6. 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 Are the accrued benefits withdrawn from the RORS taxable?
In broad terms, the tax treatment for the accrued benefits withdrawn from an RORS is as follows: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 |
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