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 Are the accrued benefits withdrawn from the RORS taxable?
In broad terms, the tax treatment for the accrued benefits withdrawn from an RORS is as follows:
| Relevant portion | Reason for withdrawal | Whether Taxable |
| Employee's contributions | Employment terminated under any circumstances | Always fully exempt |
| Employer's contributions | (1) Retirement, death or incapacity (lost of working ability due to injury/illness) | Exempt |
(2) Termination of service with 10 years of service or more
| Exempt | |
(3) Termination of service with less than 10 years of service
| If the sum does not exceed the Proportionate Benefit, it is fully exempt. If exceeded, the amount exceeding the Proportionate Benefit is taxable. | |
| (4) Other circumstances | Taxable |
Proportionate Benefit = Accrued benefits# x No. of months of service* ÷ 120
# The part relating to employer's contributions
* Only completed months of service will be counted
Example
If after serving 7 years 6 1/2 months an employee left his employment, and from the RORS he received accrued benefits representing employer's contributions of $100,000, the amount that will be exempt from Salaries Tax should be:
PB = $100,000 x 90 complete months ÷ 120 = $75,000
Print
Email