General issues and rectification of returns
		Receive a Tax Return but I have no income to report
		"Married Person's Allowance", "Joint Assessment", "Personal Assessment", or nominate my spouse to claim deduction of "Home Loan Interest"
		Documentary evidence in respect of my claim for exemption of income and deduction for expenses
		Settled the tax prior to departure, returned Hong Kong and became employed again
		Discovered some mistakes / omissions in the tax return after submission
		Salaries drawn from my own business
		Requested by the employer to change my working status to self-employed
	Property Tax
		Solely / partly-owned property
		Vacant or self-occupied property
		Decoration expenses, management fees and government rent
	Salaries Tax
		Bonus, allowance and commission
		Right to acquire shares
		Long service payment, severance payment and payment in lieu of notice
		Pension
		Contract gratuity
		Seconded by my employer to work in the Mainland of China
		My employer provides me with a place of residence
		Deduction for "self-education expenses"
	Profits Tax
		"Gross income", "Turnover", "Gross profit" and "Assessable Profits"
		Took out a Business Registration Certificate but business not yet commenced, or the business has no activity during the whole year
		Sole-proprietorship business changed to a partnership, or vice versa
		Gross income of my sole-proprietorship business during the year was below $2,000,000
		Can the proprietor of a business entitle to the basic or other tax allowances
	Interest Deduction
		Interest deduction in respect of rented, vacant or self-occupied properties
		Nominate either the husband or wife to claim deduction for the full amount of "Home Loan Interest" paid
		Deduction for the "Home Loan Interest" in partly-owned property
		My spouse's income is below the personal allowance. Can he/she nominate me to claim deduction for the "Home Loan Interest" paid by him / her
		The interest paid for acquisition of properties
		Re-mortgaged property

General issues and rectification of returns

Receive a Tax Return but I have no income to report
1.	Q:	I have no income to report, but I have received a Tax Return - Individuals (BIR60) from the Inland Revenue Department. Do I have to complete it?
	A:	Upon receipt of the Tax Return, you are required to complete and send it back to the Inland Revenue Department within the time limit specified in the return so that the Department can assess whether or not you are liable to tax for that year of assessment. The Department may issue a Tax Return - Individuals to you in the following situations: (i) You had income from employment, rental income from solely owned property and /or business income from sole proprietorship business for the preceding year of assessment, and you have not given any notification to the Department regarding the permanent cessation of such income source(s). (ii) You have elected "Personal Assessment", or "Joint Assessment" under Salaries Tax in your spouse's Tax Return and there is indication that you may have salaries income or other income chargeable to tax for that year of assessment. (iii) Tax Returns are issued once every few years to individuals previously found to be exempt from tax (e.g., property owners whose properties were self-occupied) so as to ascertain if their tax exemption status still stands.

"Married Person's Allowance", "Joint Assessment" , "Personal Assessment", or nominate my spouse to claim deduction of "Home Loan Interest"
2.	Q:	(i) I am married. How should I claim "Married Person's Allowance", elect "Joint Assessment" or "Personal Assessment", or nominate my spouse to claim deduction of "Home Loan Interest"? (ii) If we have elected "Joint Assessment" or "Personal Assessment" but such election proves disadvantageous, will the Inland Revenue Department inform us? Do we have to withdraw the election?
	A:	(i) (a) Claim for "Married Person's Allowance" If you are married for the full year or part of the year and your spouse does not have any income chargeable to Salaries Tax during the year, you should complete Part 8.1. to get "Married Person's Allowance" under Salaries Tax. There is no need to complete Part 4.4. to elect "Joint Assessment" or Part 6 to elect "Personal Assessment". If you have elected "Joint Assessment" under Salaries Tax in Part 4.4 and/or "Personal Assessment" in Part 6, you should also complete Part 8.1 to get "Married Person's Allowance".   (b) Election for "Joint Assessment"? Generally speaking, if both husband and wife have salaries income and one of them has assessable income lower than his/her entitlements to allowances and concessionary deductions, election for Joint Assessment will be advantageous. To make an election for Joint Assessment, both husband and wife have to complete their own tax returns. Please see Example. If only one spouse has salaries income and the other does not, there is no need to elect "Joint Assessment". Under Salaries Tax, so long as the salary-earning spouse has completed Part 8.1 of the Tax Return properly, "Married Person's Allowance" will be granted.   (c) Election for "Personal Assessment"? There is no need to elect "Personal Assessment" if you only have salaries income. You may claim allowances and deductions under Salaries Tax. However, if you earn rental income or have business profits, you should consider if the election for "Personal Assessment" can reduce your overall tax liability. For instance, if you have borrowed money to purchase a property for letting, deduction of mortgage interest from your rental income can only be claimed when you elect "Personal Assessment". For married taxpayers, their spouse must sign in Part 9 of the Tax Return to confirm their agreement to elect "Joint Assessment" or "Personal Assessment".     (d) Nomination of spouse to claim deduction of "Home Loan Interest" is applicable only if your spouse has no income chargeable to tax (including rental income, salaries income and business profits). If your spouse has income chargeable to tax, the law does not permit nomination. Each spouse has to claim the deduction in his / her own tax return. However, you may seek the full deduction of "Home Loan Interest" through the election for "Joint Assessment" or "Personal Assessment". (Please refer to Question 28) (ii) Yes, you will be informed if your election proves disadvantageous. Basically, both "Joint Assessment" and "Personal Assessment" are tax relief, and the election for one or the other depends on which of them will give you the appropriate tax relief. In practice, the Inland Revenue Department will only assess you under "Joint Assessment" or "Personal Assessment" if it gives you tax advantage. Normally, if you have made an election that is proven disadvantageous, you will be informed by way of an 'Assessor Note' in the relevant notice of assessment. As explained above, you / your spouse are not required to tender a notice of withdrawal.

Documentary evidence in respect of my claim for exemption of income and deduction for expenses
3.	Q:	I want to claim exemption of income and deduction for expenses. Should I submit documentary evidence with the Tax Return - Individuals?
	A:	If you claim exemption of salaries income under section 8(1A)(c) of the Inland Revenue Ordinance or under the Arrangement between the Mainland of China and the Hong Kong Special Administrative Region for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income, you should submit the supporting documents with the return (Please refer to Question 17). However, please do not submit any documentary evidence in support of other deduction claims. They should be retained for a period of 6 years after the expiration of the relevant year of assessment. You should be able to present them to the Assessor for verification when required.

Settled the tax prior to departure, returned Hong Kong and became employed again
4.	Q:	I ceased to be employed on 31 July 2009 and departed Hong Kong for good on 1 August 2009. I had already settled all my tax liabilities prior to departure. I returned to Hong Kong on 30 September 2009 and became employed again on 15 October 2009. How should I report my employment income after my returning to Hong Kong?
	A:	Salaries Tax is assessed on the basis of actual income of the year of assessment (i.e. 1 April to 31 March of the following year). Since you had settled your tax liabilities in respect of the income for the period 1 April 2009 to 31 July 2009 before you departed Hong Kong on 1 August 2009 you will only be required to inform the Assessor in writing within 4 months after the end of the year of assessment (i.e. before 31 July 2010), of details of your employment income for the period 15 October 2009 to 31 March 2010, including the name of the employer, the capacity employed, the employment period and the amount of income. Upon receipt of this information, the Assessor will issue another Tax Return - Individuals for 2009/10 for you to report your income after you returned to Hong Kong.

Discovered some mistakes / omissions in the tax return after submission
5.	Q:	I have discovered mistakes / omissions in a tax return previously submitted by me to the Inland Revenue Department. How should I rectify the errors?
	A:	If you wish to amend the information furnished in a tax return already submitted, you have to do so by writing to the Assessor. Please furnish the required information by reference to the format of the tax return; or, you may use the IR Forms designed for making the relevant claims. The following illustrates the relevant information to be furnished / the appropriate IR Forms to be completed : Amendments required in respect of tax returns previously filed How to make amendments/rectify errors (i) For reporting income omitted /understated (i) Furnish particulars of the income -         (a) Salaries income details including: the name of employer the capacity employed the period employed the amount of income omitted /understated         (b) Solely-owned properties income details: Report in the format of Part 3 -'Property Tax' of the tax return         (c) Sole Proprietorship business details: Report in the format of Part 5 -'Profits Tax' of the tax return (ii) Individuals, having income chargeable to Salaries Tax, forgot to elect "Joint Assessment" (ii) There is no need to make any amendment to the tax return. If Joint Assessment is advantageous to the couple, the Inland Revenue Department will, in accordance with the existing procedure, issue a notice BIR50E, inviting the couple to make the election for "Joint Assessment" in writing. (iii) Individuals, having property income or business assessable profits, forgot to elect "Personal Assessment" (iii) Eligible individuals should obtain a Form IR76C for completion. (iv) Forgot to claim deduction for "Home Loan Interest" or 'Interest payments to produce rental income from properties' (iv) Complete Form IR6072 (v) Forgot to claim deduction for "Dependent Parent / Grandparent Allowance" or "Elderly Residential Care Expenses" (v) Complete Form IR6071 (vi) Forgot to claim deduction for "Child Allowance" and "Dependent Brother / Sister Allowance" (vi) Complete Form IR6044 (vii) Forgot to notify a change of Address (vii) Complete Form IR1249 Notes : You may obtain the relevant forms through our "Fax-A-Form Service" by dialing 2598 6001. Alternatively, you may download them under "Public Forms and Pamphlets" in the IRD Web site, www.ird.gov.hk.
Salaries drawn from my own business
6.	Q:	I have drawn salaries from my business. How should I report this income in the Tax Return - Individuals?
	A.	If your business is a sole-proprietorship business or partnership business, salary paid to you should be included as part of your business profits and is chargeable to "Profits Tax" and not "Salaries Tax". For sole-proprietorship business, the salary paid should be declared as part of the business profits in item (7) [Assessable Profit] in Part 5 [Profits Tax] of the Tax Return - Individuals (please refer to the answer (ii) for Question 20) and should not be reported again under Part 4 [Salaries Tax] of the Tax Return. As for partnership business, the salary paid should be declared as part of the business profits and reported in Profits Tax Return (BIR52) for that business and should not be reported again under Part 4 [Salaries Tax] of the Tax Return - Individuals.
		Note :	Do not file Employer's Return of Remuneration and Pensions (IR56B) in respect of the amount of salaries drawn by you and / or your spouse from your sole-proprietorship / partnership business.
Requested by the employer to change my working status to self-employed.
7.	Q:	I work in the service industry and have been requested by my employer to change my working status from an employee to that of a self-employed so as to release my employer from the obligation in making Mandatory Provident Fund contributions for me. Should I report my income as business profits in the Part for Profits Tax in the Tax Return?
	A.	Whether an income should be assessed to "Salaries Tax" or "Profits Tax" depends on its nature. If an employer-employee relationship exists between the payer and the taxpayer, the income will be regarded as salary income and should be reported by the taxpayer in Part 4 (Salaries Tax) of the Tax Return - Individuals. The fact that you were accepted as a self-employed person for the purposes of Mandatory Provident Fund contributions will not alter the nature of your income. The Inland Revenue Department will consider the facts of the case and decide whether you should pay "Profits Tax" or "Salaries Tax".

	Property 1	Property 2	Property 3
Location	3/F, 88 Yan Chee Street, Hong Kong	5/F, 40 Chung On Street, Hong Kong	8/F, 268 Luen Ming Street, Hong Kong
Share of Ownership	100%	100%	25%
Rental Income	$120,000	$300,000	$180,000
Rates paid by owner	$9,832	$24,640	$14,878
Irrecoverable Rent	-	$35,000	-

How to complete

Mr Lee should give the details in respect of the solely-owned properties (i.e. Properties 1 and 2) in Part 3, and put down the relevant total figures in Boxes no. 7 to 9 on the right :

	Mr. Lee should not report the rental income from the partly-owned property (i.e. Property 3). However, if he elects "Personal Assessment", he should put down the number "1" in Box no. 53. (i.e. the total number of properties partly-owned by him and let for that year) If Mr. Lee has not yet received his property tax return (BIR57), he should notify the department in writing.

		(b) If you had other solely-owned properties which were let during the year, please put a "" in the box against "Yes" in Part 3, and state full details of the solely-owned properties which were let (please refer to the example in Question 8).
		Note: You should put down the total number of properties let in Box no. 7. Please do not include in this number the properties that were vacant or occupied as your residence for the full year.
		Rates paid on properties that were vacant or wholly used as your residence are not deductible. Please do not include such in item (4) of Part 3 (or Box no. 8).

Decoration expenses, management fees and government rent
10.	Q:	I have decorated my property before renting it out. I have also paid management fees and government rent for my property. Are these decoration expenses, management fees and government rent deductible from my rental income?
	A:	Under the provisions of the Inland Revenue Ordinance, only the following items are deductible under Property Tax: 1. rates agreed to be paid and actually paid by the owner; 2. 20% allowance for repairs and outgoings; and 3. irrecoverable rent.     Thus, the management fees, government rent and decoration expenses incurred by you are not deductible and they should not be included in Box no. 8 of Part 3 of the Tax Return - Individuals.

Bonus, allowance and commission
11.	Q:	My salaries income includes bonus, allowance and commission. How should I report such income?
	A:	You should add up all of these income and fill in Part 4.1 of your tax return by entering the total amount in item (1). You should also fill in Box no. 22 the grand total of all income from all of your employers (see example below). Besides, you should report the total amount of commission income in Box no.25.

	[Example]		$		$
	Details of income from Company A
		Salary	80,000
		Commission	5,000
		Bonus	5,000		90,000
	Details of income from Company B
		Salary	180,000
		Commission	5,000
		Cash allowance	5,000		190,000
					280,000

How to complete

Right to acquire shares
12.	Q:	My employer had granted me certain right to acquire shares in the year 2006. I exercised this right and acquired the shares on 1 August 2009. I have not sold any of these shares yet. Do I have to report these shares in this year's tax return? If I have to pay tax, how is this computed?
	A:	As you had exercised the right to acquire shares on 1 August 2009, you must report the relevant gain in the Tax Return - Individuals for the year of assessment 2009/10, and whether the shares have been sold is not a relevant consideration. For tax purposes, the relevant gain is to be quantified and taxed as follows:

open market value of shares at time of exercise

	Less : amount of consideration given for the shares

Long service payment, severance payment and payment in lieu of notice
13.	Q:	Do I have to report in my tax return the long service payment, severance payment and payment in lieu of notice received upon termination of my employment?
	A:	Sums paid to you as severance payments or long service payments strictly in accordance with the provisions of the Employment Ordinance are not assessable to salaries tax. The amount not assessable to salaries tax should be computed after the deduction of : (a) contract gratuities based on length of service; (b) benefits attributable to employer's contributions paid under an occupational retirement scheme; and (c) accrued benefits attributable to employer's contributions held in a mandatory provident fund scheme or which have been paid. You need not report the sums computed as above in your tax return. However, you have to report sums that were paid in excess of your statutory entitlement. If you are not sure whether or not the long service or severance payment was made under the Employment Ordinace, you should report the total amount received by you and also supply full details. You do not have to report any payment in lieu of notice if such payment was made to you by reason of the employer's failure to give notice in accordance with the terms of the employment contract.

Pension
14.	Q:	Upon retirement, I received a lump sum and commenced to receive a monthly pension under a recognized occupational retirement scheme ("ROR scheme"). Should I report in my tax return the lump sum and monthly pension received?
	A:	Any sum received by way of commutation of pension under a ROR scheme upon retirement is not taxable and you are not required to report the sum in your tax return. However, the exemption does not apply to monthly pension which is fully taxable and should be reported in your tax return.

15.	Q:	I am a pensionable civil servant. Upon retirement, I received a lump sum and commenced to receive a monthly pension. Should I report in my tax return the lump sum and monthly pension received?
	A:	Any sum received by way of commutation of pension under the Pensions Ordinance, Pension Benefits Ordinance and Pension Benefits (Judicial Officers) Ordinance is not taxable and you are not required to report the sum in the tax return. However, the exemption does not apply to monthly pension which is fully taxable. You should report the monthly pension received in your tax return.

Contract gratuity
16.	Q:	I had completed my two years' contract of employment and received a lump sum contract gratuity. Then I renewed my contract with my employer for another two years, do I have to report the entire sum of contract gratuity in this year's tax return? Can I apply to spread it evenly as my income over the two years covered by the first contract?
	A:	You must report this lump sum gratuity payment in this year's tax return. Please include the amount of contract gratuity in "Total amount" of item (1), Part 4.1 of the tax return. You may apply to have the lump sum related back to the period in respect of which the payment was made.

[Example]

$

	Details of income from Company A during the year 2009/10
	Salary	372,000
	Contract gratuity (period : 1.7.2007 - 30.6.2009)	150,000
		522,000

	Contract gratuity may be related back to relevant years as follows:
	1.7.2007 - 31.3.2009	$150,000 / 24 months x 21 months = $131,250
		-- as income related back evenly to the years of assessment 2007/08 and 2008/09
	1.4.2009 - 30.6.2009	$150,000 / 24 months x 3 months = $18,750
		-- as income for the year of assessment 2009/10

How to complete

	Section 2 of Appendix to BIR60 should be completed as follows:

Seconded by my employer to work in the Mainland of China
17.	Q:	I am seconded by my employer to work in the Mainland of China. I always stay there. However, my salaries are paid into my bank account in Hong Kong. Do I have to pay Hong Kong Salaries Tax? If I have already paid tax in the Mainland, can I apply for exemption of Hong Kong Salaries Tax?
	A:	If your employer is a Hong Kong company but you only rendered services in Hong Kong during visits not exceeding a total of 60 days during the year of assessment, your salaries income for that year will be wholly exempt from tax. However, if you were present in Hong Kong for more than 60 days and had rendered services in Hong Kong during the relevant year of assessment, your income is wholly taxable. If you had rendered services in the Mainland and paid Individual Income Tax in the Mainland in respect of the income for such services, that part of your income can be excluded when computing the income chargeable to Hong Kong Salaries Tax If you wish to claim exemption from Salaries Tax, you are still required to enter the gross amount of your income in Box no. 22 and then enter the amount of income you wish to exclude from charge in Box no. 26 of Part 4.1 of the Tax Return - Individuals. Do not forget to provide supporting details and evidence (such as the tax receipts issued by the Mainland tax authorities, table showing the dates of arrival and departure from Hong Kong) in Section 4 of the Appendix to the Tax Return - Individuals.

My employer provides me with a place of residence
18.	Q:	My employer provides me with a place of residence. How should I report "Total value of ALL places of residence provided" (Box no. 29) in Part 4.2 of Tax Return - Individuals?
	A:	The "Total value of ALL places of residence provided" is the "rental value" less the rent, if any, suffered by you. The "rental value" is a certain percentage of the total income from the employer or associated corporation less outgoings and expenses (excluding charitable donations and self-education expenses). For a flat, that percentage is 10%. For accommodation in a hotel, hostel or boarding house, it is 8% for two rooms and 4% for one room. If this "rental value" is greater than the rateable value of the accommodation provided, you may elect to substitute it by the rateable value. If you share a flat with other employees, the rental value will be calculated as 4% if one room is provided to you and 8% for two. If under the tenancy agreement you are responsible for the payment of rates and management fees, and your employer has accepted these as part of the costs of providing the accommodation for the purpose of making refund of rent to you, you may also include such rates and management fees in the column for "Rent paid by ME to landlord".

[Example]

Mr Wong's income from Company A -- $600,000 Rent paid by him to landlord -- $300,000 Rent refunded to him by employer -- $288,000 Total value of ALL places of residence provided (Box no. 29) =$600,000 x 10% - $(300,000 - 288,000) =$48,000

How to complete

Deduction for "self-education expenses"
19.	Q:	How can I claim deduction for "self-education expenses"?
	A:	You are required to enter the amount of expenses paid during the relevant year of assessment in Box no. 31 of item (2), Part 4.3 of the Tax Return - Individuals. The maximum amount deductible is $60,000 for the year of assessment 2009/10. However, if the expenses are reimbursed or reimbursable by your employer or other persons (such as the Government), they are not deductible and should not be claimed. You need not attach any supporting documents to your completed tax return. You should retain them for future inspection, upon request by the Department. (Please refer to Question 3)

"Gross income", "Turnover", "Gross profit" and "Assessable Profits"
20.	Q:	(i) Explain the difference of "Gross income", "Turnover" and "Gross profit" in Part 5 of the Tax Return - Individuals? (ii) How should I compute the "Assessable Profits"?
	A:	(i) "Gross income" comprises all income. It includes ordinary business income, proceeds from the sale of capital assets and any other non-taxable receipts whether or not derived from the principal activities of your business. "Turnover" is the income from your ordinary business. It is the income received/receivable from the sale of goods or services rendered. "Gross profit" is equal to the amount of turnover less the cost of goods sold. If you were not involved in the sale of goods during this year of assessment, please enter "0" in the box for Gross profit. However, you still have to complete items (6) to (9) in Part 5 of the Tax Return. [Example]

Mr Wong is the sole-proprietor of Da Da Garment Factory, which had the following business results:

			Income
		$	$
	Turnover	400,000	400,000
	Less: Cost of goods sold	250,000
	Gross profit	150,000
	Proceeds from sale of machineries		300,000
	Gross income		700,000

How to complete

Part 5

Profits Tax

$

	Item (3)	Gross income (including turnover and other income)	700,000
	Item (4)	Turnover	400,000
	Item (5)	Gross profit/(loss)	150,000

(ii) The "Assessable Profits" are the net profits for the basis period, arising in or derived from Hong Kong and calculated in accordance with the Inland Revenue Ordinance. You may make use of the proforma tax computation form to make the necessary adjustments to the amount of net profits per accounts to arrive at the amount of assessable profits.

Took out a Business Registration Certificate but business not yet commenced, or the business has no activity during the whole year
21.	Q:	(i) I planned to set up a sole-proprietorship business and took out a Business Registration Certificate a year ago. However, business has not yet commenced. How should I report such a business in the Tax Return? (ii) If my sole-proprietorship business has ceased already and there was no business activity during the whole year, how should this be reported in the Tax Return?
	A:	(i) If you have taken out a Business Registration Certificate but your sole-proprietorship business has not commenced, you should complete the business name and business registration number in Part 5 of your tax return and also enter "0" in items (3) to (9).     (ii) Cessation of business must be reported in writing to the Business Registration Office. To do so you may complete Form IRC3113 obtainable from the Business Registration Office. If you have a fax machine, you may dial 2598 6001 for our Fax-a-form Service. You may also download the form under "Public Forms and Pamphlets" in the IRD Website, www.ird.gov.hk. Even though there was no business activity, you still have to complete the business name and business registration number of the business in Part 5 and enter "0" for items (3) to (9) in this year's tax return. After you have cancelled the business registration of your business, you need not report it in your tax returns for the years following.

Sole-proprietorship business changed to a partnership, or vice versa
22.	Q:	If my sole-proprietorship business has changed to a partnership during the year of assessment, or vice versa, do I need to report such a business in the Tax Return - Individuals?
	A:	The point to remember is that you only need to furnish information in Part 5 of the Tax Return - Individuals in respect of businesses which were operated as sole proprietorships throughout the relevant year of assessment. For a business that was partly operated as a sole-proprietorship and partly operated as a partnership during the year, the profits should be reported on a Profits Tax Return (BIR52). You are not required to report such a business in the Tax Return - Individuals. However, such business is to be regarded as a partnership business, and upon election for "Personal Assessment", you should include it in the total number of partnership businesses when you complete item (3) of Part 6 of the Tax Return - Individuals.

Gross income of my sole-proprietorship business during the year was below $2,000,000
23.	Q:	The gross income of my sole-proprietorship business during the year was below $2,000,000. Do I need to retain this year's business records, and if so, for how long?
	A:	Yes. As the gross income of your sole-proprietorship business did not exceed $2,000,000, you are not required to submit the Balance Sheet, the Profits and Loss Accounts and the supporting schedules with your tax return. However, according to Section 51C of the Inland Revenue Ordinance, any person carrying on a business in Hong Kong must keep sufficient business records of income, expenditure, assets and liabilities, in English or in Chinese, to enable his/her assessable profits to be readily ascertained. Records relating to any business transaction must be retained for at least 7 years. This period of 7 years should be counted from the date of completion of the transaction.

Can the proprietor of a business entitle to the basic or other tax allowances
24.	Q:	I am the proprietor of a business. Am I entitled to the basic or other tax allowances (such as child, single parent, dependent parent, dependent grandparent or dependent brother/sister allowances), and Home Loan Interest deduction?
	A:	Profits from sole proprietorship/partnership businesses are taxed at the standard rate (15% for year of assessment 2009/10) under "Profits Tax". However, if you are eligible to elect "Personal Assessment", by doing so you may claim the following deductions and the tax on your income will be computed at the progressive rates applicable to "Salaries Tax": (a) interest incurred on money borrowed for the purpose of producing property income (the amount deductible should not exceed the net assessable value of the individual property let); (b) approved charitable donations; (c) elderly residential care expenses; (d) home loan interest; (e) business losses incurred in the year of assessment; (f) losses brought forward from previous years under "Personal Assessment"; and (g) personal allowances.     If you are married and your spouse has assessable income, the election must be made by both of you in Part 6 of the tax returns and each of you must sign in Part 9 of the other's Tax Return - Individuals to confirm the election. Your total income (including salaries, rental income and business profits), net of the appropriate deductions, will be aggregated with that of your spouse to arrive at the joint total income of the couple for the purpose of computing your tax liabilities under "Personal Assessment". Normally, the tax payable on the joint assessment will be proportionately allocated to you and your spouse on the basis of your respective reduced total incomes. Notices of assessment will be issued to you and your spouse separately.

Interest deduction in respect of rented, vacant or self-occupied properties
25.	Q:	I owned several properties and they were put to different use - let, vacant or occupied as my residence. I wish to claim interest deduction for the purchase of my properties. Which parts of the Tax Return should be completed?
	A:	It all depends on the type of properties (solely-owned or partly-owned) and the usage (let, vacant or used as residence). For solely-owned properties, details of rent should be provided in Part 3 of your tax return. Rental income from partly-owned properties should not be reported in the Tax Return - Individuals. (Please refer to Question 8) For properties that were vacant or occupied by you as residence for the full year, you need not report such properties in Part 3 of your tax return. (Please refer to Question 9) If you wish to claim interest deductions, you must complete Part 7 of the tax return. However, any interest paid in respect of vacant properties is not deductible. (Please refer to Question 29) The table below summarizes those parts of the Tax Return - Individuals that should be completed under different scenarios:

	Scenario 1 Property solely-owned & let out	Scenario 2 Property partly-owned & let out	Scenario 3 Property used as own residence	Scenario 4 Property vacant or for other use
Rental Income from the property	Complete Part 3	Not applicable (To be reported in Property Tax Return)	Not applicable	Not applicable
Election for Personal Assessment	Complete Part 6	Complete Part 6	Complete Part 6	Complete Part 6
Total Number of Properties	Enter in Box no. 7 under Part 3	Enter in Box no. 53 under Part 6*	Not applicable	Not applicable
	(* If you do not elect Personal Assessment, please do not complete Box no. 53)
Interest Deduction	Complete Part 7.1 and 7.2** [Note (1)]	Complete Part 7.1 and 7.2** [Note (1)]	Complete Part 7.1 and 7.3** [Note (2)]	Not applicable
	(**For re-mortgaged loan, also complete Part 7.4)

	Note:	(1)	"Personal Assessment" must be elected in Part 6 if you wish to claim interest deduction for letting properties.
		(2)	"Home Loan Interest" is only deductible from a person's assessable income under "Salaries Tax" or from a person's total income under "Personal Assessment".

Nominate either the husband or wife to claim deduction for the full amount of "Home Loan Interest" paid
26.	Q:	My spouse and I live in a property jointly owned by us. Can we nominate one of us to claim deduction for the full amount of "Home Loan Interest" paid?
	A:	The amount of Home Loan Interest paid by each of you is computed according to your respective share of ownership in the dwelling. In the case of a joint tenancy, it is regarded as in equal shares. If your spouse has no income chargeable to tax for the relevant year of assessment, he /she can nominate you to claim deduction in respect of the "Home Loan Interest" paid by him /her. To do so, please insert "" in item (2)(i) under Part 7.3 (i.e. Box no. 59, 67 or 75). You should also complete Part 8.1 and invite your spouse to sign the declaration in Part 9 to indicate his/her agreement. Do not forget to complete the relevant boxes in Part 7 of your Tax Return - Individuals. (Please refer to Example 2 in Question 29) Your spouse would then be regarded as having been allowed the Home Loan Interest deduction for a year of assessment. If your spouse has income chargeable to tax, nomination is not permitted under the law. He/she has to claim the deduction in his/her own Tax Return. However, you may consider election for "Joint Assessment" or "Personal Assessment", so as to claim deduction of the full amount of Home Loan Interest paid. (Please refer to Question 28)

Deduction for the "Home Loan Interest" in partly-owned property
27.	Q:	My spouse and I live in a property owned by us. The mortgage interest is paid by me only. What amount can I claim as "Home Loan Interest" deduction?
	A:	Since you own the dwelling as one of the joint owners or tenants in common, the amount of interest deductible is restricted to that portion of the total interest proportional to the number of joint tenants/share of your ownership. The amount allowable for deduction should not exceed the ceiling prescribed in the Inland Revenue Ordinance as proportionately reduced. You should complete Part 7.1 and 7.3. In Part 7.3, you should fill in your share of interest as mentioned above.

My spouse's income is below the personal allowance. Can he/she nominate me to claim deduction for the "Home Loan Interest" paid by him / her
28.	Q:	My spouse need not pay tax as he/she only had meagre income below the personal allowance. Can he/she nominate me to claim deduction for the "Home Loan Interest" paid by him/her?
	A:	No. Your spouse has to claim deduction for the "Home Loan Interest" in his/her own Tax Return. You may consider election for "Joint Assessment' or "Personal Assessment" under which you can claim the full amount of the relevant "Home Loan Interest" paid by you and your spouse. (i) If both you and your spouse have salaries income and your spouse has income less than the total of allowable "Home Loan Interest" and Personal Allowance, you and your spouse may elect "Joint Assessment" under Salaries Tax in Part 4.4 so that the relevant "Home Loan Interest" would be deductible from your aggregate assessable income (Please refer to the example below). (ii) If you and/or your spouse has/have income other than salaries, and if you are eligible and have elected "Personal Assessment" in Part 6, the allowable "Home Loan Interest" paid will be first deducted from your spouse's income. Any part of the interest deduction not so utilized would be set off against your total income.     However, any excess could not be carried forward to the following year.   [Example] Year of assessment 2009/10: Husband's salary $300,000, Wife's salary $150,000, Personal Allowance $108,000 each, Wife paid Home Loan Interest $80,000 for a property solely owned by her.   Under Separate Assessment: Husband: Net Chargeable Income = $300,000 - $108,000 = $192,000     Salaries Tax payable after the 75% tax reduction (capped at $6,000)* = $14,640     Wife: Net Chargeable Income = $150,000 - $108,000 - $80,000 = 0     Salaries Tax payable = 0 Balance of interest deduction $38,000 cannot be transferred to husband, nor carried forward to next year.   Under Joint Assessment: The interest paid by the wife will be deductible from their aggregate assessable income. In other words, the whole amount of $80,000 can be deducted in this example.   The aggregate Net Chargeable Income = $300,000 + $150,000 -$216,000 - $80,000 = $154,000   Salaries Tax payable after the 75% tax reduction (capped at $6,000)* = $8,180   Note : For 2009/10, 75% of the final tax payable under salaries tax and tax under personal assessment would be waived, subject to a ceiling of $6,000 per case.

The interest paid for acquisition of properties
29.	Q:	How can I claim interest deduction for the purchase of property? How should I complete the Tax Return to claim deduction if the property is only partly-owned by me?
	A:	For properties that were used as own residence or for letting purpose, no matter solely-owned or partly-owned by you, you may claim interest deduction under "Salaries Tax" or "Personal Assessment" by completing Part 7 of the Tax Return. Firstly, you have to provide details of the properties in Part 7.1. Secondly, depending on the usage of the properties, you have to complete Part 7.2 or 7.3. If a re-mortgaged loan is involved, you must also complete Part 7.4. (1) Complete Part 7.2 for the deduction of interest in respect of a loan obtained for the acquisition of a property for letting purpose. For partly-owned properties, you should enter your share of interest payments in Part 7.2 (i.e. Box no. 57, 65 or 73) in accordance with your share of ownership (please refer to Example 1 below). Note: You may claim such interest deduction only under Personal Assessment. Please complete Part 6 of the Tax Return to make a valid election for Personal Assessment.   (2) Complete Part 7.3 for deduction of Home Loan Interest. For partly-owned properties, you should enter your share of interest payments in item (1) of Part 7.3 (i.e. Box no. 58, 66 or 74) according to your share of ownership (please refer to Example 2 below). Note: Home Loan Interest Deduction is only allowable under "Salaries Tax" or "Personal Assessment". If you had only rental income or business income, you should elect "Personal Assessment" in order to obtain such interest deduction. [Example] Two examples of partly-owned properties (year of assessment 2009/10):-

	Example 1	Example 2
Location	8/F, 268 Luen Ming Street, Hong Kong	Block A, 2/F, 8 Ching Yee Street, Hong Kong
Share of ownership	25%	50%
Usage	Letting	Own residence
Total Interest Paid	$24,000	$160,000
Share of interest payments:	$24,000 x 25%	$160,000 x 50%
	= $6,000	=$80,000

(Home Loan Interest will be apportioned according to the share of ownership, maximum amount allowable $100,000) $100,000 x 50% = $50,000

How to Complete

Re-mortgaged property
30.	Q:	My property was initially mortgaged to Bank A and now re-mortgaged to Bank B. Is the total interest paid deductible? How should I complete the Tax Return?
	A:	Whether you may claim interest deductions in the Tax Return depends on the usage of your property and the purpose for which the loan was borrowed: (i) If the loan was made for the purchase of your residence, you can claim deduction of "Home Loan Interest" under "Salaries Tax" or "Personal Assessment" by completing Parts 7.1, 7.3 and 7.4 of the Tax Return - Individuals. (ii) If interest payments were incurred to purchase properties for letting, you have to elect "Personal Assessment" to claim interest deductions. For making election for "Personal Assessment", you should complete Part 6 and also provide further details in Parts 7.1, 7.2 and 7.4 of the Tax Return - Individuals.     If you re-mortgaged the property before the original mortgaged loan was fully repaid and you used the money borrowed under the re-mortgaged loan to repay the original loan (e.g., you re-mortgaged in order to enjoy a lower rate of interest offered by another lending institution), the Assessor must be informed of the amount of the re-mortgaged loan as well as the balance of the original loan that was repaid. You will not get full deduction of the interest paid under the re-mortgaged loan, if only part of it was applied for repayment of the original loan. For example, you still owed Bank A $1,000,000 and you obtained a re-mortgaged loan of $1,500,000 from Bank B. Interest will be prorated on the basis of 1/1.5. In other words, only 2/3 of the interest paid by you to Bank B will be considered for deduction. If the re-mortgaged loan was obtained after the initial loan had been fully repaid, the whole of the interest paid to Bank B is non-deductible.   If you wish to claim interest deductions for your re-mortgaged loan, you have to furnish full details in respect of your re-mortgaged loan and the previous mortgaged loan in Part 7.4 of your tax return.   [Example] A few years ago Mr. Lee obtained a loan from Bank A to purchase a property for letting. On 1.10.2009, that property was re-mortgaged to Bank B for a loan of $1,500,000. On the same day the loan from Bank A was redeemed and the amount of principal redeemed was $1,000,000. Mr. A incurred the following interest payments for the year of assessment 2009/10:-

	(1)	1.4.2009 to 30.9.2009, interest to Bank A	$58,000
	(2)	1.10.2009 to 31.3.2010, interest to Bank B	$60,000

Computation of deductible interests

	(1)	1.4.2009 to 30.9.2009 : $58,000 (wholly deductible).
	(2)	1.10.2009 to 31.3.2010 : $60,000 x 1,000,000/1,500,000  =   $40,000.

	The total deductible amount is $(58,000 + 40,000) =    $98,000.
	This amount should be entered in Part 7.2 (If the property concerned was used as residence and "Home Loan Interest" Deduction is claimed, the amount should be entered in Part 7.3).

Part 7 of the Tax Return should be completed as follows: