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14 Frequently Asked Questions for Personal Tax 2024


14 Frequently Asked Questions for Personal Tax 2024
2024-05-12

The Hong Kong Inland Revenue Department has issued the Individual Tax Returns (“ITR”) (Form BIR60) for the Year of Assessment 2023/24 to most individual taxpayers in Hong Kong in early May 2024.

This article contains some questions that are commonly raised by individual taxpayers when they prepare their ITRs and some ITR filing tips which are intended for general information only.

If you need a professional tax advisor to take care of your personal tax filing matters or handle your particular tax situation, please do not hesitate to contact us.(Note)

 

1. How Salaries Tax is computed?

Before completing your Individual Tax Return (Form BIR 60), it is important to understand how Salaries Tax in Hong Kong is computed.

 

Under Hong Kong tax laws, Salaries Tax is charged on individuals in respect of all income arising in or derived from Hong Kong in relation to any office, employment, pension or payments for services rendered in Hong Kong. The tax payable is calculated at Progressive Tax Rates on Net Chargeable Income or at Standard Tax Rate on Net Income, whichever is lower.

 

  • Net Chargeable Income = Taxable income – Allowable Deductions – Personal Allowances 

  • Net Income = Taxable Income – Allowable Deductions

 

Allowable Deductions

Expenses are allowable – other than those of a capital, private or domestic nature – to the extent that they are incurred wholly, exclusively and necessarily in the production of assessable income. For Salaries Tax purposes, the test is strictly applied.

 

Maximum Allowable Deduction for amount paid for 2023/24 2024/25
1. Self-education expenses HK$100,000 HK$100,000
2. Home loan interest HK$100,000 HK$100,000
3. Elderly residential care expenses HK$100,000 HK$100,000
4. Contribution to recognised retirement schemes HK$18,000 HK$18,000
5. Donations to charitable organisation 35% of net income 35% of net income
6. Qualifying premiums paid under Voluntary Health Insurance Scheme Policy HK$8,000 per insured person HK$8,000 per insured person
7. Qualifying annuity premiums and tax deductible MPF voluntary contribution HK$60,000 HK$60,000
8. Domestic rent deduction* HK$100,000 HK$100,000

*The domestic rent deduction applies to taxpayers who are not owners of any domestic property, subject to the fulfilment of certain conditions (see question 11).

 

The Progressive Tax Rates for the years of assessment 2023/24 and 2024/25 range from 2% to 17%.

Net Chargeable Income   Progressive Tax Rate for 2023/24 and 2024/25
First HK$50,000 2%
Next HK$50,000 6%
Next HK$50,000 10%
Next HK$50,000 14%
Remainder 17%

 

The Standard Tax Rates for the years of assessment 2023/24 and 2024/25 range from 15% to 16%.

 

  2023/24 2024/25*
First Tax rate Tax rate
Next 15% 15%
Next 15% 16%

* Legislative amendments are required for implementing the tax measures as proposed by the Financial Secretary in the 2024-25 Budget.

 

Personal Allowances

 

Personal Allowances are available to an individual taxpayer unless it is more beneficial for him or her to be charged to tax at the Standard Tax Rate on his or her Net Income.

 

Major Personal Allowances 2023/24 (HK$) 2024/25 (HK$)
1. Basic allowance 132,000 132,000
2. Married person's allowance 264,000 264,000

3. Child allowance (each)
    First to ninth child:

   
     - Year of birth 260,000 260,000
     - Other years 130,000 130,000
4. Dependent parent allowance / Dependent grandparent allowance:    
    (a) Aged 55 to 59    
       - basic allowance 25,000 25,000
       - additional allowance (for dependent parent / grandparent living with the taxpayer continuously
         throughout the whole year of assessment)
25,000 25,000
    (b) Aged 60 or above    
       - basic allowance 50,000 50,000
       - additional allowance (for dependent parent / grandparent living with the taxpayer continuously
         throughout the whole year of assessment)
50,000 50,000
5. Dependent brother / sister allowance 37,500 37,500
6. Single parent allowance 132,000 132,000
7. Disable dependent allowance 75,000 75,000
8. Personal disability allowance 75,000 75,000

 

For Hong Kong Salaries Tax purposes, a year of assessment runs from 1 April to 31 March of the following year. For example, if you started working in Hong Kong on 1 October 2023, you will have to declare your taxable income earned during the period from 1 October 2023 to 31 March 2024 in the 2023/24 Individual Tax Return (Form BIR 60).

 

Full details of Personal Allowances, Allowable Deductions and applicable Salaries Tax rates can be found at the IRD’s website [Link].

 

To find out more about how PKF Hong Kong can assist you in handling your personal tax matters, please feel free to contact your usual PKF tax executives, or reach out to our Tax Partner, Henry Fung (henryfung@pkf-hk.com).

 

 

2. If I am a part-time employee or self-employed person, do I need to file a tax return?

The law provides that, whether you are a part-time employee or self-employed person, you must complete and submit your Individual Tax Return (Form BIR60) in time if you have received an Individual Tax Return (Form BIR60) from the IRD.

 

If you are self-employed (i.e. running a sole proprietorship or partnership business), you are liable to Profits Tax if your sole proprietorship or partnership business has derived net assessable profits which arise in or are derived from Hong Kong. 

 

In general, if you are running a sole proprietorship business, you need to file your Individual Tax Return (Form BIR60), together with the supporting tax computation and a set of the sole proprietorship business’s financial statements, on an annual basis.  As for partnership businesses, a Profits Tax Return - Persons Other Than Corporations (Form BIR52), together with a set of the partnership’s financial statements and tax computation of the partnership business, are required to be filed annually.

 

To find out more about how PKF Hong Kong can assist you in handling your personal tax matters, please feel free to contact your usual PKF tax executives, or reach out to our Tax Partner, Henry Fung (henryfung@pkf-hk.com).

 

3. When will I receive my Individual Tax Return?

The IRD normally issues the Individual Tax Returns (Forms BIR60) to regular taxpayers on the first working day of May every year. 

 

The bulk issue of the 2023/24 Individual Tax Returns (Forms BIR60) took place on 2 May 2024. The due dates for filing the Individual Tax Returns (Forms BIR60) are as follows:-

Status Due date for unrepresented cases Extended due date for represented cases
Not involving sole-proprietorship 3 July 2024 3 July 2024
Involving sole-proprietorship

2 August 2024

2 October 2024

 

To find out more about how PKF Hong Kong can assist you in handling your personal tax matters, please feel free to contact your usual PKF tax executives, or reach out to our Tax Partner, Henry Fung (henryfung@pkf-hk.com).

 

4. If I do not receive my Individual Tax Return from the IRD, does it mean 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 have derived income that is liable to Salaries Tax for 2023/24 but do not receive your 2023/24 Individual Tax Return (Form BIR60), which should have normally been issued by the IRD in early May 2024, you are obliged to inform the IRD of your chargeability to tax in writing no later than 31 July 2024.

 

To find out more about how PKF Hong Kong can assist you in handling your personal tax matters, please feel free to contact your usual PKF tax executives, or reach out to our Tax Partner, Henry Fung (henryfung@pkf-hk.com).

 

5. Can I be exempt from Salaries Tax if I spend less than 60 days a year in Hong Kong in a tax year?

 

In most cases, you can be exempt from Salaries Tax in a year of assessment if you rendered all services under your employment outside of Hong Kong for that year of assessment.  "Services" would also include activities such as attending trainings, meetings or reporting in Hong Kong.  Alternatively, most employment income from services rendered in Hong Kong during visits not exceeding a total of 60 days in a year of assessment can also be exempt from Salaries Tax.  "Visits" refer to a short or temporary stay, where a partial day spent in Hong Kong is still counted as a full day.

 

Even if you do not fulfil the specified conditions for a full exemption from Salaries Tax, depending on the circumstances of your case, you may still be eligible for a partial exemption of income or tax credit claim to reduce your Salaries Tax liabilities in Hong Kong. 

 

To find out more about how PKF Hong Kong can assist you in handling your personal tax matters or under what conditions you may be exempt from Hong Kong Salaries Tax, please feel free to contact your usual PKF tax executives, or reach out to our Tax Partner, Henry Fung (henryfung@pkf-hk.com).

 

6. If I am married, shall I elect Joint Assessment in my Individual Tax Return (Form BIR 60)?

 

Generally speaking, separate assessment is beneficial if both the husband and the wife are chargeable to Salaries Tax, and the income of each of them exceeds the limit of Basic Allowance (i.e. HK$132,000 for 2023/24 and 2024/25).

 

If you are married and your spouse does not have income assessable under Salaries Tax, you are entitled to claim Married Person’s Allowance (i.e. HK$264,000 for 2023/24 and 2024/25) and do not need to elect Joint Assessment in your Individual Tax Return (Form BIR 60).

 

If both you and your spouse have income assessable under Salaries Tax, you and your spouse may elect to be jointly assessed (i.e. under Joint Assessment) if the election can reduce the overall tax liability. In general, Joint Assessment can be advantageous for a married couple if the net income of one spouse is less than the total amount of the Personal Allowances to which he or she is entitled.

 

To find out more about how PKF Hong Kong can assist you in handling your personal tax matters, please feel free to contact your usual PKF tax executives, or reach out to our Tax Partner, Henry Fung (henryfung@pkf-hk.com).

 

7. If I want to claim a tax deduction for self-education expenses, do I need to submit documentary evidence when I file my Individual Tax Return for the IRD’s examination?

If you have incurred self-education expenses, including tuition and examination fees, in connection with a prescribed course of education undertaken by you to gain or maintain qualifications for use in your employment and you want to claim such expenses as a tax deduction, you do not need to submit any documentary evidence when you file your Individual Tax Return (Form BIR60) in support of the deduction claim. However, you should retain the relevant supporting documents (e.g. receipts) for a period of 6 years after the expiration of the year of assessment in which the payments were made and submit them to the IRD for examination upon request in case your deduction is selected for review at a later time.

 

To find out more about how PKF Hong Kong can assist you in handling your personal tax matters, please feel free to contact your usual PKF tax executives, or reach out to our Tax Partner, Henry Fung (henryfung@pkf-hk.com).

 

8. In the year of assessment of 2023/24, can I get any reduction in Salaries Tax?

 

In the 2024/25 Hong Kong Budget delivered on 28 February 2024, the Financial Secretary proposed a one-off reduction of 100% of the final tax for the year assessment 2023/24 in respect of Profits Tax, Salaries Tax and tax under Personal Assessment, subject to a ceiling of HK$3,000 per case (Legislative amendments are required for implementing the tax measures as proposed by the Financial Secretary in the Budget). The IRD will reflect the tax reduction in the tax demand notes to be issued. 

 

To find out more about how PKF Hong Kong can assist you in handling your personal tax matters, please feel free to contact your usual PKF tax executives, or reach out to our Tax Partner, Henry Fung (henryfung@pkf-hk.com).

 

9. If my parents / grandparents are under employment, can I still claim the Dependent Parent Allowance / Dependent Grandparent Allowance?

 

You are entitled to Dependent Parent Allowance / Dependent Grandparent Allowance in respect of each parent / grandparent maintained by you / your spouse, not being a spouse living apart from you, during a year of assessment.  To qualify for such allowances, the 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.

 

If your parent/ grandparent resides, without paying the full cost, with you continuously throughout the whole year, you are also entitled to additional Dependent Parent Allowance / additional Dependent Grandparent Allowance.

 

Dependent Parent / Dependent Grandparent Allowance 2023/24 (HK$) 2024/25 (HK$)
(a) Aged 55 to 59    
    - basic allowance 25,000 25,000
    - additional allowance (for dependent parent / grandparent living with the taxpayer continuously
      throughout the whole year of assessment)
25,000 25,000
(b) Aged 60 or above    
    - basic allowance 50,000 50,000
    - additional allowance (for dependent parent / grandparent living with the taxpayer continuously
      throughout the whole year of assessment)
50,000 50,000

 

In light of the above, you can still claim the Dependent Parent Allowance / Dependent Grandparent Allowance if the above conditions are satisfied regardless of whether your parents / grandparents are under employment or not.

 

We, PKF Hong Kong, provide comprehensive tax and business advisory services in respect of the Hong Kong tax regime. To find out more about how we can assist you in handling your personal tax matters, please feel free to contact your usual PKF tax executives, or reach out to our Tax Partner, Henry Fung (henryfung@pkf-hk.com).

 

10. Can I claim Dependent Parent Allowance or Dependent Grandparent Allowance jointly with my brothers or sisters?

No. Only one individual will be granted a Dependent Parent Allowance or Dependent Grandparent Allowance in respect of a parent or grandparent maintained by that individual or by his or her spouse. If two or more siblings are entitled to claim Dependent Parent Allowance or Dependent Grandparent Allowance for the same parent or grandparent, they must agree among themselves on who shall claim the allowance. The IRD will not consider a claim for Dependent Parent Allowance or Dependent Grandparent Allowance made by two or more siblings for the same parent or grandparent until the claimants have reached a consensus on who shall be entitled to make such claim.

 

We, PKF Hong Kong, provide comprehensive tax and business advisory services in respect of the Hong Kong tax regime. To find out more about how we can assist you in handling your personal tax matters, please feel free to contact your usual PKF tax executives, or reach out to our Tax Partner, Henry Fung (henryfung@pkf-hk.com).

 

11. How can I claim domestic rent deductions?

 

An individual taxpayer who is chargeable to Salaries Tax or tax charged under Personal Assessment is eligible to claim a tax deduction for domestic rental expenses paid by him/her or his/her spouse as a tenant under a qualifying tenancy of domestic premises.

 

To be eligible for domestic rent deduction, the rented domestic premises must be used by the taxpayer as his/her principal place of residence in Hong Kong. In addition, the agreement for the qualifying tenancy (or sub-tenancy) of the domestic premises must be stamped in accordance with the Stamp Duty Ordinance.

 

The maximum amount of domestic rent deduction is HK$100,000 per year of assessment.

 

If there is more than one tenant under a qualifying tenancy, the deduction ceiling applicable to such tenancy will be reduced in proportion to the number of tenants under the tenancy.

 

In case the period of a tenancy for which the domestic rents are paid covers only a part of a year of assessment (i.e. less than 12 months), the deduction ceiling will be reduced in proportion to the length of the period covered by the tenancy within that year of assessment.

 

There are many circumstances under which the domestic rents deduction will not be allowed. For example, if the taxpayer or the taxpayer’s spouse (who is not living apart from the taxpayer) is a legal and beneficial owner of any domestic premises in Hong Kong, if the rents payable or paid by the taxpayer or the taxpayer’s spouse in respect of a place of residence are wholly or partly paid or refunded by the employer or its associated corporation, etc.

 

A taxpayer who wishes to claim a domestic rent deduction should retain documentary evidence showing that the premises were used as his/her place of residence.

 

To find out more about how PKF Hong Kong can assist you in handling your personal tax matters, please feel free to contact your usual PKF tax executives, or reach out to our Tax Partner, Henry Fung (henryfung@pkf-hk.com).

 

12. If I have derived business profits or received rental income in addition to my salary, should I elect Personal Assessment when completing my Individual Tax Return (Form BIR 60)?

 

You may elect Personal Assessment if you have to pay Profits Tax and/or Property Tax in addition to Salaries Tax. Depending on your situation, the election of Personal Assessment may reduce your tax liability, but sometimes it may not. 

 

In general, if you are a sole proprietor or an individual partner who has derived business profits, your profits are subject to Profits Tax. If you own a property and receive rental income, your rental income will be subject to Property Tax. Both Profits Tax and Property Tax are charged at the standard rate. However, if you are eligible to elect Personal Assessment, you may reduce the tax you need to pay by aggregating your assessable income under Salaries Tax, Profits Tax and Property Tax and then applying the progressive Salaries Tax rates to calculate your total tax payable.

 

In the case of a sole proprietorship or a partnership business that has suffered losses, such losses may be used to offset against the income that is subject to Property Tax and/or Salaries Tax. In addition, if a married person chooses to be assessed jointly with his/her spouse under Personal Assessment, any deductions and losses exceeding the total income of the married person can be used to offset against the total taxable income of his/her spouse.

 

All in all, by electing Personal Assessment, it may be possible to achieve tax savings.

 

At PKF Hong Kong, we provide comprehensive tax and business advisory services in respect of the Hong Kong tax regime. To find out if you are eligible for Personal Assessment and to learn how we can assist you with your personal tax matters, please feel free to contact your usual PKF tax executives, or reach out to our Tax Partner, Henry Fung (henryfung@pkf-hk.com).

 

13. I am employed by a Hong Kong company and is about to cease my employment and leave Hong Kong permanently. What obligations do my employer and I have to fulfill before my departure from Hong Kong?

 

Your employer is required to inform the IRD of your cessation of employment and departure from Hong Kong by filing a duly completed Form IR56G not later than one month before your expected date of departure. Your employer is also required to withhold all payment of any amount (including salaries, commission etc.) due to you for one month from the date on which the IR56G was filed, or until receipt of the “Letter of Release” which will be issued by the IRD after you have settled your tax, whichever is earlier.

 

As an individual taxpayer, you are required to notify the IRD in writing not later than one month before your intended date of departure from Hong Kong. The IRD will issue an Individual Tax Return (Form BIR 60) to you upon receiving your notification. For tax clearance purposes, you should bring a copy of the Form IR56G issued by your employer (together with the necessary supporting documents) and attend the IRD in person to clear your tax before departing from Hong Kong. Alternatively, you may appoint a tax representative to handle your tax clearance process.

 

If you fail to settle your taxes before departure, the IRD may issue a garnishee notice to your employer requiring your employer to settle your taxes from the money withheld (since in such case the “Letter of Release” may not be obtained). Both you and your employer must fulfil the legal obligations to notify the IRD of your impending departure and follow the necessary tax clearance procedures.

 

We, PKF Hong Kong, shall be pleased to assist you in handling your personal tax clearance matters, requesting the IRD to issue the “Letter of Release” at the shortest possible time so that your employer can promptly release to you the money previously withheld before your departure. For further information about how we may assist you, please feel free to contact your usual PKF tax executives, or reach out to our Tax Partner, Henry Fung (henryfung@pkf-hk.com).

 

14. What are the advantages of engaging a tax representative (like PKF Hong Kong) to prepare your Individual Tax Return (Form BIR 60)?: -

 

  • To prevent incorrect tax filing - we will prepare your Individual Tax Return (Form BIR 60) with a view to ensuring proper tax treatment of all your taxable income, benefits-in-kind or fringe benefits.

 

  • To help you obtain the tax deduction or allowance you are entitled to - we will help you claim the proper amounts of Personal Allowances and Allowable Deductions (e.g. Basic Allowances, Married Person’s Allowances, Child Allowances, etc.) with a view to reducing your overall tax liability in a proper and legitimate way.

 

  • To file your Individual Tax Return (Form BIR 60) on time - to avoid penalty which may arise because of late tax filing.

 

  • To prepare a clear and easily comprehensible Salaries Tax computation showing your taxable income, the Personal Allowances and the Allowable Deductions to which you are entitled, and the amount of tax liability (by applying the applicable tax rates), so that you can have a better idea of how much tax you will have to pay.

 

  • To check the Notice of Tax Assessment to be issued by the IRD to make sure that the IRD’s computation is in line with the details reported in the Individual Tax Return and advise you of the tax payment due date(s).

 

  • To assist you in applying for an extension of time for filing the Individual Tax Return, if necessary.

 

  • To assist you in answering any queries which may be raised by the IRD with regard to any deduction or tax exemption claims made by you in your tax filings.

 

  • To assist you in notifying the IRD of your chargeability to tax before the statutory notification due date. This is important because an individual taxpayer who has derived taxable income is required to inform the IRD in writing of his chargeability to Salaries Tax within 4 months after the end of the tax year (unless he or she has already been furnished with an Individual Tax Return). Failure to notify chargeability before the statutory deadline is an offence which is subject to a penalty of HK$10,000 plus up to 300% of the tax liability.

 

PKF Hong Kong's professional tax advisors provide comprehensive tax and business advisory services in respect of the Hong Kong tax regime. For further information about how we may assist you, please do not hesitate to contact your usual PKF tax executives, or reach out to our Tax Partner, Henry Fung (henryfung@pkf-hk.com).

 

(NOTE): The information contained in this document is only for general information and is not intended to address the circumstances of any particular entities or individuals. Accordingly, this document does not constitute accounting, tax, legal, investment, consulting, or other professional advice or services. No action should be taken solely on the basis of the contents of this document which only contain a brief outline of the relevant laws. Before taking any action, please ensure that you obtain advice specific to your circumstances from your usual PKF tax partners or other tax advisers or liaise with the relevant tax authorities. We accept no responsibility or liability to any persons choosing to take action or implement business plans or activities solely or partially based on this document.