In the 2009-10 Budget delivered on 25 February 2009, the Financial Secretary proposed a one-off reduction of 50 % of the 2008-09 final tax in respect of salaries tax and tax under personal assessment, subject to a ceiling of $6,000. On 26 May 2009, the Financial Secretary proposed to increase the one-off reduction for the 2008-09 salaries tax and tax under personal assessment to 100%, subject to a revised ceiling of $8,000. See Implementation Details of the One-off reduction for details.

Individuals having business profits or rental income, if eligible, can enjoy the reduction by electing personal assessment. Under personal assessment, they will enjoy a reduction of 100% of the 2008-09 final tax, subject to a ceiling of $8,000 per case.

Please refer to the example in Annex 1 for typical cases showing tax savings of taxpayers liable to salaries tax when the one-off reduction in 2008-09 final tax is implemented. You can also use our tax computation program to calculate your tax liability under salaries tax or personal assessment under the 2009-10 Budget proposal.

The tax reduction will be reflected in the tax bill in 2009-10. Taxpayers will, as usual, file their tax returns - individuals for 2008-09 which will be issued starting from May 2009. They need not make any application on the reduction.

The legislation to implement the one-off tax reduction was passed on 24 June 2009, the Inland Revenue Department will effect the reduction in the final assessment for 2008-09. Most taxpayers will receive their tax bills, with the reduction duly reflected, starting from the third quarter in 2009. As in previous years, salaries tax will generally fall due in January 2010.

The one-off reduction will only apply to the 2008-09 final tax, but not to the provisional tax of the same year. For most taxpayers, the second instalment of their 2008-09 provisional tax will fall due in April 2009, which should be paid on time despite the proposed reduction. The provisional tax paid will, in accordance with the Inland Revenue Ordinance, be applied in payment of the final tax for 2008-09 and provisional tax for 2009-10. Excess balance, if any, will be refunded.

Individuals having business profits or rental income, if eligible, can enjoy the reduction by electing personal assessment. They can make the election when completing their 2008-09 tax returns. The Department will check in each case if the personal assessment election will reduce the amount of tax payable, and assess each taxpayer in the way most advantageous to him.

Individuals having salaries income only, but no rental income or business profits, are not required to elect personal assessment.

Tax bills issued before enactment of the relevant legislation will not reflect the tax reduction. The Inland Revenue Department will revise them after the enactment. Excess tax paid will be refunded from late July onwards. Taxpayers are not required to apply for such refund or make phone enquiry in this regard.