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Budget 2018-19 FAQ

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1.

Q:

What tax measures are proposed in the 2018-19 Budget for individual taxpayers?

 
 

A:

Individual taxpayers get a one-off reduction of 75% of the final tax for the year of assessment 2017/18 in respect of profits tax, salaries tax and tax under personal assessment, subject to a ceiling of $30,000 per case. Furthermore, the following tax measures are introduced from the year of assessment 2018/19 onwards:

(a)  Adjusting the tax bands and marginal tax rates as follows:

 Year of Assessment 2017/18 From 2018/19 onwards#
  Net Chargeable Income
(Tax band)
$
Rate Net Chargeable Income
(Tax band)
$
Rate
On the first  45,000  2%  50,000  2%
On the next  45,000  7%  50,000  6%
On the next  45,000  12%  50,000  10%
On the next      -         50,000 14%
  135,000   200,000  
Remainder   17%   17%

 

(b)  Increasing the following allowances:

 Year of Assessment 2017/18
$
From 2018/19
onwards#
$
 Child Allowance    
  For each of the 1st to 9th child 100,000 120,000
  Additional Child Allowance for each child born during the year of assessment 100,000 120,000
 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 46,000 50,000
  Parent / Grandparent aged between 55 and 59 23,000 25,000
 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 46,000 50,000
  Parent / Grandparent aged between 55 and 59 23,000 25,000

 

(c)  Raising the deduction ceiling for Elderly Residential Care Expenses as follows:

 Year of Assessment 2017/18
 
  $
From 2018/19
onwards#
$
 Deduction ceiling for Elderly Residential Care Expenses 92,000 100,000

 

(d)  Introducing Personal Disability Allowance:

 Year of Assessment 2017/18
 
  $
From 2018/19
onwards#
$
 Personal Disability Allowance Not applicable 75,000

 

 #Until superseded

 

In the 2018-19 Budget, the Financial Secretary also proposed:
(a) Relaxing the requirement for election of Personal Assessment by married persons so that each of them can make his/her own election for personal assessment separately.

(b) Introducing a tax deduction of qualified premium for eligible health insurance products under the Voluntary Health Insurance Scheme. The annual tax ceiling of premium for tax deduction is $8,000 per insured person.  This measure will be implemented from the year of assessment following the passage of the relevant legislative amendments.

The relevant legislative amendments for the above two tax measures are in progress.

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2.

Q:

Do I need to apply for the tax reduction, the new level of allowances and the new tax bands and marginal tax rates?

 
 

A:

You only need to, as usual, file your 2017/18 tax return for individuals (BIR60). IRD will effect the tax reduction in the final assessment for 2017/18 and apply the new level of allowances and the new tax bands and marginal tax rates in calculating the 2018/19 provisional tax.  For 2017/18 assessments issued before the legislative amendments, IRD will revise them.  It is expected that the revised assessments, with the relevant tax measures duly reflected, will be issued starting from late July 2018.  There is no need for you to make a separate application.

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3.

Q:

Can I withhold payment of the 2017/18 provisional tax because of the tax reduction?

 
 

A:

You are required to pay on time the 2017/18 provisional tax.  Otherwise, recovery action will be taken by IRD.  Similar to previous occasions, the tax reduction is to reduce the 2017/18 final tax that will be charged and not the 2017/18 provisional tax that has already been charged.  Therefore, you are still required to pay the 2017/18 provisional tax as charged.

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4.

Q:

Will IRD refund the 2017/18 provisional tax already paid by me?

 
 

A:

As the tax reduction is to reduce the 2017/18 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 2017/18.  The tax reduction is not applicable to the 2017/18 provisional tax.  The provisional tax paid will be applied to settle the 2017/18 final tax and 2018/19 provisional tax.  Excess balance, if any, will be refunded.

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5.

Q:

How to compute the tax reduction?

 
 

A:

You may use the Tax Calculator provided by GovHK to calculate your 2017/18 and 2018/19 salaries tax and tax under personal assessment.

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6.

Q:

I have to pay salaries tax and profits tax for the year of assessment 2017/18 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 2017/18 is 75% of the tax assessed under personal assessment (subject to a ceiling of $30,000) and not the tax payable under salaries tax and profits tax.

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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 $60,000 in total.  However, when the husband and the wife are assessed under personal assessment, they can only get a reduction of $30,000.  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 2017/18 are reduced by 75%, subject to a ceiling of $30,000 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 $30,000. 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 $30,000 in total.  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 2017/18, taxpayers should take into account the factor that the tax reduction for each couple will be capped at $30,000.  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.

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8.

Q:

I have two businesses in the year of assessment 2017/18, 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 2017/18, subject to a ceiling of $30,000.

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9.

Q:

I paid Elderly Residential Care Expenses of $105,000 in 2017/18, which exceeded the specified maximum of $92,000 for 2017/18.  What amount should I write down in the 2017/18 tax return for individuals (BIR60) for claiming the Elderly Residential Care Expenses deduction?

 
 

A:

You should state the actual amount of $105,000 paid in Part 8.4 of your 2017/18 tax return for individuals (BIR 60).  The Assessor will allow the respective maximum deductions at $92,000 and $100,000 when computing your 2017/18 final salaries tax and 2018/19 provisional salaries tax liabilities.

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10.

Q:

After I had filed my 2017/18 tax return for individuals (BIR 60), the residential care home, in which my 65 years old father stayed, informed me that the residential care expenses payable in 2018/19 would be increased from $90,000 to $110,000.  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 2018/19 exceeds $92,000, you may apply in writing for holding over the 2018/19 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. 


After receiving the application and in computing the provisional salaries tax payable for 2018/19, the Assessor will apply the deduction ceiling of $100,000 for calculating the Elderly Residential Care Expenses.

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11.

Q:

What amount of Child Allowance can I claim in respect of a child born in 2018/19 and thereafter?

 
 

A:

You can claim Child Allowance of $120,000 and a one-off allowance of $120,000 in the year of assessment in which your child was born (i.e. 2018/19).  In the years thereafter (until superseded), you can claim for each year a Child Allowance of $120,000 in respect of the child as long as other prescribed conditions are satisfied.

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12.

Q:

My child was born on 3 April 2018.  What should I do if I want to claim the child allowance in the year of birth?

 
 

A:

You can complete Part 8.2 of the 2017/18 tax return for individuals by providing details of your new born child.  IRD will grant Child Allowance of $240,000 for that child when computing your 2018/19 provisional tax.

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13.

Q:

My child will be born in 2018/19.  How can I make a claim for the increased amount of Child Allowance?
 
 

A:

After your child is born, you may apply in writing for holding over of the 2018/19 provisional salaries tax charged.  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. 

 

Besides, when you are completing the 2018/19 tax return next year, please fill in details of your child for claiming the Child Allowance.

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14.

Q:

Who is eligible to claim the newly introduced Personal Disability Allowance?

 
 

A:

If a taxpayer is eligible to claim an allowance under the Government´s Disability Allowance Scheme, he / she can claim this newly introduced Personal Disability Allowance with effect from the year of assessment 2018/19.  For more details on Government´s Disability Allowance Scheme, please refer to the following link:

More on the Government’s Disability Allowance Scheme

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15.

Q:

I am eligible to claim an allowance under the Government's Disability Allowance Scheme, how can I claim the newly introduced Personal Disability Allowance?

 
 

A:

You may apply in writing for holding over of the 2018/19 provisional salaries tax charged.  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.