10 Frequently Asked Questions for Personal Tax
As the saying goes, "Nothing is certain but death and taxes." As the tax-man comes a-calling, our tax experts are here to assist and provide sound professional advice to help in completing the necessary tax filing.
How Salaries Tax is computed?
Before completing the tax filing, you may need to know how the salaries tax is computed.
According to the Inland Revenue Department, the Salaries Tax payable is calculated at progressive rates on the net chargeable income or at the standard rate on the net income, whichever is lower.
Net Chargeable Income = Total Income - Deductions – Allowances
Net Income = Total Income - Deductions
The year of assessment runs from 1st April to 31st March of the following year. In other words, if you started to work on 1st September 2018, then you will have to declare your tax return from 1st September 2018 to 31st March 2019.
How do I need to know if I am subject to tax filing? Does being a Part-time or self-employed need to file the tax return?
If you are a part-time employee, you are liable to Salaries Tax and required to file the Tax Return - Individuals if your total employment income for a year of assessment exceeds your total allowances and allowable deductions.
If you are self-employed (i.e. running a sole proprietorship or partnership business), you are liable to Profits Tax if there are assessable profits derived from your sole proprietorship or partnership business.
In general, if you are running a sole proprietorship business, you need to file the Tax Return – Individuals (BIR60) together with financial statements and tax computation of the sole proprietorship business. As for partnership business, a Profits Tax Return - Persons Other Than Corporations (BIR52) together with financial statements and tax computation of the partnership business should be filed.
*Please do not hesitate to contact our tax team if you need more information in this regard.
When will I receive the tax return?
The Inland Revenue Department issues Tax Returns – Individuals (BIR60) to regular taxpayers on the first working day of May every year.
If I did not receive the tax return, does it mean that I do not need to report or pay any tax?
No, you may be liable to tax if you derive employment income, rental income or business profits from Hong Kong. If you are liable to tax and did not receive the tax returns, you are obliged to inform the IRD of your chargeability to tax no later than 4 months after the end of the basis period (i.e. on or before 31 July).
When will be the deadline for me to file the tax return?
Taxpayers are required to complete and send the Tax Returns – Individuals (BIR60) back to the IRD within 1 month from the date of issue of the Returns. For the year 2018-19, the deadline for submitting the Tax Return – Individuals (BIR60) which is issued on 2 May 2019 is 3 June 2019. For sole-proprietors of unincorporated businesses, the deadline for submission is 2 August 2019. An extension of 1 month will be given automatically if the Return is filed electronically.
If I am married, shall I elect joint assessment?
If you are married and your spouse does not have income assessable under Salaries Tax, you are entitled to claim the married person’s allowance and do not need to elect a joint assessment.
If both you and your spouse have income assessable under Salaries Tax, you and your spouse may elect to be jointly assessed if the election can reduce the overall tax liability. In general, joint assessment can be advantageous for a married couple if the assessable income of one spouse is less than his or her tax allowance.
If I want to claim the deduction of self-education expenses, do I need to provide evidence together with the tax return for the Inland Revenue Department‘s examination?
You do not need to attach any supporting documents with your Tax Return - Individuals to support your deduction claim. However, you should retain the supporting documents for a period of 6 years after the expiration of the relevant year of assessment and submit them to the Assessor for verification when required.
In the year of 2018-19, can I get any tax rebate?
The Legislative Council has passed the proposal of the 2019-20 Hong Kong Budget. A one-off rebate of 75% of salaries tax that had been paid for the year 2018-19 (subject to a ceiling of HK$20,000) will be offered to set-off against the final tax payable for that year. Upon enactment of the relevant legislation, the IRD will affect the reduction in the final assessment for 2018-19 in the notice of tax assessment.
If my parents/grandparents are under employment, can I still claim the dependent parent and dependent grandparent allowance?
You may claim the allowance in respect of each dependent parent/grandparent maintained by you / your spouse, not being a spouse living apart from you, during a year of assessment. To qualify for the dependent parent/grandparent allowance, the dependent parent/grandparent must at any time during the year be:
- ordinarily resident in Hong Kong;
- aged 55 or more, or eligible to claim an allowance under the Government's Disability Allowance Scheme; and
- resided with you / your spouse, without paying the full cost, for a continuous period of not less than 6 months or have received from you / your spouse not less than HK$12,000 in money towards his / her maintenance.
Hence, you can still claim the dependent parent / dependent grandparent allowance if the above conditions are satisfied regardless of whether your parents/grandparents are under employment.
Are there any ways for me to achieve tax efficiency?
Yes, our firm offers tailor-made tax planning services depending on our clients’ situation. Please do not hesitate to contact us in this regard.
If I derive business profits or receive rental income in addition to my salary, should I elect personal assessment?
You may elect personal assessment if you have to pay Profits Tax and/or Property Tax apart from Salaries Tax. Depending on your situation, the election of personal assessment may reduce your tax liability but sometimes it may not.
For Personal tax allowances and deductions, please click the button below to download.
PKF Hong Kong's professional tax advisors provide comprehensive tax and business advisory services in respect of the Hong Kong tax regime. Please do not hesitate to contact our tax team if you need more information in this regard.