What tax measures are proposed in the 2013-14 Budget for individual taxpayers?
Individual taxpayers will get a one-off reduction of 75% of the final tax for the year of assessment 2012/13 in respect of profits tax, salaries tax and tax under personal assessment, subject to a ceiling of $10,000 per case. Furthermore, the following tax measures will be introduced from year of assessment 2013/14 onwards:
(a) Increase in child allowance as follows:
Year of Assessment
(From 2013/14 onwards)
Child Allowance (For each dependant)
1st to 9th Child
Additional Child Allowance for each child in the year of birth
(b) Increase in the maximum allowable deduction for self-education expenses as follows:
Do I need to apply for the tax reduction and the new allowances?
You only need to file, as usual, your 2012/13 tax return for individuals (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 2012/13 . If you are eligible to claim child allowance or the child allowance for new born child in the year of birth, the Department will apply the new allowances in calculating the 2013/14 provisional tax. For 2012/13 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 2013. There is no need for you to make a separate application.
Can I withhold payment of the 2nd instalment of 2012/13 provisional tax falling due from April 2013 onwards because of the proposed tax reduction?
You are required to pay on time the 2nd instalment of the 2012/13 provisional tax falling due from April 2013. Otherwise, recovery action will be taken by IRD . Similar to previous occasions, the tax reduction is to reduce the 2012/13 final tax that will be charged and not relating to the 2012/13 provisional tax that has already been charged. Therefore, you are still required to pay the 2012/13 provisional tax as charged.
Will the Inland Revenue Department refund the 2012/13 provisional tax already paid by me?
As the tax reduction is to reduce the 2012/13 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 2012/13 that will be issued starting from the third quarter of 2013. The tax reduction is not applicable to the 2012/13 provisional tax. The provisional tax paid will be applied to pay the 2012/13 final tax and 2013/14 provisional tax. Excess balance, if any, will be refunded.
I have to pay salaries tax for the year 2012/13 and I have elected for personal assessment for the year. How the tax reduction should be computed?
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 2012/13 is 75% of the tax assessed under personal assessment and not the tax payable under salaries tax.
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 $20,000 in total. However, when the husband and the wife are assessed under personal assessment, they can only get a reduction of $10,000. Is it unfair to a couple electing for personal assessment?
Profits tax, salaries tax and tax under personal assessment for the year of assessment 2012/13 are reduced by 75%, subject to a ceiling of $10,000 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 $10,000. 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 $10,000. 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 2012/13, taxpayers should take into account the factor that the tax reduction for each couple will be capped at $10,000. 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.
I paid self-education expenses of $90,000 in 2012/13, which exceeded the specified maximum of $60,000 for 2012/13. What amount should I write down in the 2012/13 individuals tax return (BIR60) for claiming the self-education expenses deduction?
You should state the actual amount of $90,000 paid in Part 4.3 of your 2012/13 tax return for individuals (BIR 60). The Assessor will allow the respective maximum deductions at $60,000 and $80,000 when computing your 2012/13 final salaries tax and 2013/14 provisional salaries tax liabilities.
After I had filed my 2012/13 individuals tax return (BIR 60), the educational institute, to which I had paid for the first half year, informed me that the course fees payable in 2013/14 will be increased from $59,000 to $85,000. What should I do if I want to claim the increased deduction?
If the amount of self-education expenses paid for 2013/14 exceeds $60,000, you may apply in writing for holding over the 2013/14 provisional salaries tax upon receiving the assessment and notice for payment of provisional salaries tax. The application must be lodged not later than:
28 days before the due date for payment of the provisional tax, or
14 days after the date of issue of the notice for payment of the provisional tax,
whichever is the later.
In recomputing the provisional salaries tax payable for 2013/14, the Assessor will not deduct $85,000 as the amount of self-education expenses but will restrict the deduction to $80,000.
My son was born on 3 April 2013. What should I do if I want to claim the child allowance in the year of birth?
You can complete Part 8.2 of the 2012/13 tax return for individuals by providing details of your new born son. The Department will grant child allowance of $140,000 for that child when computing your 2013/14 provisional tax.