Expected Income Reduction and Provisional Salaries Tax for the Year of Assessment 2009/10

FAQ : Expected Income Reduction and Provisional Salaries Tax for the Year of Assessment 2009/10

	Under what circumstances would IRD charge a taxpayer less / nil 2009/10 provisional salaries tax?
	I have just retired or changed employment with a reduced salary in May 2009. What information should I provide so that the IRD would charge me less / nil 2009/10 provisional salaries tax?
	Would the IRD charge me less / nil provisional salaries tax if I am unable to estimate my total employment income accurately for the year 2009/10?
	What should I do if I find the 2009/10 provisional salaries tax has not been reduced in the tax demand note despite my request?
	Would there be any penalty if the information I provided to the IRD about 2009/10 income was not correct?
	I have not ceased or changed employment but I expect my income significantly less in 2009/10, can I pay less 2009/10 provisional salaries tax?
	Where can I obtain the application form for holding over of provisional salaries tax?
	I ceased to be employed permanently / retired in October 2008. How should I complete my 2008/09 tax return?
	I was laid off in February 2009. Up to now, I am still unemployed. How should I report my employment income in my 2008/09 tax return?
	I was laid off in October 2008 and found another employment in January 2009 with a reduced salary. Would the IRD charge me less 2009/10 provisional salaries tax?
	I am required to take 1-month no pay leave in the year 2009/10. Can I pay less 2009/10 provisional salaries tax?
	My bonus / commission income for the year 2009/10 is likely to be reduced substantially. Can I pay less 2009/10 provisional salaries tax?
	My employer's business is being seriously affected by the economic downturn. My employment might be terminated sometime later in the year 2009/10. Can I apply for exemption from payment of 2009/10 provisional salaries tax when filing the 2008/09 tax return?

Questions and Answers

1.	Q:	Under what circumstances would IRD charge a taxpayer less / nil 2009/10 provisional salaries tax?

	A:	2009/10 provisional salaries tax charged is normally based on a taxpayer's income for the year 2008/09. The law also provides that where a taxpayer commences or ceases employment within a year of assessment, the Assessor is empowered to estimate the amount of provisional tax payable for that year as well as the year after. At the time of assessment, if the IRD is aware that a taxpayer has ceased employment and will not derive further employment income for the rest of the year; or that a taxpayer has changed employment and the income from the new employment is definitely lower than that from his previous employment, the IRD will consider assessing the 2009/10 provisional tax based on the estimated income of the taxpayer for the year from 1 April 2009 to 31 March 2010.

I have just retired or changed employment with a reduced salary in May 2009. What information should I provide so that the IRD would charge me less / nil 2009/10 provisional salaries tax?

You should provide the names of your previous and new employers, the respective dates of cessation of your previous employment and commencement of your current employment and an estimate of your total income for the period from 1 April 2009 to 31 March 2010 in your 2008/09 tax return.


(a)	Tax return in paper form
	(i)	You can put down the details, if possible, in the space near Box “22” in Part 4.1 under “Salaries Tax”.
	(ii)	If there is insufficient space, you can give the details on a separate sheet of “A4 size paper” and attach it to the tax return. You must state your name, file number and sign on the supplementary sheet.

(b)	Tax return by e-filing
	You can give the details in the free-text box “Supplementary Information on Income Chargeable to Salaries Tax” on the page with the heading “Income Accrued”. A maximum of 2,000 English characters or 500 Chinese words can be written in the box. The details would then be recorded in Section 4 of the Appendix to the e-return.

3.	Q:	Would the IRD charge me less / nil provisional salaries tax if I am unable to estimate my total employment income accurately for the year 2009/10?

	A:	If the information provided is insufficient, the IRD would consider assessing your 2009/10 provisional tax based on your income for 2008/09. The IRD will inform you of the decision and draw your attention to your right to apply for holdover of 2009/10 provisional salaries by way of Assessor's Notes on the tax demand note.

4.	Q:	What should I do if I find the 2009/10 provisional salaries tax has not been reduced in the tax demand note despite my request?

	A:	You can apply for holding over of the 2009/10 provisional salaries tax if you estimate that your net chargeable income for the year 2009/10 is likely to be less than 90% compared with the year 2008/09; you are entitled to an allowance that has not been taken into account in the computation of the provisional tax; or you have ceased employment. (See FAQ 6 for the time limit of holding over of provisional salaries tax and FAQ 7 for the way of obtaining an holdover application form.)

5.	Q:	Would there be any penalty if the information I provided to the IRD about 2009/10 income was not correct?

	A:	You must file correct tax return and provide correct information. Taxpayers providing incorrect information leading to an undercharge of 2009/10 provisional salaries tax are liable to a fine of up to $10,000 and treble the amount of the tax undercharged.

6.	Q:	I have not ceased or changed employment but I expect my income significantly less in 2009/10, can I pay less 2009/10 provisional salaries tax?

	A:	2009/10 provisional salaries tax shall be charged on you by reference to your income for the year 2008/09. However, if you anticipate that your net chargeable income for the year 2009/10 is likely to be less than 90% of that for the year 2008/09, you may apply to hold over your 2009/10 provisional salaries tax not later than 28 days before the day the provisional salaries tax is to be paid or 14 days after the date of the notice for payment of provisional salaries tax, whichever is the later. Many months have to go before 31 March 2010. You will be in a better position to estimate your total income for 2009/10 accurately in November / December 2009. In general, the first tax instalment normally falls due in January 2010 and you may apply for holding over of your 2009/10 provisional salaries tax around November 2009. The deadline for your holdover application will be shown on your tax bill.

7.	Q:	Where can I obtain the application form for holding over of provisional salaries tax?

	A:	The application form (IR 1121) is available for download at the IRD website or can be obtained by fax through the IRD telephone hotline 187 8011. Taxpayers may also make use of the online services provided under eTAX (www.gov.hk/etax) to lodge holdover applications.

8.	Q:	I ceased to be employed permanently / retired in October 2008. How should I complete my 2008/09 tax return?

	A:	You should report your employment income from April to October 2008 and confirm that you have no intention to resume employment in the 2008/09 tax return. (See FAQ 2 for where to provide the information.) The IRD will compute your 2008/09 final salaries tax liability but will not charge you any 2009/10 provisional salaries tax.

9.	Q:	I was laid off in February 2009. Up to now, I am still unemployed. How should I report my employment income in my 2008/09 tax return?

	A:	You should fill in your employment income from April 2008 to February 2009 and report that you remain unemployed in your 2008/09 tax return. (See FAQ 2 for where to provide the information.) The IRD will compute your 2008/09 final salaries tax liability but will consider not charging you any 2009/10 provisional salaries tax.

10.	Q:	I was laid off in October 2008 and found another employment in January 2009 with a reduced salary. Would the IRD charge me less 2009/10 provisional salaries tax?

	A:	The IRD will consider to charge you less 2009/10 provisional salaries tax if your salary is substantially reduced as a result of change of employment. To help IRD assess the amount of provisional tax to be charged, please provide an estimate of your total income for the period 1 April 2009 and 31 March 2010 in the return. (See FAQ 2 for where to provide the information.) Alternatively, after you receive your tax demand note, you may apply to hold over your 2009/10 provisional salaries tax. (See FAQ 6 for the grounds and the time limit to apply holding over of provisional salaries tax.)

11.	Q:	I am required to take 1-month no pay leave in the year 2009/10. Can I pay less 2009/10 provisional salaries tax?

	A:	As there is no change of employment, 2009/10 provisional salaries tax charged shall be based on your income for the year 2008/09. After receiving your tax demand note, you may apply to hold over 2009/10 provisional salaries tax if you anticipate your net chargeable income for the year 2009/10 is likely to be less than 90% compared with the year 2008/09. (See FAQ 6 for the time limit to apply holding over of provisional salaries tax.)

12.	Q:	My bonus / commission income for the year 2009/10 is likely to be reduced substantially. Can I pay less 2009/10 provisional salaries tax?

	A:	Same as FAQ 11.

13.	Q:	My employer's business is being seriously affected by the economic downturn. My employment might be terminated sometime later in the year 2009/10. Can I apply for exemption from payment of 2009/10 provisional salaries tax when filing the 2008/09 tax return?

	A:	Same as FAQ 11.


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