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What is personal
assessment
The Inland Revenue Ordinance provides
for the levying of three separate direct taxes, viz. salaries
tax on income from office and employment, profits
tax on profits from businesses and property tax
on income from properties. Personal assessment is not a levy of
tax. It is a relief for certain individual taxpayers who are chargeable
to profits tax and property tax. A person who only derives income
chargeable to salaries tax will not benefit by electing personal
assessment.
How may personal
assessment reduce my tax liability
Sole-proprietor or partners of a business and property owners who
receive rental income are assessed to profits tax and property tax
respectively at standard rate. Under personal assessment, income
of the individual taxpayer chargeable to salaries tax, profits tax
and property tax are aggregated, and from this total, the following
may be deducted:
The balance, if any, will then be taxed at
the same rates as those
used for salaries tax.
The income and deduction position for each individual will differ
from year to year. For the same individual, election may be advantageous
for one year and disadvantageous in the next. However, you need
not worry about this. If for any year the election that you have
made does not result in any tax benefit to you, IRD's computer system
can identify your case and automatically tax demand notes will be
issued as if you have not made an election for personal assessment.
Whether for a particular year of assessment you may pay less tax
through election for personal assessment, it depends on the amounts
of your income and deductions for that year. See Examples 1, 2 and
3 under "
A Brief Guide to Personal Assessment". Further Examples
are available for individual business owner.
Credit will be given for any tax already paid
on the income included in the assessment. If the total of the tax
already paid exceeds the tax chargeable under personal assessment,
a refund will be made.
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| Treatment
of married couple under personal assessment |
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| Where a taxpayer is married and is not living apart from his/her
spouse, and both of them have income chargeable to tax, election
for personal assessment must be made by the couple jointly.
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| Separate taxation for husband and wife is not applicable under
personal assessment. When a married couple elect personal assessment,
the total income of the individual taxpayer, as appropriately
reduced, will be aggregated with that of his/her spouse to arrive
at the joint total income of the couple for assessment purposes.
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| If the aggregate amount of an individual taxpayer's losses*
and deductions exceeds the total income of the individual taxpayer,
such excess must first be set off against the total income of
his/her spouse before carried forward. The maximum amount that
can be carried forward to be set off against the total income
of the individual taxpayer for future years of assessment is
the unabsorbed losses*. |
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| Normally, the tax payable on the joint assessment is proportionally
allocated to the husband and the wife on the basis of their
respective reduced total income, and a notice of assessment
will be issued to each of them. See Example 4 under "A
Brief Guide to Personal Assessment". |
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| * "Losses" means the sum of business losses incurred
in the year of assessment and losses brought forward from previous
years under personal assessment. |
Who may elect personal
assessment
An individual may elect personal assessment if:
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he/she is 18 years of age or over, or under that age if
both of his/her parents are deceased; and
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the individual is or, if he/she is married, his/her spouse
is a permanent or temporary resident in Hong Kong;
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For the purpose of personal assessment:
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"permanent resident" means an individual who ordinarily resides in Hong Kong; |
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"temporary resident" means an
individual who stays in Hong Kong for a period or a number of
periods amounting to more than 180 days during the year of assessment
in respect of which the election is made or for a period or periods
amounting to more than 300 days in 2 consecutive years of assessment,
one of which is the year of assessment in respect of which the
election is made. |
Time
limit for electing personal assessment
Election for personal assessment must be made
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within 2 years after the end of the year of assessment in
respect of which the election is made; (e.g. election for
personal assessment for the year of assessment 2007/08 has
to be made not later than 31 March 2010), or
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within 2 months after the issue of a notice of assessment
or a notice of additional assessment to tax for the year of
assessment in respect of which the election is made,
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whichever is the later.
How to elect personal
assessment
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| You may make an election by completing Part 6 in the Tax Return
- Individuals (B.I.R. 60) for the relevant year of assessment.
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If you have not made an election in the tax
return, you may make an election subsequently by completing
an application form I.R. 76C
provided it is made within the prescribed time limit as mentioned
above. You may send the completed form to the Inland Revenue
Department by post (G.P.O. Box 132, Hong Kong) or by fax (2877
1232). |
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| You may fill in I.R. 76C electronically, sign it by means
of a digital certificate and transmit it to the Inland Revenue
Department through the Internet. If you wish to submit I.R.
76C electronically, you have to install the e-Form program in
your computer first, and then download the e-Form I.R. 76C and
install it in the e-Form program. For details, please visit
our web page Electronic Services
: e-Form. |
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| If you are married and not living apart from your spouse,
and both of you have income chargeable to tax and wish to elect
personal assessment, you and your spouse must sign jointly on
both tax returns or I.R. 76C to complete the election process.
You and your spouse should report your individual income in
your own Tax Return - Individuals (B.I.R. 60) separately. |
Common
Questions and Answers
For common questions and answers on personal assessment,
please click here.
How
to compute the amount of tax payable under Personal Assessment
Related
Pamphlet
If you would like to read the pamphlet on "A brief
guide to personal assessment ¡VWhether tax may be reduced through
election for personal assessment", please click
here.
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