2015-16 Budget – Tax Measures
In his 2015-16 Budget, the Financial Secretary has proposed a number of tax measures. The relevant legislation of the following measures was passed on 9 July 2015 and gazetted on 17 July 2015:
- Reducing profits tax, salaries tax and tax under personal assessment for the year of assessment 2014/15
- Increasing child allowances
Highlights of the measures and implementation details are set out in the following paragraphs. Answers to frequently asked questions (FAQ) and illustrative examples showing how the the above measures would reduce taxpayers' salaries tax and tax under personal assessment are also provided.
You may use the tax computation program provided by GovHK to calculate your salaries tax and tax under personal assessment.
Profits tax, salaries tax and tax under personal assessment for the year of assessment 2014/15 are reduced by 75%, subject to a ceiling of $20,000 per case.
For profits tax, the ceiling of the tax reduction is applied to each business. For salaries tax, the ceiling is applied to each individual taxpayer; but for couples jointly assessed, the ceiling is applied to each couple. For personal assessment, single taxpayers will each be subject to the ceiling. Married couples must make their personal assessment election together and the ceiling will therefore apply to each couple.
The tax reduction is not applicable to property tax. Individuals with rental income, if eligible for personal assessment, may be able to enjoy such reduction under personal assessment.
A taxpayer who is separately chargeable to salaries tax and profits tax can enjoy tax reduction under each of the tax types. For a taxpayer having business profits or rental income and electing for personal assessment, the reduction will be based on the tax payable under personal assessment. It might be different from the amount of tax reduction he would get if he was not assessed under personal assessment. The exact position will need to be evaluated case by case. The Inland Revenue Department (IRD) will check if the election will reduce the amount of tax payable in each case, and assess each taxpayer in the way most advantageous to him.
To apply for personal assessment, if eligible, the taxpayer should complete Part 6 of his tax return for individuals for the year of assessment 2014/15. Individuals having salaries income only, but no business profits and rental income, need not elect for personal assessment.
The reduction will reduce taxpayers’ amount of tax payable for the year of assessment 2014/15. Taxpayers should file their profits tax returns and tax returns for individuals for the year of assessment 2014/15 as usual. IRD will effect the reduction in the final assessment. For any final assessment for 2014/15 issued before the enactment of the law, IRD will make a reassessment. It is expected that excess tax paid will be refunded starting from mid August 2015. Taxpayers are not required to make any applications or enquiries to IRD.
The tax reduction is only applicable to the final tax for the year of assessment 2014/15, but not to the provisional tax of the same year. The provisional tax paid will be applied to pay the final tax for the year of assessment 2014/15 and the provisional tax for the year of assessment 2015/16. Excess balance, if any, will be refunded.
The child allowance and the additional child allowance in the year of birth are increased from the current $70,000 to $100,000 for each child effective from the year of assessment 2015/16. After the increase, the total allowance for a child born in 2015/16 is $200,000 for the year.
IRD will automatically apply the new level of child allowances in calculating the provisional salaries tax for the year of assessment 2015/16. Taxpayers who are eligible to claim child allowance are only required to complete their tax returns for individuals for the year of assessment 2014/15 and do not need to make separate applications for the increased child allowances. Taxpayer who wants to apply for additional child allowance for the child born on or after 1 April 2015 and up to the date of completion of the tax return can refer to FAQ 10 and Example 2. For child born after the date of completion of the tax return, taxpayer can apply for holding over of provisional tax after receipt of the notice of assessment (refer to FAQ 11).