Does the expense of self-education need to be job related?
The expense must be incurred in respect of prescribed courses which were undertaken for the purpose of gaining or maintaining qualifications for use in any employment. In other words, it must be related either to the present job or job in the future.
What do expenses of self-education include? Other than the fees for the course and the course materials, is the examination fee included?
Expenses which can be claimed included tuition and examination fees in connection with a prescribed course of education and fees for materials essential to the course and purchased from the course organizer. Expenditure of a capital nature such as the cost of acquiring and installing a computer for a computer course, as well as travelling expenses for attending the course cannot be claimed.
Examination set by a professional body for its members
Are fees paid by a taxpayer in respect of an examination set by a professional body (e.g. Hong Kong Institute of Certified Public Accountants) for its members without undertaking a prescribed course of education deductible?
The examination fees paid are deductible if the examination is undertaken by the taxpayer to gain or maintain qualifications for use in his/her employment.
Are self-study expenses (e.g. costs of books) incurred in preparing for public examinations deductible?
Since "expenses of self-education" is defined in the Ordinance as expenses paid by the taxpayer on fees etc. in connection with a "prescribed course of education", expenses incurred on self-study do not fall within the definition and therefore cannot be deducted for salaries tax purposes.
Is the expense paid for "Tai Chi course" or "cooking lessons" deductible?
No. General interest classes, for example, a "Tai Chi course" or "cooking lesson", will not be qualified as an employment-related course. Moreover, the course is not provided by a specified education provider.
Is the fee paid to a private tutor for Putonghua lessons by a salesperson deductible?
Although the course may be employment-related, the course fee is not tax deductible even if supported by receipts issued by the private tutor. For a course to be qualified as a "prescribed course of education", the course provider must be a specified education provider or a trade, professional or business association or the course must be accredited or recognized by an institution specified in Schedule 13 of Inland Revenue Ordinance. As a private tutor is not a specified education provider, the fee paid is not in connection with a prescribed course of education and therefore not deductible for tax purpose.
Is the expense paid for a heavy goods vehicle driving course by a person who wishes to become a driver deductible?
Although a driving course of this nature may be employment-related, the course expenses are not tax deductible. For a course to be qualified as a "prescribed course of education", the course provider must be a specified education provider or a trade, professional or business association.
Fee paid but did not attend any lesson because of illness
A taxpayer paid a fee of $40,000 to enroll in a course at a university. However, he did not attend any lesson as he was ill and was hospitalized. Can he claim a deduction for the course fee?
A course fee is deductible only if the expenses were paid for a “prescribed course of education”. A prescribed course of education is a course undertaken by the taxpayer to gain or maintain qualifications for use in his employment. In this case, as the taxpayer did not attend any lesson, he failed to fulfill the condition of undertaking the course and therefore the course fee of $40,000 paid by him is not deductible.
A taxpayer made a claim for a deduction of course fee of $30,000 in his tax return for the year of assessment 2016/17. The assessor accepted the claim and allowed the deduction. Subsequently, he received a reimbursement of course fee of $10,000 from the Continuing Education Fund in the year of assessment 2017/18. Is this sum of $10,000 a chargeable income?
Continuing Education Fund (CEF) is set up by the Government to encourage people in continuous study. Any payment from CEF is not a chargeable income, as it is not derived from any office or employment. On the other hand, deductible self-education expenses do not include any reimbursement from employers or other parties. A taxpayer can only claim deductions for the actual amount of self-education expenses paid. In this case, this taxpayer should inform the Inland Revenue Department in writing about the reimbursement of course fee of $10,000 as soon as he received it in the year of assessment 2017/18. The Department will issue an additional salaries tax assessment for the year of assessment 2016/17 to him to adjust the amount of self-education expenses previously granted.
How to claim for the deduction and compute the deductible amount
In which year of assessment and how can I claim a deduction? If I paid course fees of $20,000 and subsequently got a refund of $8,000 from my employer within the same year of assessment, what amount should I claim, $20,000 or $12,000?
What you have to do is simply to put down the actual amounts paid in the relevant box in your Tax Return - Individuals for the year of assessment in which you paid the fees. There is no need to complete any claim form.
The amount that you should claim in your tax return depends on how the $8,000 refund is treated in the relevant Employer's Return (IR56 series of forms).
If your employer has included the refund as your income in the Employer's Return, you should claim a deduction for the gross amount of $20,000 in your Tax Return - Individuals.
On the contrary, if the refund was not included as your income in the Employer's Return, you should only claim the net sum paid by you, i.e., $12,000, in your Tax Return - Individuals.
Do I have to retain supporting documents to substantiate my claims for deduction?
Yes, you must retain the supporting documents.
As you personally incurred the expenses, you have to provide receipts as evidence for your claim. When you make payments, you should obtain receipts from the suppliers for safe keeping.
The general rule governing the submission of Tax Return - Individuals (Form BIR60) is that you need not attach any documentary evidence for expense claims at the time of submission.
You should retain the receipts for a period of 6 years after the expiration of the year of assessment in which the payments were made. You are required to produce receipts if your case is selected for review.
The consequence for failure to produce the receipts is that:-
your claim for deduction will be rejected, or
if the expenses had been allowed in good faith, the Assessor will withdraw the deductions and issue an additional assessment.
penalty or prosecution will be imposed for any false claim.