach the Inland Revenue Department's Assessing Group which manages his case (if known), or the Central Enquiry Counter (G/F, Inland Revenue Centre), and present the following documents, if they want their tax clearance to be processed quickly: 
   • a copy of their IR56G (prepared by the employer) or Form 1R56J in case of government servant; 
   • notice of termination of employment; 
   • notice of final payment of remuneration; and

   • any other documentation necessary to substantiate deduction and allowance claims. 

     In practice, if there is any special circumstance where you need to depart Hong Kong in less than 1 month, you are suggested to approach the Inland Revenue Department in person to make your case and to deal with the tax clearance process as quickly as possible to mitigate any risk of penalty.

5. An assessment notice will often be issued before the taxpayer departs. If the taxpayer objects to the assessment, they should raise their objection(s), but they could also need to pay the full amount of tax due right away or buy tax reserve certificates for the amount of tax that is being contested.

   a. Note: If the Inland Revenue Department does not receive your completed return within the specified period, or if it is impracticable issue a Tax Return or if the expected date of month from the date on which departure is imminent, the Inland Revenue Department will issue an estimated assessment based on the available information. The estimated assessment may be excessive and you may have to lodge objections.

6. Pay tax in return for payment receipts.
7. To acquire a copy of the Letter of Release ("Letter"), payment receipts must be presented to the Collection Section (4/F of the Inland Revenue Centre). If payment is made by way of: 

• Cash, EPS or cashier order, the Letter will be issued immediately; 
• PPS or via Internet, the Letter will be received about 2 working days after the Inland Revenue Department receives payment confirmation from the paying institution; 
• Personal cheque or mixed payments (e.g., cash and EPS), a Letter of Release is normally sent by post 10 days after receipt;
• Even where the taxpayer is exempt from tax, the Inland Revenue Department will still continue to issue a Letter of Release upon completion of the tax clearance procedures.

After tax clearance, the taxpayer may still have to further inform the Inland Revenue Department in writing where: 

1. Additional remuneration is received or accrued (for example, additional bonus); 
2. Income is derived from Hong Kong (regular Tax Returns must be filed);
3. Share awards vested in the taxpayer after tax clearance; and 
4. Taxpayer exercised any share options after tax clearance.

If you are entitled to additional remuneration giving rise to further Salaries Tax liabilities after tax clearance, you and your employer have to go through the tax clearance process again, which means your employer is required to file an additional/revised Form IR56G to report the bonus and not to make any payment of money or money's worth for a period of one month from the date of giving notice. 

I have furnished the Tax Return, what is the earliest time I can expect to collect my tax demand note for tax clearance purpose?

If a properly completed Tax Return with supporting documents is furnished in person directly to the assessing officer handling your case and early tax clearance has been requested, you may be able to receive your tax demand note on the date following the date of furnishing the Tax Return at the earliest. 

Duties of an employer

The Inland Revenue Ordinance requires the employer of an employee who is chargeable to Salaries Tax and is about to leave Hong Kong for more than one month to notify the Inland Revenue Department in writing of the expected date of departure of the employee at least one month prior to the departure date. The employer is also required to withhold any payments to the employee for a period of one month from the date on which the notification was given, or until the abovementioned Letter of Release is received from the Inland Revenue Department, whichever is earlier. But this does not apply to an employee who is required in the course of employment to leave Hong Kong at frequent intervals. Failure of such will result in a fine at level 3 (currently $10,000). 

Tax clearance for other types of tax obligations

The taxpayer leaving Hong Kong would also have to obtain tax clearance in respect of its property and business income, if any:

• Rental income from property owned: If the property has been sold before departure and Personal Assessment is elected, the departing taxpayer is required to notify the Inland Revenue Department at least one month before departure. Otherwise, notification is not required, and the taxpayer is only required to inform the Inland Revenue Department of the new postal address if applicable and file annual Tax Return for rental income from the property as usual.
• Profits from business owned: If business has ceased prior to departure, the leaving taxpayer is required to notify the Inland Revenue Department at least one month before departure. Otherwise, notification is not required but the taxpayer has to inform the Inland Revenue Department of the new postal address if applicable and file annual Tax Return for profit/loss from the business as usual.

1. Can I get a preliminary calculation of my Salaries Tax through the Internet?

The Inland Revenue Department has developed a simple Salaries Tax Computation Program to help you calculate your own Salaries Tax liability. To make use of this program, please go to the Inland Revenue Department's webpage.

2. Who can use Internet Filing? What types of tax return can be submitted through the Internet?

In order to use the Internet filing service, you must open an eTax Account.

To open your eTAX Account, you have to login eTAX by using –

• your Taxpayer Identification Number (TIN) and eTAX Password; or
• a personal digital certificate issued by a recognised certification

Through the Internet Filing service, taxpayers may lodge their Tax Returns - Individuals (B.I.R. 60) and Property Tax Returns - Property Jointly-owned or Co-owned by Individuals (B.I.R. 57) for the current year of assessment.

The only exceptions are: 

1. Tax Return - Individuals (B.I.R. 60)

• Returns which require submission of supporting documents. Example: During the relevant year, the taxpayer was operating a sole-proprietorship business that had a gross annual income of more than $2,000,000, or the taxpayer claims full or partial exemption of employment income.
• The taxpayer has deemed assessable profits pursuant to section 20AE, 20AF, 20AX, and/or 20AY of the Inland Revenue Ordinance for that year of assessment.
• The taxpayer has obtained an advance ruling on any of his/her tax matters in relation to the year of assessment concerned.
• The taxpayer claims double taxation relief for that year of assessment. 
   

   2. Property Tax Return (B.I.R. 57)

• The property is owned by more than 2 owner.

What are the benefits of Internet Filing?

Internet Filing of BIR60

• Automatic extension of 1 month for filing
• Pre-filling of data, to save your time in completing the tax return
• Saving of partially completed return for further completion within 4 months
• Computation of your estimated Salaries Tax payable before submission, to help you optimize total tax payable

Internet Filing of BIR57

• Automatic extension of two weeks for filing
• Pre-filling of data (available for 2022/23 Tax Return only)
• Saving of partially completed return for further completion within 1 month
• Instant transmission of return data and acknowledgement of receipt
• Viewing of your electronic return data instantly and anytime during the 3-year retention period

How can I sign my electronic Tax Return?

You can sign your Tax Return with your eTAX Password, MyGovHK Password (Note), recognized digital certificate or “iAM Smart" account with digital signing function. (Note: only applicable for cases login via MyGovHK Account using MyGovHK Username and Password).

The eTAX services are for the sole and exclusive use by the taxpayer.  You should never authorize any other person to use your TIN, eTAX Password, MyGovHK Username/Password, digital certificate or “iAM Smart" account to communicate with the Inland Revenue Department on your behalf in connection with the eTAX services.

Where and how can I acquire a password for electronic filing? 

eTAX Password is an authentication means to login your eTAX Account.  An Access Code is required before you can register an eTAX Password of your choice. 

a) Apply through the Internet / Telephone

An application could be made online under eTAX using your Hong Kong Identity Card Number and Taxpayer Identification Number (TIN) as printed on the front page of the Tax Return – Individuals or the Notice of Assessment. The Inland Revenue Department will send an Access Code Notice to your correspondence address within the next 2 working days for you to set your eTAX Password.

b) Apply By Form
Alternatively, you may also choose to apply by using Form I.R.6104.

After completing the Form I.R.6104, you may return it by post, by fax (fax number: 2519 3566) or in person. The signature on the form should be the same as that in your Tax Return.

For application by Form I.R.6104, the Inland Revenue Department will send you the Access Code Notice and the e-Tax Password after verifying the details on the form.

Register a taxpayer's own Password

Upon receipt of the Access Code Notice, please login your eTAX Account and undergo a simple registration process to create your eTAX Password and set up your account profile.  If you do not complete the registration within 3 weeks from the date of the Access Code Notice, your Access Code will be revoked without further notice and you will have to apply again for using the eTAX Services.

For more details on Internet Filing of Tax Returns, please visit the eTax website. 

II. Profits Tax

With reference to section 14 of the Inland Revenue Ordinance, Profits Tax shall be charged for each year of assessment on persons carrying on a trade, profession or business in Hong Kong in respect of their assessable profits arising in or derived from Hong Kong for that year from such trade, profession or business (excluding onshore profits arising from the sale of "capital assets").

“Persons” (in the context of Profits Tax) include corporations/limited companies, sole proprietorships, partnerships and trustees, etc. Self-employed persons are also included.

There is no distinction made between Hong Kong residents and non-residents. A resident may therefore derive profits from abroad without being taxed in Hong Kong. Conversely, a non-resident may be subject to tax on profits arising in Hong Kong. The question of whether a business is carried on in Hong Kong and whether profits are derived from Hong Kong is largely a question of fact. Generally, for Hong Kong companies that are not part of a multinational group, no tax is levied on profits arising abroad, even if they are remitted to Hong Kong.

Hong Kong companies that are part of a multinational group however should be aware of the new foreign-sourced income exemption regime that came into effect on 1 January 2023, under which the prescribed foreign-sourced passive income received in Hong Kong will be subject to Profits Tax unless certain exemption requirements are satisfied, and the ongoing development of the Global Anti-Base Erosion Model Rules (Pillar Two) implementation in Hong Kong.  Hong Kong companies that belong to a multinational group are encouraged to consult professional legal and tax advisors on these matters as they are complex in nature. 

Provisional Profits Tax

Profits Tax is chargeable on the assessable profits of the year. As the profits for any particular year cannot be known until after the year end, a Provisional Tax charge is raised during the course of the year. In the following year, when the profits of the previous year are ascertained, an assessment is made and credit is given for the Provisional Tax paid.

Limited Company's taxation matters 

Every corporation or limited company must appoint an auditor (section 396 of the Companies Ordinance) for the purpose of preparing the annual audited financial statements, and such auditor may also be able to handle the taxation matters of the company as your tax representative. Therefore, please check with your auditor/accountant for any Profits Tax issues concerning a limited company.

A. General guidelines on how to compute Profits Tax