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    Home > Frequently Asked Questions  > Budget 2017-18 FAQ

Budget 2017-18 FAQ

1.

Q:

What tax measures are proposed in the 2017-18 Budget for individual taxpayers

  

A:

Individual taxpayers get a one-off reduction of 75% of the final tax for the year of assessment 2016/17 in respect of profits tax, salaries tax and tax under personal assessment, subject to a ceiling of $20,000 per case. Furthermore, the following tax measures, are introduced from the year of assessment 2017/18 onwards:

(a)  Increasing the width of marginal tax bands as follows:

 Year of Assessment2016/17From 2017/18 onwards#
  Net Chargeable Income
(Tax band)
$
Rate Net Chargeable Income
(Tax band)
$
Rate
On the first  40,000  2%  45,000  2%
On the next  40,000  7%  45,000  7%
On the next  40,000 12%  45,000 12%
  120,000   135,000  
Remainder   17%   17%

 

(b)  Increasing the following allowance as follows:

 Year of Assessment2016/17

$
From 2017/18
onwards#
$
 Disabled Dependant Allowance 66,000 75,000
 Dependent Brother or Dependent Sister Allowance 33,000 37,500

 

(c)  Raising the maximum allowable deduction for Self-education Expenses as follows:

 Year of Assessment2016/17

 $
From 2017/18
onwards#
$
 Self-education Expenses 80,000 100,000

 

(d)  Extending the entitlement period for Home Loan Interest deduction as follows:

 Year of Assessment2016/17
 
From 2017/18
onwards#
 The number of years of deduction for Home Loan Interest 15 years of assessment 20 years of assessment

 #Until superseded

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2.

Q:

Do I need to apply for the tax reduction and the new level allowances?

  

A:

You only need to file, as usual, your 2016/17 tax return for individuals (BIR60). IRD will effect the tax reduction in the final assessment for 2016/17 and apply the new level of allowances and the new marginal tax bands in calculating the 2017/18 provisional tax. For 2016/17 assessments issued before the legislative amendment, IRD will revise them. It is expected that the excess tax paid, if any, will be refunded to taxpayers starting from late July 2017. There is no need for you to make a separate application.

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3.

Q:

Can I withhold payment of the 2016/17 provisional tax because of the tax reduction?

  

A:

You are required to pay on time the 2016/17 provisional tax. Otherwise, recovery action will be taken by IRD. Similar to previous occasions, the tax reduction is to reduce the 2016/17 final tax that will be charged and not relating to the 2016/17 provisional tax that has already been charged. Therefore, you are still required to pay the 2016/17 provisional tax as charged.

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4.

Q:

Will the Inland Revenue Department refund the 2016/17 provisional tax already paid by me?

  

A:

As the tax reduction is to reduce the 2016/17 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 2016/17. The tax reduction is not applicable to the 2016/17 provisional tax. The provisional tax paid will be applied to pay the 2016/17 final tax and 2017/18 provisional tax. Excess balance, if any, will be refunded.

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5.

Q:

How to compute the tax reduction?

  

A:

You may use the tax computation program provided by GovHK to calculate your 2016/17 and 2017/18 salaries tax and tax under personal assessment.

 

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6.

Q:

I have to pay salaries tax and profits tax for the year of assessment 2016/17 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 and business profits, will be aggregated to compute the tax payable. Hence, the amount of tax reduction for the year of assessment 2016/17 is 75% of the tax assessed under personal assessment (subject to a ceiling of $20,000) and not the tax payable under salaries tax and profits tax.

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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 $40,000 in total. However, when the husband and the wife are assessed under personal assessment, they can only get a reduction of $20,000. Is it unfair to a couple electing for personal assessment?

  

A:

Profits tax, salaries tax and tax under personal assessment for the year of assessment 2016/17 are reduced by 75%, subject to a ceiling of $20,000 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 $20,000. 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 $20,000. 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 2016/17, taxpayers should take into account the factor that the tax reduction for each couple will be capped at $20,000. 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.

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8.

Q:

I have two businesses in the year of assessment 2016/17, can I get a tax reduction in respect of each business?

  

A:

For each business, you can get the tax reduction of 75% of the profits tax payable for 2016/17, subject to a ceiling of $20,000.

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9.

Q:

I paid Self-education Expenses of $110,000 in 2016/17, which exceeded the specified maximum of $80,000 for 2016/17. What amount should I write down in the 2016/17 tax return for individuals (BIR60) for claiming the Self-education Expenses deduction?

  

A:

You should state the actual amount of $110,000 paid in Part 4.3 of your 2016/17 tax return for individuals (BIR 60). The Assessor will allow the respective maximum deductions at $80,000 and $100,000 when computing your 2016/17 final salaries tax and 2017/18 provisional salaries tax liabilities.

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10.

Q:

After I had filed my 2016/17 tax return for individuals (BIR 60), the educational institute, to which I had paid for the first half year, informed me that the course fee payable in 2017/18 will be increased from $79,000 to $100,500. What should I do if I want to claim the increased deduction?

  

A:

If the amount of Self-education Expenses paid or payable for 2017/18 exceeds $80,000, you may apply in writing for holding over the 2017/18 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 2017/18, the Assessor will not deduct $100,500 as the amount of Self-education Expenses but will restrict the deduction to $100,000.

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11.

Q:

I had claimed Home Loan Interest deduction for my self-owned residence and fully utilised the 15-year deduction limit in 2016/17, yet I did not claim any deduction for interest paid in 2011/12. The mortgage loan was fully repaid on 15 December 2016. Since the deduction of Home Loan Interest is extended from 15 years to 20 years from 2017/18, can I claim the mortgage interest which was paid in 2011/12 in my 2017/18 tax return or seek to revise the 2011/12 assessment to claim such interest?

  

A:

You cannot claim deduction for the interest paid in 2011/12 in the year of assessment 2017/18 since the extension of the deduction period from 15 to 20 years of assessment has no retrospective effect and deduction has been claimed for a total of 10 years of assessment prior to 2012/13. Similarly, your 2011/12 assessment cannot be revised to give effect to interest deduction.

 

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12.

Q:

Since the deduction period for claiming Home Loan Interest is extended from 15 to 20 years of assessment from 2017/18, do I need to claim the deduction consecutively?

  

A:

You need not claim the deduction 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.

 

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