D. Deductions relating to income chargeable to Salaries Tax
D. Deductions relating to income chargeable to Salaries Tax
Choosing a subtopic
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Salaries Tax
- A. Location of Employment
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B. General guidelines on how to compute Salaries Tax
- 1. What income is assessable and what deductions (and allowances) can be claimed under Salaries Tax?
- 2. What are the current rates for salaries tax?
- 3. How is Salaries Tax and Provisional Salaries Tax computed?
- 4. When do I pay my Salaries Tax and Provisional Salaries Tax?
- 5. Under what circumstances can I apply for paying less tax, or for holding over (deferring payment) of Provisional Salaries Tax?
- 6. How can married persons report their salary income?
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C. Income chargeable to Salaries Tax
- 1. My salaries income includes bonus, allowance, and commission. How should I report such income?
- 2. I have drawn a salary from my business. How should I report this income on my individual tax return (i.e. Tax Return – Individuals [B.I.R. 60])?
- 3. I have received leave pay, are these taxable?
- 4. I was laid off. I received from my employer (a) payment in lieu of notice and (b) severance/long service payment. Are these taxable?
- 5. Is the lump sum received by way of commutation of pension (replacing the monthly pension) on my retirement taxable? On the other hand, is monthly pension taxable?
- 6. I am a member of a Mandatory Provident Fund Scheme (“MPFS”). What is the tax treatment of the accrued benefits that I would receive or be deemed to have received from the MPFS upon my termination of employment?
- 7. I was a member of a Recognized Occupational Retirement Scheme (“RORS”) but not a MPF Scheme, and I left my employment. Are the accrued benefits withdrawn from the RORS taxable?
- 8. I completed a two-year-contract of employment and received a lump sum contract gratuity. Then I renewed my contract with my employer for another two years. Do I have to report the entire sum for the first contract's gratuity in this year's tax return?
- 9. How is the benefit of the provision of a place of residence assessed with respect to an employee's Salaries Tax?
- 10. What happens with respect to assessable income if the employer does not provide a place of residence to the employee, but refunds all or part of the rent paid by that employee?
- 11. How are benefits related to companies' share awards or share options taxed?
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D. Deductions relating to income chargeable to Salaries Tax
- 1. I resigned (without advance notice) and left the company on 1 March 2023. As I was required to pay one month's salary in lieu of notice to my employer, my employer did not pay me the salary for February 2023. For the year of assessment 2022/23, should I pay tax on my salary for 10 months or 11 months?
- 2. How are the contributions made to an MPF scheme (MPFS) deducted for tax purposes?
- 3. I am a director of a company and receive director's remuneration. Can I claim deductions for tax purposes from my MPF Scheme (MPFS) contributions?
- 4. If I contribute to a Recognized Occupational Retirement Scheme (“RORS”) rather than a MPF scheme, can I still claim deductions?
- 5. What are expenses of self-education? Can I claim a deduction for tax purposes if I undertake a course related to my employment?
- 6. If I did not undertake any prescribed course of education but just sat the professional examination set by a professional body (such as the Hong Kong Institute of Certified Public Accountants) for its members, can I claim the examination fee as a tax deduction?
- 7. Who are eligible to claim deductions under “Elderly Residential Care Expenses” (ERCE)? What is the maximum deduction?
- 8. What is the maximum amount of tax deduction under Home Loan Interest?
- 9. Can mortgage interest paid for the acquisition of a car parking space be claimed for tax deduction?
- 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?
- 11. I made donations to a charity. Can I claim deductions?
- 12. I paid for rents for my place of residence. Is this deductible?
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E. Allowances relating to Salaries Tax
- 1. Who are eligible to claim the “married person's allowance”? What is the amount of that 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"?
- 3. How is eligibility for claiming the “child allowance” determined? What is the current amount of that allowance?
- 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?
- 5. I have to maintain my two parents. Under what circumstances can I claim the “dependent parent allowance” or the additional dependent parent allowance”?
- 6. How to determine whether or not a dependent parent ordinarily resides in Hong Kong ?
- 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?
- 8. I am eligible to obtain a “child allowance”, but I was divorced 2 years ago. Can I claim the “single parent allowance”?
- 9. I have separated from my spouse recently and I have to solely maintain my children. Can I claim the “single parent allowance”?
- 10. Under what circumstances can I claim the “disabled dependent allowance”?
- 11. What evidence is required from applicants for the “disabled dependant allowance” when a review is made?
- 12. Under what circumstances can I claim the "Personal Disability Allowance"?
- F. Taxpayer who has recently become chargeable to tax
- G. Taxpayer who has change his/her address
- H. Taxpayer who is about to leave Hong Kong
- I. Penalties for salaries tax avoidance
- J. Objection and Appeal
- K. Preliminary calculation and filing of tax returns via the internet
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Profits Tax
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A. General guidelines on how to compute Profits Tax
- 1. What are the current rates for Profits Tax?
- 2. What are “assessable profits”? How to interpret the “basis period” for Profits Tax purposes?
- 3. Is there any difference in the reporting requirements for a sole-proprietorship business and a partnership business?
- 4. I run a business on my own. Do I qualify as a self-employed person and what are my tax obligations?
- 5. I run a business on my own and need to declare “assessable profits” in the tax return. Must I engage a professional accountant to prepare the accounts?
- 6. If I have not appointed any accountant to handle my company's taxation matters, are there any calculation aids available to help me compute the "assessable profits"?
- 7. Can I apply for paying less tax, or for the holding over (deferring payment) of Provisional Profits Tax?
- 8. The gross income of my sole-proprietorship business during the year was below $2,000,000. Do I need to retain this year's business records, and if so, for how long? Do I need to attach the Balance Sheet and Profit & Loss Accounts to my Tax Return?
- 9. If not every receipt/income from my business is taxable, which is taxable and which is not?
- 10. If not every expense/outgoing is deductible from the assessable profits, which ones are deductible?
- 11. Which expenses/outgoings are NOT deductible from the assessable profits?
- 12. Apart from those allowable deductions mentioned in the above Q&A, are there any other allowances available under Profits Tax assessments?
- 13. What is the effect on my liability for Profits Tax if I did not make any profit, but incurred a loss in my business?
- 14. Can I file my profits tax return electronically?
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B. Deductions relating to taxable profits
- 1. What should be included under the section of Employee and/or Director's remuneration in the tax return?
- 2. Is there any limit on deductions for MPF contributions made by employers for their employees?
- 3. I made mandatory contributions of $18,000 in the year of assessment 2022/23 as a self-employed person. I also employed my wife in running the business and she joined the MPFS. My MPF contribution for her during the same year was $10,000. Can I claim a further deduction for profits tax purposes from her part of contributions?
- 4. After the commencement of the MPF scheme, are there any changes to the employer's responsibilities in filing the Employer's Return?
- 5. An employer may occasionally receive a Recovery Notice issued under Section 76(1) of the Inland Revenue Ordinance requiring him/her to deduct the employee's salary for tax payments. Should the employer fulfill this obligation under the Recovery Notice
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C. Allowances relating to Profits Tax
- 1. I am the sole-proprietor and a partner of 2 companies who is liable to pay Profits Tax. Am I entitled to the basic or other tax allowances (such as child, single parent, dependent parent, dependent grandparent or dependent brother/sister allowances), and Home Loan Interest deduction?
- 2. I bought two machines for $200,000 and a second-hand lorry for $50,000. The purchase costs are capital expenditure and cannot be deducted from my assessable profits. Is there any relief that I can claim?
- 3. Are all properties bought by my company for business purposes qualified for building allowances?
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D. Scenarios on partnership business
- 1. I started a partnership business with my brother and our first accounts closed on 31 March 2023. How should I report my share of the profits of the partnership to the Inland Revenue Department?
- 2. Under a partnership agreement (with 2 partners in total), I draw a monthly salary of $10,000 from the business and the balance of the profits is divided between my partner and myself in equal shares. How will the assessable profits of the business be allocated between us?
- 3. Our partnership business had an assessed loss in the previous year of assessment and one of the partners, who is an individual, retired at the end of that year. In this regard, can the share of the loss allocated to the partner who retired be used to set off the profits of the partnership of this year and subsequent years?
- 4. One of the partners has a separate employment, and mandatory contributions (for a MPF scheme) have been made by him both in the capacity of a self-employed person and an employee. How should tax deductions be claimed under profits tax?
- E. Objection and Appeal
- F. Anti-Avoidance measures concerning Profits Tax payment
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A. General guidelines on how to compute Profits Tax
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Property Tax
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A. More information about assessable value and deductions
- 1. How should taxpayers report their rental income for Property Tax assessment to the Inland Revenue Department?
- 2. I received a Property Tax Return (B.I.R.57) last week. When should I return it to the Inland Revenue Department? Do I have to attach any supporting documents to the Return as proof for the figures that I filled in? Can I file my Tax Return via the Internet?
- 3. How to report my letting income?
- 4. I have to pay building management fees and certain other out of pocket expenses for the property. Are they deductible? Should I deduct them from the rental income and report the net amount of the income?
- 5. I bought a property and took out a mortgage loan for 10 years. Can I get any relief for the mortgage interest paid?
- 6. If the tenant fails to pay rent, can I report the uncollected rent and claim deductions in Property Tax?
- 7. What is a “lease premium”? Should it be included in the assessable value for Property Tax?
- 8. Will the letting of common areas of a building cause liability to Property Tax?
- 9. If I received a Property Tax assessment and found that the net assessable value (NAV) and the tax charged are incorrect, what should I do?
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B. Scenarios involving solely-owned properties
- 1. I let a property on 1 July 2022 for $30,000 per month. Rates for the 3 quarters to 31 March 2023 paid by me amounted to $12,000. How is Property Tax computed for 2022/23? Do I have to pay Provisional Property Tax for 2023/24?
- 2. My solely-owned property yielded a rental income of $30,000 per month until the tenant left on 31 May 2023. It was let again after 3 months' vacancy at a reduced monthly rental of $24,000. Can I apply to pay less property tax (or to holdover/defer payment of provisional tax)?
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C. Scenarios involving jointly-owned properties
- 1. My 3 sons and I are the joint owners of a property. How should I state my share of ownership?
- 2. I have received a Property Tax Return for a property owned by my parents and myself. My mother passed away on 1 August 2022. How should I complete the Property Tax Return for 2022/23?
- 3. My parents are joint owners of the property. If they are unable to write, how can they sign the Tax Return (B.I.R.57)?
- 4. My spouse and I let out a flat and a parking space together to the same tenant at one lump sum rental. However, I received two separate Property Tax Returns, how should I fill in Part 4 of the Return?
- 5. My husband and I jointly own a flat and a parking space. The flat is let for rental income and the parking space is used for parking our own car. The Property Tax Return shows the location of property as consisting of both the flat and the parking space. How should we report this situation in the Tax Return?
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A. More information about assessable value and deductions
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Personal Assessment (may provide more tax relief in some cases)
- 1. Who are eligible to choose Personal Assessment?
- 2. If I received monthly rental of $40,000 from letting a property under mortgage (interest of $42,000 was paid during the year), can I pay less tax under Personal Assessment? When will the selection of Personal Assessment not be advantageous?
- 3. If I suffered a business loss of $100,000 but received salaries income of $400,000 from a separate employment, can I pay less tax under Personal Assessment?
- 4. The profit of my sole-proprietorship business was assessed at $460,000. My wife received a monthly rent of $10,000 from a property under mortgage. She paid mortgage interest of $56,000 during the year. How is Personal Assessment applied to a married couple?
- 5. Is there a time limit for selecting Personal Assessment?
- Taxation Arrangement between the Mainland China and Hong Kong (to avoid double taxation)
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Stamp Duty
- 1. In what ways can I have a document stamped?
- 2. Can I submit a license agreement for a property for stamping electronically?
- 3. What is the time limit for stamping a document? Will penalties be imposed if I stamp the document late?
- 4. Other than the penalties imposed for late stamping, what are the consequences if I fail to stamp a document on which stamp duty is charged?
- 5. When will I have to pay an "adjudication fee"?
- 6. If the duty payer does not agree with the stamp duty assessment, what can he/she do?
- Estate Duty
- Objection and Appeal against Tax Assessment
- Advance Rulings (to obtain early decisions on uncertain tax matters)
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