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| 2. |
Q: |
Who can enjoy the tax waiving? |
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A: |
All individuals who are chargeable to Salaries
Tax or tax under Personal Assessment will be paying only half
of their tax, subject to the ceiling of $15,000.
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| 3. |
Q: |
Do I need to apply
for this waiving of tax?
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A: |
Taxpayers do not
need to make any application. They only need to file their
Tax Returns - Individuals for 2006-07 in the coming May.
The Inland Revenue Department will effect the waiving in
the final assessments for 2006-07. Salaries tax bills with
the waiving will be issued from late July onwards. The tax
payable will normally fall due in January 2008. For tax
bills issued before legislative amendments i.e. 23 May 2007,
the Department will reassess them after the enactment of
the legislation. The excess tax paid will be refunded to
taxpayers from late July onwards. There is no need for taxpayers
to make phone enquiry.
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| 4. |
Q: |
Can
taxpayers withhold payment of the 2nd instalment of 2006-07
Provisional Salaries Tax falling due from April 2007 because
of the proposed waiving of tax?
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A: |
Taxpayers are
required to pay on time the 2nd instalment of the 2006-07
Provisional Salaries Tax falling due from April 2007. Otherwise,
recovery action will be taken by the Inland Revenue Department.
As the waiving of Salaries Tax is to reduce the 2006-07
Final Tax that will be charged and not relating to the 2006-07
Provisional Tax that has already been charged, taxpayers
are still required to pay the 2006-07 Provisional Tax. The
amount of tax that will be waived can only be computed after
taxpayers filed their 2006-07 Tax Returns - Individuals
which will be issued to them in May 2007 and will be reflected
in the 2006-07 final assessment. The 2006-07 Provisional
Tax paid will be applied for payment of the 2006-07 Final
Tax and the 2007-08 Provisional Tax. The balance payable
will normally fall due in January 2008, see the example
below for an illustration:
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Example
Mr. Chan is a single person. His salary income for the year
of assessment 2006-07 is $207,000. He has paid 2006-07 provisional
tax of $9,830
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$ |
$ |
| Income |
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207,000 |
| Less¡GPersonal Allowance |
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100,000 |
| Net Chargeable Income |
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107,000 |
| Tax payable thereon |
30,000@2% |
600 |
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30,000@7% |
2,100 |
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30,000@13% |
3,900 |
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17,000@19% |
3,230 |
9,830 |
| Less¡G50% Tax Reduction |
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4,915 |
| 2006-07 Final Tax |
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4,915 |
| Less¡G2006-07 Provisional Tax paid |
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9,830 |
| Balance of final tax payable |
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(4,915) |
| Add¡G2007-08 Provisional Tax |
35,000@2% |
700 |
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35,000@7% |
2,450 |
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35,000@12% |
4,200 |
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2,000@17% |
340 |
7,690 |
| Balance of total tax payable |
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2,775 |
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| 5. |
Q: |
Will the Inland Revenue
Department refund the 2006-07 Provisional Tax already paid
to the taxpayer?
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A: |
As the waiving of Salaries
Tax is to reduce the 2006-07 Final Tax that will be charged,
the waiving of tax will only be reflected in the tax bills
due in January 2008 and taxpayer will then find the amount
payable substantially reduced. The amount of tax that can
be waived can only be computed after taxpayers filed their
tax returns issued to them in May 2007 and will be reflected
in the 2006-07 Final Tax. The waiving of tax is not applicable
to the 2006-07 Provisional Tax, The Provisional Tax already
paid will be applied for payment of the 2006-07 Final Tax
and the 2007-08 Provisional Tax. Excess balance, if any,
will be refunded. (see Example in answer
to Question 4).
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| 6. |
Q: |
How is the amount of tax waived computed
?
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A: |
Taxpayers who want to compute the amount
of tax waived can make use of the Tax
Computation Program of the Inland Revenue Department
on the IRD Homepage. You are reminded that if you are chargeable
to Salaries Tax, the tax payable less the amount waived
does not represent the total tax payable in the coming year
as you have not yet adjusted the 2006-07 Provisional Tax
already paid and the 2007-08 Provisional Tax payable (see
Example in answer to Question 4).
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| 7. |
Q: |
I have to pay Salaries Tax for the
year 2006-07 and I have also elected for Personal Assessment
for the year. How to compute the amount of tax waived?
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A: |
Under Personal Assessment, all income of
an individual taxpayer chargeable to tax, including the
salary income will be aggregated together to compute the
tax payable. Hence, the amount of tax waived for the year
2006-07 is 50% of the tax assessed under Personal Assessment
and not the tax payable under Salaries Tax. If the tax payable
under Personal Assessment is less than $30,000, the tax
waived is 50%; if the tax payable under Personal Assessment
is $30,000 or more, then the amount waived is restricted
to $15,000.
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| 8. |
Q: |
If a taxpayer and his spouse have
elected for Personal Assessment for the year 2006-07, is the
maximum amount of tax waived $15,000 for each of them as if
under Salaries Tax (i.e. the couple can get a maximum amount
of tax waived of $30,000) or $15,000 in total for both?
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A: |
The amount of tax waived will depend on
the amount of Salaries Tax payable or tax assessed under
Personal Assessment subject to a maximum amount of $15,000.
Under Salaries Tax, if the couple is assessed separately,
the taxpayer and his spouse will each be assessed as an
individual and each has his/her own tax payable. Hence the
maximum amount of tax waived for each of them is $15,000,
and the couple can enjoy in total a maximum amount of tax
waived of $30,000. However if the couple has elected for
Personal Assessment, they will be assessed jointly under
one assessment. The maximum amount of tax waived is $15,000.
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| 9. |
Q: |
Why the couple paying Salaries Tax
can enjoy a maximum amount of tax waived of $30,000 in total
whereas under Personal Assessment they can only get $15,000
of tax waived?
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A: |
Under Personal Assessment, the amount of
tax waived will depend on the amount of tax assessed subject
to a maximum amount of $15,000. Under Salaries Tax where
the couple is assessed separately, taxpayer and his spouse
will each be assessed as an individual and each has his/her
own tax payable. Hence the maximum amount of tax waived
for each of them is $15,000. However if the couple has elected
for Personal Assessment, they will be assessed jointly under
one assessment. In that situation the maximum amount of
tax waived is $15,000.
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| 10. |
Q: |
If taxpayer and his spouse have elected
for Personal Assessment for the year 2006-07, how to compute
the amount of tax waived enjoyed by each of them?
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A: |
The amount of tax waived will depend on
the amount of tax payable by the couple under Personal Assessment
subject to a maximum amount of $15,000. After the deduction
of the tax waived, the balance of the tax payable will be
proportionally allocated to each of them on basis of their
respective total income.
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