Hong Kong Salaries Tax

1. Hong Kong Salaries Tax hkcompanyregistration.com info@hkcompanyregistration.com

2. Hong Kong Salaries Tax +852 2780 0607 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# RATE TAX ($) NET CHARGEABLE INCOME ($) On the First 2% 1,000 50,000 On the Next 6% 3,000 50,000 4,000 100,000 On the Next 5,000 10% 50,000 9,000 150,000 On the Next 7,000 50,000 14% 16,000 200,000 Remainder 17% # Until superseded Copyright © 2019 · Hong Kong Company Registration. All rights reserved. (https://www.hkcompanyregistration.com/) Last updated Dec 2019 | 1

3. Hong Kong Salaries Tax +852 2780 0607 Calculating Net Chargeable Income Pensions, termination payments and retirement benefits including accrued benefits received occupational retirement receipt or deemed mandatory provident fund schemes. ? from recognized schemes receipt or from Net chargeable income is calculated by deducting allowable allowances from the total income of the individual. deductions and Back pay, gratuities, deferred pay and pay-in-arrears ? Stock awards and share options offered by the employer 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: ? 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 ? Cash allowances, fringe benefits, the liability of employees discharged by employers, convertible education benefits, and holiday journey benefits. ? It must be noted that severance payments and long service payments that are payable to an employee under Ordinance and are not in excess of his/her entitlement are not assessable income. benefits, the Employment 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. Copyright © 2019 · Hong Kong Company Registration. All rights reserved. (https://www.hkcompanyregistration.com/) Last updated Dec 2019 | 2

4. Hong Kong Salaries Tax +852 2780 0607 DEDUCTIONS: Qualifying premiums paid under Voluntary Health Insurance Scheme (VHIS) CLAIMABLE AMOUNT: The specified maximum deduction for the year of assessment 2019/20 onwards is $8,000. CLAIMABLE CONDITIONS: 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 HKID cardholder at any time during the year of assessment; or ? in the case of a child aged below 11 years and who does not hold an HKID, the child’s biological or adoptive parents must be an HKID cardholder when the insured person was born or adopted. ? The deduction allowable to each taxpayer for each insured person should not exceed the qualifying premiums paid or the specified maximum deduction, whichever is lower. Specified relative is the Taxpayer’s spouse; ? Taxpayer’s or his/her spouse’s parent/grandparent, who is aged 55 or more; or under the age of 55 but eligible to claim an allowance under the Government’s Disability Allowance Scheme; ? Taxpayer’s or his/her spouse’s child or sibling, who is at any time during the year of assessment unmarried and under 18 years of age; or, ? ? aged between 18 and 25 years and pursuing full-time studies at school or university; or, ? over 18 years of age but is unable to work due to physical or mental disabilities. ? 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. Copyright © 2019 · Hong Kong Company Registration. All rights reserved. (https://www.hkcompanyregistration.com/) Last updated Dec 2019 | 3

5. Hong Kong Salaries Tax +852 2780 0607 DEDUCTIONS: Tax Deductions for Qualifying Annuity Premiums and Tax Deductible MPF Voluntary Contributions CLAIMABLE AMOUNT: The specified maximum deduction (the aggregate limits for both QDAP and TVC) for the year of assessment 2019/20 onwards is $60,000. CLAIMABLE CONDITIONS: 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. DEDUCTIONS: Approved Charitable Donations CLAIMABLE AMOUNT: 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. CLAIMABLE CONDITIONS: 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. Copyright © 2019 · Hong Kong Company Registration. All rights reserved. (https://www.hkcompanyregistration.com/) Last updated Dec 2019 | 4

6. Hong Kong Salaries Tax +852 2780 0607 DEDUCTIONS: Expenses of Self-education CLAIMABLE AMOUNT: HK$100,000 CLAIMABLE CONDITIONS: 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. DEDUCTIONS: Contributions to a Mandatory Provident Fund Scheme or Recognized Occupational Retirement Scheme CLAIMABLE AMOUNT: HK$18,000 CLAIMABLE CONDITIONS: 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. DEDUCTIONS: Home Loan Interest CLAIMABLE AMOUNT: HK$100,000 a year for up to 20 years (not necessarily consecutive) CLAIMABLE CONDITIONS: 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: The taxpayer is either a sole owner, a joint tenant or a tenant in common as shown in the records of the Land Registry; ? The dwelling is a separate rateable unit under the Rating Ordinance: that is, it is situated in Hong Kong; ? the dwelling is used wholly or partly as the taxpayer’s place of residence in the year of assessment. ? the loan is secured by a mortgage or charge over the dwelling or over any other property in Hong Kong; and ? the lender is an organisation prescribed under section 26E(9) of the Inland Revenue Ordinance (IRO) ? Copyright © 2019 · Hong Kong Company Registration. All rights reserved. (https://www.hkcompanyregistration.com/) Last updated Dec 2019 | 5

7. Hong Kong Salaries Tax +852 2780 0607 It must be noted that if the taxpayer is a joint owner, the claimable interest paid shall be regarded as equally paid by the joint tenants, and in the case of tenants in common, it shall be deemed to be paid in proportion to the share of each tenant in common. The claimable amount shall be the apportioned interest. ? the dwelling is partly used as the place of residence, the amount of interest deductible will be restricted accordingly); ? interest was paid before the dwelling is used, it shall not be claimable. ? the taxpayer owns multiple places of residence, then claims can be made only against interest paid towards a principle place of residence. ? It must be noted that if A deduction can be claimed separately on the share of interest in the case of joint ownership. ? If one of them has income less than the total of allowable interest and personal allowances, then they can elect for joint assessment so that the interest is deductible from the aggregate assessable income. ? If one of them as the owner of the house has no chargeable income due to loss or otherwise he/she can nominate the spouse to claim the deduction. It must be noted that nominations must be made year by year, and the nominating spouse must sign the nominee’s tax return to signify his or her agreement to the nomination. ? In the case of personal assessment, the allowable HLI is first deducted from the total income of the one who paid the HLI. Any part of the deduction not fully utilised is then set off against the other’s total income. ? DEDUCTIONS: Elderly Residential Care Expenses CLAIMABLE AMOUNT: HK$100,000 CLAIMABLE CONDITIONS: 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. Copyright © 2019 · Hong Kong Company Registration. All rights reserved. (https://www.hkcompanyregistration.com/) Last updated Dec 2019 | 6

8. Hong Kong Salaries Tax +852 2780 0607 The following conditions must be satisfied: The parent or grandparent is 60 years old or above, or otherwise entitled to claim an allowance under the Government’s Disability Allowance Scheme. ? The expenses were paid to a residential care home or any person acting on its behalf. ? The residential care home is situated in Hong Kong and is licensed or exempted from licensing or is a registered nursing home. ? It must be noted that claims can be made on the net amount paid after reimbursements. Only one person can be granted the deduction for the same parent or grandparent for a year of assessment. In case of other potential claimants, it must be mutually agreed between them on who shall claim a deduction for the year of assessment. 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: Basic Allowance CLAIMABLE AMOUNT: HK$132,000 CLAIMABLE CONDITIONS: Claimable by all individuals Copyright © 2019 · Hong Kong Company Registration. All rights reserved. (https://www.hkcompanyregistration.com/) Last updated Dec 2019 | 7

9. Hong Kong Salaries Tax +852 2780 0607 ALLOWANCE TYPE: Married person’s allowance CLAIMABLE AMOUNT: HK$264,000 CLAIMABLE CONDITIONS: 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. ALLOWANCE TYPE: Married person’s allowance CLAIMABLE AMOUNT: HK$264,000 CLAIMABLE CONDITIONS: 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. ALLOWANCE TYPE: Child allowance CLAIMABLE AMOUNT: 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 CLAIMABLE CONDITIONS: Claimable if during the year of assessment the individual maintains an unmarried child ( biological, adopted or step-child) who is under 18 years old; or, ? aged between 18 and 25 years and pursuing full-time studies at school or university; or, ? over 18 years of age but is unable to work due to physical or mental disabilities. ? Note: In the case of both husband and wife with chargeable income, the allowance must be claimed by one with the higher income and in the case of husband and wife with chargeable income and one of them is assessed at standard rate, the allowance must be claimed by the one whose income is not assessed at standard rate. Copyright © 2019 · Hong Kong Company Registration. All rights reserved. (https://www.hkcompanyregistration.com/) Last updated Dec 2019 | 8

10. Hong Kong Salaries Tax +852 2780 0607 ALLOWANCE TYPE: Dependent Brother or sister allowance CLAIMABLE AMOUNT: HK$37,500 for each dependent. CLAIMABLE CONDITIONS: 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: under 18 years old; or ? aged between 18 and 25 years and pursuing full-time studies at school or university; or, ? over 18 years of age but is unable to work due to physical or mental disabilities. ? To be deemed to have maintained, the claimant must have solely or predominantly cared of the brother or sister. In case of another potential claimant, the claimants must mutually agree on who shall make a claim. In the event of disagreement, no allowance shall be granted. ALLOWANCE TYPE: Dependent Parent Grand Parent CLAIMABLE AMOUNT: 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. CLAIMABLE CONDITIONS: 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: ordinarily resident in Hong Kong[i]; ? aged 55 or more, or eligible to claim an allowance under the Government’s Disability Allowance Scheme; and ? resided with the individual or his/her spouse for a continuous period of not less than six months without paying the full cost or have received from the individual or his/her spouse not less than $12,000 in money towards his/her maintenance. ? The individual is entitled to Additional Dependent Parent and Grandparent Allowance if the dependent parent/grad parent resided continuously throughout the whole year. Copyright © 2019 · Hong Kong Company Registration. All rights reserved. (https://www.hkcompanyregistration.com/) Last updated Dec 2019 | 9

11. Hong Kong Salaries Tax +852 2780 0607 ALLOWANCE TYPE: Single Parent Allowance CLAIMABLE AMOUNT: HK$132,000 CLAIMABLE CONDITIONS: 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. ALLOWANCE TYPE: Disabled Dependent Allowance CLAIMABLE AMOUNT: HK$75,000 for each dependent CLAIMABLE CONDITIONS: Claimable if 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. the individual or his/her spouse maintains a dependent (spouse or ALLOWANCE TYPE: Disabled Dependent Allowance CLAIMABLE AMOUNT: HK$75,000 for each dependent CLAIMABLE CONDITIONS: Claimable if the individual is a claimant of the Government’s Disability Allowance Scheme. Copyright © 2019 · Hong Kong Company Registration. All rights reserved. (https://www.hkcompanyregistration.com/) Last updated Dec 2019 | 10

12. Hong Kong Salaries Tax +852 2780 0607 Filing Tax Return 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. 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. [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. Hassle- Free Accounting and Tax Service Focus on building your business and we will take care of your tax and accounting needs. Contact Us Copyright © 2019 · Hong Kong Company Registration. All rights reserved. (https://www.hkcompanyregistration.com/) Last updated Dec 2019 | 11

13. HONG KONG COMPANY REGISTRATION Unit 912, 9/F, Two Harbourfront, 22 Tak Fung Street, Hunghom, Kowloon, Hong Kong ? ? +852 2780 0607 ? info@hkcompanyregistration.com ? hkcompanyregistration.com OUR REGIONAL PRESENCE The information contained herein is intended for general information purposes only and shall not be regarded as professional advice. Readers are therefore advised that before acting on any matter arising from these notes, they should discuss their particular situation with the Firm. No liability can be accepted for any action taken as result of reading the notes without prior consultation with regard to all relevant factors. FOLLOW US ON: Copyright © 2019 • Hong Kong Company Registration. All rights reserved.