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Budget 2016-17 FAQ
1.
Q:
What tax measures are proposed in the 2016-17 Budget for individual taxpayers?
A:
Individual taxpayers will get a one-off reduction of 75% of the final tax for the year of assessment 2015/16 in respect of profits tax, salaries tax and tax under personal assessment, subject to a ceiling of $20,000 per case. Furthermore, the following tax measures are introduced from the year of assessment 2016/17 onwards:
(a) Increasing the following allowances:
| Year of Assessment | 2015/16 $ |
From 2016/17 onwards $ |
|
| Basic Allowance | 120,000 | 132,000 | |
| Married Person's Allowance | 240,000 | 264,000 | |
| Single Parent Allowance | 120,000 | 132,000 | |
| Dependent Parent / Grandparent Allowance (for each dependant) |
|||
| Parent / Grandparent aged 60 or above, or is eligible to claim an allowance under the Government's Disability Allowance Scheme | 40,000 | 46,000 | |
| Parent / Grandparent aged between 55 and 59 | 20,000 | 23,000 | |
| Additional Dependent Parent / Grandparent Allowance (for each dependant who is living with the taxpayer continuously throughout the year) |
|||
| Parent / Grandparent aged 60 or above, or is eligible to claim an allowance under the Government's Disability Allowance Scheme | 40,000 | 46,000 | |
| Parent / Grandparent aged between 55 and 59 born during the year of assessment | 20,000 | 23,000 | |
(b) Raising the maximum allowable deduction for elderly residential care expenses as follows:
| Year of Assessment | 2015/16 $ |
From 2016/17 onwards $ |
|
| Elderly Residential Care Expenses | 80,000 | 92,000 | |
2.
Q:
Do I need to apply for the tax reduction and the new allowances?
A:
You only need to file, as usual, your 2015/16 tax return for individuals (BIR60). IRD will effect the tax reduction in the final assessment for 2015/16 and apply the new allowances in calculating the 2016/17 provisional tax. For 2015/16 assessments issued before the legislative amendment, IRD will revise them. It is expected that the excess tax paid, if any, will be refunded to taxpayers starting from July 2016. There is no need for you to make a separate application.
3.
Q:
Can I withhold payment of the 2nd instalment of 2015/16 provisional tax falling due from April 2016 onwards because of the proposed tax reduction?
A:
You are required to pay on time the 2nd instalment of the 2015/16 provisional tax falling due from April 2016. Otherwise, recovery action will be taken by IRD. Similar to previous occasions, the tax reduction is to reduce the 2015/16 final tax that will be charged and not relating to the 2015/16 provisional tax that has already been charged. Therefore, you are still required to pay the 2015/16 provisional tax as charged.
4.
Q:
Will the Inland Revenue Department refund the 2015/16 provisional tax already paid by me?
A:
As the tax reduction is to reduce the 2015/16 final tax that will be charged, the reduction will only be reflected in the notices of salaries tax assessment, profits tax assessment and personal assessment for 2015/16. The tax reduction is not applicable to the 2015/16 provisional tax. The provisional tax paid will be applied to pay the 2015/16 final tax and 2016/17 provisional tax. Excess balance, if any, will be refunded.
5.
Q:
How to compute the tax reduction?
A:
You can use the tax computation program provided by GovHK to calculate your 2015/16 and 2016/17 salaries tax and tax under personal assessment.
6.
Q:
I have to pay salaries tax and profits tax for the year of assessment 2015/16 and I have elected for personal assessment for the year. How the tax reduction should be computed?
A:
Under personal assessment, all income of an individual taxpayer, including salaries income and business profits, will be aggregated to compute the tax payable. Hence, the amount of tax reduction for the year of assessment 2015/16 is 75% of the tax assessed under personal assessment (subject to a ceiling of $20,000) and not the tax payable under salaries tax and profits tax.
7.
Q:
A husband and a wife, each with employment income and liable to salaries tax, are separately assessed to tax and they can enjoy a maximum tax reduction of $40,000 in total. However, when the husband and the wife are assessed under personal assessment, they can only get a reduction of $20,000. Is it unfair to a couple electing for personal assessment?
A:
Profits tax, salaries tax and tax under personal assessment for the year of assessment 2015/16 are reduced by 75%, subject to a ceiling of $20,000 per case. Under salaries tax, a husband and a wife are separately assessed. Each of them will get a tax reduction of 75%, subject to a ceiling of $20,000. However, under personal assessment, there is no separate taxation and only one assessment will be issued. Therefore, the tax reduction for the couple is 75%, capped at $20,000. Whether a taxpayer should apply for personal assessment will depend on his situation. When considering an election for personal assessment for the year of assessment 2015/16, taxpayers should take into account the factor that the tax reduction for each couple will be capped at $20,000. IRD will check each personal assessment election to see if it will reduce the amount of tax payable, and assess each taxpayer in the way most advantageous to him.
8.
Q:
I have two businesses in the year of assessment 2015/16, can I get a tax reduction in respect of each business?
A:
For each business, you can get the tax reduction of 75% of the profits tax payable for 2015/16, subject to a ceiling of $20,000.
9.
Q:
I paid elderly residential care expenses of $95,000 in 2015/16, which exceeded the specified maximum of $80,000 for 2015/16. What amount should I write down in the 2015/16 tax return for individuals (BIR60) for claiming the elderly residential care expenses deduction?
A:
You should state the actual amount of $95,000 paid in Part 8.4 of your 2015/16 tax return for individuals (BIR 60). The Assessor will allow the respective maximum deductions at $80,000 and $92,000 when computing your 2015/16 final salaries tax and 2016/17 provisional salaries tax liabilities.
10.
Q:
After I had filed my 2015/16 tax return for individuals (BIR 60), the residential care home, in which my 65 years old father stays, informed me that the residential care expenses payable in 2016/17 will be increased from $78,000 to $98,000. What should I do if I want to claim the increased deduction?
A:
If the amount of elderly residential care expenses paid or payable for 2016/17 exceeds $80,000, you may apply in writing for holding over the 2016/17 provisional salaries tax upon receiving the assessment and notice for payment of provisional salaries tax. The application must be lodged not later than:
| (a) | 28 days before the due date for payment of the provisional tax, or |
| (b) | 14 days after the date of issue of the notice for payment of the provisional tax, |
| whichever is the later. | |
In computing the provisional salaries tax payable for 2016/17, the Assessor will not deduct $98,000 as the amount of elderly residential care expenses but will restrict the deduction to $92,000.