2024-25 Budget – Tax Measures

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In the 2024-25 Budget, the Financial Secretary proposed a one-off reduction of 100% of the final tax for the year of assessment 2023/24 in respect of profits tax, salaries tax and tax under personal assessment, subject to a ceiling of $3,000 per case. Furthermore, it is also proposed to implement a two-tiered standard rates regime for salaries tax and tax under personal assessment starting from the year of assessment 2024/25. In calculating the amount of tax under standard rate for a taxpayer whose net income exceeds $5 million, the first $5 million of the net income will continue to be subject to the standard rate of 15% and the portion of the net income exceeding $5 million will be subject to the standard rate of 16%. Details are as follows:

* Net income = Total income – Deductions

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You only need to file your Tax Return - Individuals (BIR60) for the year of assessment 2023/24 as usual. After the enactment of the relevant legislation, IRD will effect the tax reduction in the final assessment for the year of assessment 2023/24 (hereinafter called "2023/24 assessment") and will also revise those 2023/24 assessments which are issued before the legislative amendment. There is no need for you to make a separate application.

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After the enactment of the relevant legislation, IRD will apply the new two-tiered standard rates in calculating the provisional salaries tax for the year of assessment 2024/25. When doing the calculation, the first $5 million of your net income will be subject to the standard tax rate of 15%, i.e. $750,000, while the remaining portion of your net income of $1 million will be subject to the standard tax rate of 16%, i.e. $160,000. The total amount of provisional salaries tax will be $910,000.

A:

You are required to pay on time the 2023/24 provisional tax. Otherwise, recovery action will be taken by IRD. Similar to previous occasions, the tax reduction is to reduce the 2023/24 final tax that will be charged and not the 2023/24 provisional tax that has already been charged. Therefore, you are still required to pay the 2023/24 provisional tax as charged.

A:

As the tax reduction is to reduce the 2023/24 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 to be issued for the year of assessment 2023/24. The tax reduction is not applicable to the 2023/24 provisional tax. The provisional tax paid will be applied to settle the 2023/24 final tax and 2024/25 provisional tax. Excess balance, if any, will be refunded.

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You may use the Tax Calculator provided in GovHK to calculate your 2023/24 and 2024/25 salaries tax and tax under personal assessment upon the implementation of the proposed tax measures.

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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 2023/24 is 100% of the tax assessed under personal assessment (subject to a ceiling of $3,000) and not the tax payable under salaries tax and profits tax.

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Profits tax, salaries tax and tax under personal assessment for the year of assessment 2023/24 are reduced by 100%, subject to a ceiling of $3,000 per case. Under salaries tax, a married couple are separately assessed. Each of them will get a tax reduction of 100%, subject to a ceiling of $3,000. From the year of assessment 2018/19, the requirement for the election of personal assessment is relaxed by allowing married persons the option to elect for personal assessment separately (hereinafter called "Separate PA"). Under Separate PA, a married couple are separately assessed. Each of them will get a reduction of 100% of the tax assessed under their own personal assessment, subject to a ceiling of $3,000. If the taxpayer elects for personal assessment jointly with his / her spouse, the tax reduction for the couple is 100% of their total tax assessed under personal assessment, capped at $3,000. Whether a taxpayer should apply for personal assessment jointly with his / her spouse will depend on his / her own situation. When considering an election for personal assessment for the year of assessment 2023/24, taxpayers should take into account the factor that the tax reduction for personal assessment jointly elected by a couple will be capped at $3,000. You may use the Tax Calculator provided in GovHK to calculate the tax payable under different scenarios for the year of assessment 2023/24.

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For each business, you can get the tax reduction of 100% of the profits tax payable for the year of assessment 2023/24, subject to a ceiling of $3,000.

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The profits tax reduction proposed in the 2024-25 Budget also applies to companies (including corporations and partnership businesses). Under the proposed tax reduction, they will get a one-off reduction of 100% of the final profits tax for the year of assessment 2023/24, subject to a ceiling of $3,000 per case.