FAQ : 2012-13 Budget

2.	Q:	Do I need to apply for the tax reduction for 2011-12 and the new allowances for 2012-13?
	A:	You only need to file, as usual, your 2011-12 individuals tax return (BIR60) which will be issued in May this year. After enactment of the relevant legislation, IRD will effect the tax reduction in the final assessment for 2011-12 and apply the new allowances in calculating the 2012-13 provisional tax. For 2011-12 assessments issued before the legislative amendment, the Department will revise them after enactment of the legislation. It is expected that the excess tax paid, if any, will be refunded to taxpayers starting from late July 2012. There is no need for you to make a separate application.

3.	Q:	Can I withhold payment of the 2nd instalment of 2011-12 provisional tax falling due from April 2012 onwards because of the proposed tax reduction?
	A:	You are required to pay on time the 2nd instalment of the 2011-12 provisional tax falling due from April 2012. Otherwise, recovery action will be taken by IRD . Similar to previous occasions, the tax reduction is to reduce the 2011-12 final tax that will be charged and not relating to the 2011-12 provisional tax that has already been charged. Therefore, you are still required to pay the 2011-12 provisional tax as charged.

4.	Q:	Will the Inland Revenue Department refund the 2011-12 provisional tax already paid by me?
	A:	As the tax reduction is to reduce the 2011-12 final tax that will be charged, the reduction will only be reflected in the notices of salaries tax assessment, profits tax assessment and personal assessment for 2011-12 that will be issued starting from the third quarter of 2012. The tax reduction is not applicable to the 2011-12 provisional tax. The provisional tax paid will be applied to pay the 2011-12 final tax and 2012-13 provisional tax. Excess balance, if any, will be refunded.

5.	Q:	How to compute the tax reduction?
	A:	You can use the tax computation program to calculate your 2011-12 and 2012-13 salaries tax and tax under personal assessment.

6.	Q:	I have to pay salaries tax for the year 2011-12 and I have elected for personal assessment for the year. How the tax reduction should be computed?
	A:	Under personal assessment, all income of an individual taxpayer, including salaries income, will be aggregated to compute the tax payable. Hence, the amount of tax reduction for the year 2011-12 is 75% of the tax assessed under personal assessment and not the tax payable under salaries tax.

7.	Q:	A husband and a wife, each with employment income and liable to salaries tax, are separately assessed to tax and they can enjoy a maximum tax reduction of $24,000 in total. However, when the husband and the wife are assessed under personal assessment, they can only get a reduction of $12,000. Is it unfair to a couple electing for personal assessment?
	A:	The Financial Secretary has proposed to reduce 75% of the 2011-12 final tax in respect of profits tax, salaries tax and tax charged under personal assessment, subject to a ceiling of $12,000 per case. Under salaries tax, a husband and a wife are separately assessed. Each of them will get a tax reduction of 75%, subject to a ceiling of $12,000. However, under personal assessment, there is no separate taxation and only one assessment will be issued. Therefore, the tax reduction for the couple is 75%, capped at $12,000. Whether a taxpayer should apply for personal assessment will depend on his situation. When considering an election for personal assessment for the year of assessment 2011-12, taxpayers should take into account the factor that the tax reduction for each couple will be capped at $12,000. IRD will check each personal assessment election to see if it will reduce the amount of tax payable, and assess each taxpayer in the way most advantageous to him.

8.	Q:	I paid elderly residential care expenses of $80,000 in 2011-12, which exceeded the specified maximum of $72,000 for 2011-12. What amount should I write down in the 2011-12 individuals tax return (BIR60) for claiming the residential care expenses deduction?
	A:	You should state the actual amount of $80,000 paid in Part 8.4 of your 2011-12 individuals tax return (BIR 60). After enactment of the relevant legislation, the Assessor will allow the respective maximum deductions at $72,000 and $76,000 when computing your 2011-12 final salaries tax and 2012-13 provisional salaries tax liabilities.

9.	Q:	After I had filed my 2011-12 individuals tax return (BIR 60), the residential care home, in which my 65 years old father stays, informed me that the residential care expenses payable in 2012-13 will be increased from $65,000 to $85,000. What should I do if I want to claim the increased deduction?
	A:	If the amount of Elderly Residential Care Expenses paid or payable for 2012-13 exceeds $72,000, you may apply in writing for holding over the 2012-13 provisional salaries tax upon receiving the assessment and notice for payment of provisional salaries tax. The application must be lodged not later than: (a) 28 days before the due date for payment of the provisional tax, or (b) 14 days after the date of issue of the notice for payment of the provisional tax, whichever is the later. In computing the provisional salaries tax payable for 2012-13, the Assessor will not deduct $85,000 as the amount of Elderly Residential Care Expenses but will restrict the deduction to $76,000.

10.	Q:	I had claimed home loan interest deductions for my self-owned residence and fully utilized the 10-year deduction limit in 2008-09. The mortgage loan was fully repaid on 31 August 2010. Since it is proposed in the 2012-13 Budget that the deduction of home loan interest is extended from 10 years to 15 years from 2012-13, can I claim the mortgage interest which were paid during the period from 1 April 2009 to 31 August 2010 in my 2012-13 Tax Return, or seek to revise the 2009-10 and 2010-11 assessments to claim such interest?
	A:	You cannot claim deduction for the interest paid during the period from 1 April 2009 to 31 August 2010 in the year 2012-13 since the extension of the deduction period to 15 years of assessment as proposed in the 2012-13 Budget has no retrospective effect. Similarly, your 2009-10 and 2010-11 assessments cannot be revised to give effect to the deduction.

11.	Q:	Since the deduction period for claiming home loan interest is extended from 10 to 15 years from 2012-13, do I need to claim the deductions consecutively?
	A:	You need not claim the deductions consecutively. After granting each deduction of home loan interest to you, the Commissioner will notify you of the number of years for which the deductions have been allowed and the remaining number of years for claiming deductions.

12.	Q:	I purchased a property in June 2001 and obtained a 20-years mortgage loan from bank. I cannot claim any deduction of home loan interest in my 2011-12 individuals tax return (BIR60) because I had already got the deduction for home loan interest for 10 years in 2010-11. Since it is proposed in the 2012-13 Budget that the deduction period for home loan interest is extended to 15 years from 2012-13, how can I claim deduction of the mortgage interest which will be paid in 2012-13 for computing the 2012-13 provisional tax?
	A:	Since you did not claim any home loan interest deduction in your 2011-12 individuals tax return (BIR60), no deduction will be allowed when computing the 2012-13 provisional tax. However, if your net chargeable income for 2012-13 for which provisional tax was charged is, or is likely to be, less than 90% of the net chargeable income for 2011-12 or of the estimated sum in respect of which you are liable to pay provisional tax, you may apply in writing for holding over of the 2012-13 provisional tax upon receiving the assessment and notice for payment of provisional salaries tax. The application must be lodged not later than: (a) 28 days before the due date for payment of the provisional tax, or (b) 14 days after the date of issue of the notice for payment of the provisional tax, whichever is the later.