Salaries Tax
FAQs
Salaries Tax payable is calculated at progressive rates on your net chargeable income or at standard rate on your net income, whichever is lower.
Net Chargeable Income = Total Income – Deductions – Allowances
Net Income = Total Income – Deductions
A year of assessment runs from 1 April to 31 March of the following year. Provisional Salaries Tax for a year is usually based on the income less the allowances of the preceding year.
In every year of assessment you are entitled to a basic allowances and can claim the following allowances where appropriate:
– Married person’s allowance
– Child allowance
– Dependent brother or dependent sister allowance
– Dependent parent and dependent grandparent allowance
– Single parent allowance
– Disabled dependant allowance
– Personal disability allowance
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 after the end of the year of assessment to which the claim relates.
You are not required to submit evidence in support of the claim together with the tax return. You should, however, retain that evidence and supply it to IRD for verification when required.
You can claim outgoings and expenses outgoing and expenses that are wholly, exclusively and necessarily incurred in the production of the assessable income. Exceptions are expenses of a domestic or private nature and capital expenditure.
Other deductions include:
– qualifying premiums paid under the Voluntary Health Insurance Scheme (VHIS) policy;
– qualifying annuity premiums and tax deductible MPF voluntary contributions;
– deduction for domestic rents;
– approved charitable donations;
– expenses of self-education;
– contributions to mandatory provident fund scheme and recognized occupational retirement schemes;
– depreciation and other capital allowances for plant and machinery when their use is essential to the production of assessable income;
– losses brought forward from previous years under personal assessment;
– home loan interest paid;
– interest incurred on money borrowed for the purposes of producing rental income chargeable to property tax; and
– elderly residential care expenses.
You need not attach any supporting documents to your Tax Return , but you should retain the receipts for a period of 6 years after the expiration of the year of assessment in which the payments were made. IRD can review your case to ascertain the proper amount deductible, and you are required to produce receipts if your case is selected for review.
An application for holding over of provisional salaries tax may be made if:
Your entitled allowances (e.g. child allowance for a new born baby) and/or deductible expenses (e.g. self-education expenses or contributions to a recognized retirement scheme) are not included in the computation of provisional tax; and
Your net chargeable income of the provisional tax year is less than 90% of the preceding year. (The net chargeable income is arrived at by deducting allowable deductions and allowances.)
You have ceased, or will before the end of the provisional tax year, to derive income chargeable to salaries tax.
You have objected to your salaries tax assessment for the year preceding the provisional tax year.
Application for holdover of provisional tax must be made in writing within the prescribed time limit, i.e. 28 days before due date for payment of provisional tax, or within 14 days after the issue of the demand for provisional tax, whichever is the later.
Employment income derived from services rendered outside Hong Kong is exempted from salaries tax if the person is chargeable to and has paid tax of substantially the same nature as salaries tax with respect to that income.
Hong Kong has entered into double tax agreements with 45 countries. For employment income derived outside Hong Kong in a territory that has entered into a double tax agreement with Hong Kong, any relief from double tax is by way of a tax credit rather than an income exemption.