In his 2017-18 Budget, the Financial Secretary proposed a number of tax measures. The relevant legislation for the following measures was passed and gazetted:
For the year of assessment 2016/17
Reducing 75% of the final tax for the year of assessment 2016/17 in respect of profits tax, salaries tax and tax under personal assessment, subject to a ceiling of $20,000 per case.
From the year of assessment 2017/18 onwards
increasing the width of marginal tax bands;
increasing disabled dependant allowance and dependent brother or dependent sister allowance;
raising the deduction ceiling for self-education expenses; and
extending the entitlement period for home loan interest deduction
The tax reduction is not applicable to property tax. Individuals earning rental income, if eligible, may elect for personal assessment in Part 6 of the tax return to enjoy the tax reduction. The Inland Revenue Department (IRD) will examine each case to see if the personal assessment election will reduce the amount of tax payable, and assess each taxpayer in the way to his advantage.
For profits tax, the tax reduction ceiling 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 personal assessment election together and the ceiling will therefore apply to each couple.
A taxpayer who is separately chargeable to salaries tax and profits tax can enjoy the tax reduction under each of the tax types. If he elects personal assessment, the reduction will have to be based on the tax payable under personal assessment.
Taxpayers should complete the 2016/17 tax returns as usual. No application is required for the above measures. IRD will effect the tax reduction in the final assessment for 2016/17 and apply the new level of allowances/deduction ceiling (if applicable) and new marginal tax bands in calculating the 2017/18 provisional tax.
If the amount of self-education expenses paid in 2016/17 exceeds the ceiling of $80,000, you can put down the full amount of payment in Part 4.3 of the 2016/17 tax return. IRD will make reference to the amount stated in calculating your 2017/18 provisional tax.
If the self-education expenses that you actually paid or expect to be paid in 2017/18 exceed $80,000, you can apply for holding over the 2017/18 provisional salaries tax within the period specified in the Inland Revenue Ordinance.
The deduction ceiling for home loan interest is maintained at $100,000 a year.
Other Useful Tips
Inform IRD promptly if your correspondence address has changed.
Check your copy of “Employer’s Return of Remuneration and Pension” (IR56B/F/G) carefully. In case of doubt, clarify with your employer immediately and inform IRD, if necessary.
Claim for deductions under salaries tax (i.e. outgoing and expenses, self-education expenses, approved charitable donations and contributions to the MPF or ORSO Scheme) can be made in Part 4.3 of the tax return.
When filing your tax return, do not attach supporting documents for deductions claimed. However, such documents should be retained for 7 years for examination when called for.
When sending your completed tax return to IRD by post, affix sufficient stamp according to the appropriate category of postage so as to ensure delivery in order.
The registered owner of a self-occupied property can claim for the deduction of home loan interest. If the relevant property is solely owned by you, the maximum amount of home loan interest deductible is $100,000 for each year of assessment. Where a property is owned by joint tenants or tenants in common, the maximum deduction allowable is apportioned between/among all the owners on the basis of their respective ownership ratios.
To rectify any error or omission in your tax return discovered after submission, inform IRD in the soonest. State your name, phone number, file number, the relevant year of assessment and details of your amendments, and sign your rectification notice. eTAX users can also file their rectification notices by logging in their eTAX accounts.