Tax levied on chargeable incomes of individuals is known as salaries tax in Hong Kong, which charges one of the lowest corporate and individual taxes in the world. Hong Kong follows a territorial taxation policy whereby tax is charged only on the incomes earned in Hong Kong. A Hong Kong tax resident who has paid taxes in the Mainland on his/her income derived from services rendered in the Mainland may claim for a tax credit under section 50 and the Comprehensive Arrangement. Dividends are tax exempted, and there is no capital gains tax or inheritance tax. The Year of Assessment (YA) runs from 1 April to 31 March the following year.
There are no exemptions available on chargeable income. Notably, individuals are subjected to a progressive tax rate starting from 2% and capped at 17% on their net chargeable income or at a standard rate of 15% on the net income, whichever is lower.
Progressive Tax Rates
The following progressive tax rates are applicable on the net chargeable income of individuals
Year of Assessment 2018/19 onwards#
| Net chargeable Income ($) | Rate | Tax ($) | |
|---|---|---|---|
| On the First | 50,000 | 2% | 1,000 |
| On the Next | 50,000 | 6% | 3,000 |
| 100,000 | 4,000 | ||
| On the Next | 50,000 | 10% | 5,000 |
| 150,000 | 9,000 | ||
| On the Next | 50,000 | 14% | 7,000 |
| 200,000 | 16,000 | ||
| Remainder | 17% |
# Until superseded
Calculating Net Chargeable Income
Net chargeable income is calculated by deducting allowable deductions and allowances from the total income of the individual.
The Total income of individuals includes salaries, wages and director’s fees as well as commissions and bonuses. It will also include any encashment of leave, and gratuities paid at the end of contract or payments received in lieu of notice. The following benefits and perks will also be treated as part of total income:
- Cash allowances, fringe benefits, the liability of employees discharged by employers, convertible benefits, education benefits, and holiday journey benefits.
- Pensions, termination payments and retirement benefits including accrued benefits received from recognized occupational retirement schemes or receipt or deemed receipt from mandatory provident fund schemes.
- Back pay, gratuities, deferred pay and pay-in-arrears
- Stock awards and share options offered by the employer
- Tips received from the employer or any other person
- The rental value of a place of residence that has been provided by the employer
- Salaries tax paid by the employer
It must be noted that severance payments and long service payments that are payable to an employee under the Employment Ordinance and are not in excess of his/her entitlement are not assessable income.
Deductions
Besides the outgoings and expenses that are wholly, exclusively and necessarily incurred in the generation of the assessable income, the following deductions can be claimed by an individual from his/her total income.
| Deductions | Claimable Conditions | Claimable Amount |
|---|---|---|
| Qualifying premiums paid under Voluntary Health Insurance Scheme (VHIS) | Claimable for qualifying premiums paid by the individual or his/her spouse as a policyholder for an insured person – the individual or specified relative – and must be a
Specified relative is the
There is no cap on the number of specified relatives claimed by a taxpayer. Deductions can be claimed for premiums paid for the same insured person under one or more than one VHIS policy. In case of more than one policyholders, the premium shall be deemed to have been paid equally by all taxpayers. Extending this provision, more than one taxpayer can claim a deduction for the same insured person. |
The specified maximum deduction for the year of assessment 2019/20 onwards is $8,000. |
| Tax Deductions for Qualifying Annuity Premiums and Tax Deductible MPF Voluntary Contributions |
Claimable on qualifying annuity premiums and tax-deductible MPF voluntary contributions (TVC) paid by the taxpayer or his/her spouse as a policyholder of a Qualifying Deferred Annuity Policy (QDAP) for an annuity payment receivable by an annuitant. It is applicable to a year of assessment commencing on or after 1 April 2019. To qualify the QDAP must be certified by the Insurance Authority to be in compliance and regular payment must be receivable under the policy by an annuitant during an annuity period. The policyholder, the annuitant and person making the annuity premiums must be the taxpayer, or his/her spouse or the taxpayer and his/her spouse. To qualify the TVC must be paid into a TVC account defined under the Mandatory Provident Fund Schemes Ordinance. The taxpayer must be the TVC account holder. The deductible amount is the net of the refunds, and total allowable deductions cannot exceed the aggregate of qualifying annuity premiums and tax-deductible MPF voluntary contributions paid during the year of assessment or the specified maximum deduction, whichever is lower. Deductions can be claimed for premiums paid for more than one policy; there is no cap on QDAP. |
The specified maximum deduction (the aggregate limits for both QDAP and TVC) for the year of assessment 2019/20 onwards is $60,000. |
| Approved Charitable Donations |
Claimable on donations made (but not claimed by the spouse of the taxpayer) to any charity that is exempted from tax under section 88 of the Inland Revenue Ordinance or to the Government for charitable purposes. Not all payments to tax-exempt charities are deductible. Example payments made for goods or services, raffle tickets etc. |
The aggregate deduction of approved charitable donations cannot be less than $100. The aggregate deduction shall not exceed 35% of the income after allowable expenses and depreciation allowances or assessable profits. |
| Expenses of Self-education |
Claimable on expenses on tuition fee and the related examination fee paid for a prescribed course of education offered by a education provider, or a trade/professional/business association or a course accredited or recognised by an institution specified by Schedule 13 of IRO, for gaining or maintaining qualifications for use in either a current or a planned employment. Claimable on the net amount paid after reimbursements, if any. Must be claimed in the year of payment. |
HK$100,000 |
| Contributions to a Mandatory Provident Fund Scheme or Recognized Occupational Retirement Scheme | Mandatory contributions to MPF schemes are deductible in computing your assessable income as an employee or assessable profits as a self-employed person’s own contribution. | HK$18,000 |
| Home Loan Interest | Claimable for interest paid during the year of assessment on loan for the acquisition of a dwelling situated in Hong Kong and any car parking space located in the same development of the dwelling.
The following conditions must be fulfilled:
In the case of married persons,
|
HK$100,000 a year for up to 20 years (not necessarily consecutive) |
| Elderly Residential Care Expenses |
Claimable on payments made in the year of assessment to a residential care home for the care of a parent or grandparent (biological, step, adoptive) of the taxpayer or his/her alive or deceased spouse. A person who is chargeable to tax at the standard rate is also entitled to the deduction. The following conditions must be satisfied:
|
HK$100,000 |
Allowances
All allowances should normally be claimed on your Tax Return – Individuals (BIR60) during the year of assessment to which they are related. Late claims are possible but the written claim should not be later than 6 years from the relevant year of assessment. In every year of assessment the following allowances are available for deduction from total incomes.
| Allowance Type | Claimable Conditions | Claimable Amount 2018/19 onwards # |
|---|---|---|
| Basic Allowance | Claimable by all individuals | HK$132,000 |
| Married person’s allowance | Claimable in any year of assessment if the individual is married at any time during that year and maintaining or supporting the spouse regardless of staying together or apart, and the spouse did not have any chargeable income in the year, or the individual and the souse have elected for joint assessment or personal assessment jointly for the year. | HK$264,000 |
| Child allowance | Claimable if during the year of assessment the individual maintains an unmarried child ( biological, adopted or step-child) who is
|
HK$120,000 for each of the 1st to 9th child. For each child born during the year, the allowance will be increased by HK$120,000 |
| Dependent Brother or sister allowance | Claimable if the individual or his/her spouse maintains an unmarried brother or sister ( full/half-blood, adopted, step, or biological child of the individual’s or his/her spouse’s adoptive parents or the siblings of a deceased spouse) who at any time during the year of assessment was:
|
HK$37,500 for each dependent. |
| Dependent Parent Grand Parent | Claimable for each dependent parent/grandparent (biological/adoptive/step-parent/grandparent of the individual or his her spouse or deceased spouse) maintained by the individual or his/her spouse not living apart. To qualify for the allowance, the dependent parent/grandparent must at any time during the year be:
|
HK$50,000 for each parent/grandparent aged 60 or more. HK$25,000 for each parent/grandparent aged between 55 and 59. HK$50,000 additional dependent parent/grandparent allowance for each parent/grandparent aged 60 or more. HK$25,000 additional dependent parent/grandparent allowance for each parent/grandparent aged between 55 and 59. |
| Single Parent Allowance |
Claimable if the individual has undertaken the ongoing responsibility for care and supervision of his/her child; and the individual was not married at any point during the year of claim, and was granted a child allowance for the year of claim. It must be noted that the single parent allowance is granted on time spent on care and supervision, whereas the child allowance is granted on money spent on maintenance and education. Single parent allowance cannot be availed for monetary contributions made towards the education or maintenance of the child. No allowance will be granted on the second or subsequent child. In the case of divorce or separation, and if both parents want to claim the allowance, will be apportioned according to the time, the child was predominantly or solely cared for by the claimants. In case of dispute, the Commissioner will decide the basis of apportionment. |
HK$132,000 |
| Disabled Dependent Allowance | Claimable if the individual or his/her spouse maintains a dependent (spouse or child/parent/grandparent/brother/sister of the individual or his/her spouse) who claims an allowance under the Government’s Disability Allowance Scheme.
It must be noted that this allowance is in addition to the married person’s allowance, or child allowance, or dependent parent and grandparent allowance or elderly residential care expenses; or dependent brother or dependent sister allowance. |
HK$75,000 for each dependent |
| Personal Disability Allowance | Claimable if the individual is a claimant of the Government’s Disability Allowance Scheme. | HK$75,000 |
# Until superseded
Filing Tax Return
Annual tax returns must be filed with the Inland Revenue Department (IRD) within one month from the date of issue of individual tax returns, which the IRD sends by May 1 of each year. Sole proprietors can file the returns within three months from the date of issue. Even if a taxpayer does not have income in a year of assessment, must still need to declare zero income in the tax form.
Returns can be filed online or by postal mail. The IRD will send a notice of assessment indicating the amount of tax payable for the year of assessment. In the event of an objection, IRD must be informed within 30 days from the issue of notice of assessment. If there is a delay in filing the return, the IRD may issue an estimated assessment. The tax must be paid on or before the due date specified in the notice of assessment failing which the IRD may impose penalties.
[i] To determine whether a dependant is ordinarily resident in Hong Kong, the Inland Revenue Department may consider objective factors including: (i) the number of days he/she stayed in Hong Kong, the frequency of his / her visit to Hong Kong and the length of each stay; (ii) whether he/she has a permanent dwelling in Hong Kong; (iii) whether he/she owns a property for residence outside Hong Kong; (iv) whether he/she works or carries out a business in Hong Kong ; (v) whether his/her relatives are mainly residing in Hong Kong.
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