Tax Information : Individuals : Deduction for Expenses of Self-education

	Deduction for Expenses of Self-education
		Definition of Self-education expenses
		Prescribed course of education
		Education providers
		Amount of allowable deduction
		How and when to claim
		Supporting documents
		Common questions and answers

You may claim deduction of self-education expenses (including tuition and the related examination fees) paid for a prescribed course of education under Salaries Tax. In general terms, a prescribed course of education means a course undertaken at a specified education provider to gain or maintain qualifications for use in either the current or a planned employment.

The Inland Revenue (Amendment) Ordinance 2004 enacted on 25 June 2004 extends the scope of self education expenses, with retrospective effect from the year of assessment 2000/01, to cover examination fees paid for examinations set by an education provider or a trade, professional or business associations for the purpose of gaining or maintaining qualifications for use in any employment.

Taxpayers who may benefit from the aforesaid amendment ordinance and who have not previously been granted deduction of examination fees paid during any of the year of assessment from 2000/01 to 2003/04 in respect of such examinations can apply to claim the deduction for the relevant years. Such applications have to be made within 12 months after the date of enactment of the respective legislation (i.e. 25 June 2004) or within 6 years after the end of the relevant year of assessment, whichever is the later.

Prescribed course of education

A prescribed course of education is a course of education provided by an education provider. With effect from the year of assessment 2004/05, a prescribed course of education is extended to cover a training or development course not only provided but also recognized or accredited by the Vocational Training Council, the Construction Industry Training Authority and major trade associations for the regulated professions as specified in Schedule 13 of the Inland Revenue Ordinance. With effect from 5 May 2008, the Hong Kong Council for Accreditation of Academic and Vocational Qualifications was added to the Schedule. Taxpayers applying for the deduction are required to provide details in respect of the courses so recognized or accredited.

For the expense to be deductible, the course must be undertaken for the purpose of gaining or maintaining qualifications for use in any employment. The qualifications can be for use in the current employment or a planned new employment.

Examples are:

a management course by a business executive;
a commercial or computer course by a secretary or clerk;
a vocational training course by a technician;
a continuing professional development seminar by an accountant or a lawyer.

Education providers

Specified education providers in general refer to universities, university colleges or technical colleges; Government schools or other schools registered or exempted from registration under the Education Ordinance and the following institutions specifically approved by the Commissioner of Inland Revenue:-

	1.	Hong Kong Productivity Council (w.e.f. 1.4.1996)
	2.	The Arts School of Hong Kong Arts Centre (w.e.f. 1.4.1996)
	3.	Charmtime Limited - Pang's Music Therapy Centre (Note: Only teachers enrolled for the course can claim tax deduction, but not other students) (w.e.f. 28.9.1998)
	4.	The Continuous Learning Centre of Vocational Training Council (w.e.f. 6.1.1999)
	5.	Top Express Consultants Limited - Rigos US CPA Review (w.e.f. 31.10.2000)
	6.	Hong Kong Trade Development Council (w.e.f. 19.11.2001)
	7.	Phillip Institute of Financial Learning Co. Limited (w.e.f. 30.10.2002)
	8.	Physical Fitness Association of Hong Kong, China Limited (w.e.f. 25.3.2003)
	9.	International Health and Fitness Institute (w.e.f. 27.11.2003)

Amount of allowable deduction

You should claim deductions for the actual amount of self-education expenses paid in the year of payment. However, fees that have been reimbursed or are reimbursable by an employer, the Government (e.g. under the Continuing Education Fund), or any other person/organisation cannot be deducted.

The maximum amount deductible for the years of assessment from 2002/03 to 2006/07 is $40,000.

From the year of assessment 2007/08 onwards, the upper limit of the amount deduction is $60,000. Taxpayers benefited from complete or partial refund of course fees from the employer, the Government or any other person/organisation should only claim deduction for the actual amount borne by themselves.

Furthermore, it is specifically provided in the Inland Revenue Ordinance that in computing the taxpayer's tax liabilities, the same payment may never get deduction twice.

You must claim deductions of self education expenses in respect of the year of assessment in which payments were made. Sometimes, course participants are required to make payments in one year of assessment, say February 2008, for courses that commence in a different (subsequent) year of assessment, say September 2008. In such case, the expense should be claimed for the year of assessment 2007/08 instead of 2008/09.

As mentioned above, the taxpayer who has received complete or partial reimbursement of course fees may either claim the balance, or claim the full amount but treat the reimbursed amount as income. Take a look at the following scenarios :

Case 1

If Mr. LEE paid $20,000 course fees during the year of assessment 2007/08 and received $8,000 refund from his employer within the same year, the amount of his claim depends on how the reimbursed amount is treated in the 2007/08 Employer's tax return.

 

Income reported by employer in I.R. 56 Form series for 2007/08 Amount of deduction to be claimed in Mr. LEE's tax return for 2007/08 $8,000 has been included as part of Mr. LEE's income $20,000 $8,000 has not been included as part of Mr. LEE's income $12,000

Case 2

Same facts as for Case 1, but Mr. LEE received the refund in the year of assessment 2008/09. Mr. LEE may claim deduction for $20,000 in his 2007/08 tax return, but he must remember to report the reimbursed sum of $8,000 as his 2008/09 income.

To avoid understating his assessable income, Mr. LEE should report the reimbursed sum of $8,000 as his 2008/09 income. The reporting or non-reporting of the sum of $8,000 in the Employer's tax return for 2008/09 would not affect his obligation to do so.

Do not attach any documentary evidence to your Tax Return - Individuals (B.I.R. 60). To substantiate your deduction claim and for ascertainment of the proper amount deductible, you have to retain relevant documentary evidence for 7 years. Upon request, you have to present them to the Assessor for inspection.

For common questions and answers on deduction for expenses of self-education, please click here.