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One-off Reduction in 2009/10 Final Tax

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1.

Q:

Which year does the Financial Secretary propose a one-off tax reduction?

 
 

A:

The Financial Secretary proposes to reduce 75% of the 2009/10 final tax in respect of salaries tax and tax charged under personal assessment, subject to a ceiling of $6,000 per case.

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2.

Q:

Who can enjoy the tax reduction?

 
 

A:

Taxpayers who are chargeable to salaries tax and tax under personal assessment will have a reduction of 75% of their 2009/10 final tax, subject to a ceiling of $6,000 per case.

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3.

Q:

Do I need to apply for this tax reduction?

 
 

A:

As a taxpayer, you need not make any application. You only need to file, as usual, your 2009/10 tax return - individuals which will be issued starting from the coming May. After the enactment of tax reduction legislation, the Inland Revenue Department will effect the tax reduction in the final assessment for 2009/10. Notices of assessment for salaries tax and tax under personal assessment with the tax reduction will be issued in the third quarter of 2010. For 2009/10 assessments issued before the legislative amendment, the Department will revise them after the enactment of the legislation. The excess tax paid, if any, will be refunded to you from late July 2010 onwards. There is no need for you to make enquiry.

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4.

Q:

Can I withhold payment of the 2nd instalment of 2009/10 provisional tax falling due from April 2010 onwards because of the proposed tax reduction?

 
 

A:

You are required to pay on time the 2nd instalment of the 2009/10 provisional tax falling due from April 2010. Otherwise, recovery actions will be taken by the Inland Revenue Department.

Similar to last year, the tax reduction is to reduce the 2009/10 final tax that will be charged and not relating to the 2009/10 provisional tax that has already been charged. Therefore, you are still required to pay the 2009/10 provisional tax as charged.

 

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5.

Q:

Will the Inland Revenue Department refund the 2009/10 provisional tax already paid by me?

 
 

A:

As the tax reduction is to reduce the 2009/10 final tax that will be charged, the reduction will only be reflected in the notices of assessment which will be issued starting from the third quarter of 2010 and you will then find reduction in the amount of tax payable for salaries tax and tax under personal assessment. The tax reduction is not applicable to the 2009/10 provisional tax. The provisional tax already paid will be applied for payment of the 2009/10 final tax and the 2010/11 provisional tax. Excess balance, if any, will be refunded.

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6.

Q:

How to compute the tax reduction?

 
 

A:

You can make use of the tax computation program to compute the tax reduction. For salaries taxpayers, please note the tax payable after reduction has not taken into account your 2009/10 provisional tax paid.

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7.

Q:

I have to pay salaries tax for the year 2009/10 and I have elected personal assessment for the year. How to compute the tax reduction?

 
 

A:

Under personal assessment, all income of an individual taxpayer chargeable to tax, including the salaries income, will be aggregated together to compute the tax payable. Hence, the amount of tax reduction for the year 2009/10 is 75% of the tax assessed under personal assessment and not the tax payable under salaries tax.

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8.

Q:

A husband and a wife with employment income and liable to salaries tax are separately assessed to tax and they can enjoy a maximum tax reduction of $12,000 in total. However, when the husband and the wife are assessed under personal assessment, they can only get $6,000. Is it unfair to a couple electing personal assessment?

 
 

A:

The Financial Secretary proposes to reduce 75% of the 2009/10 final tax in respect of salaries tax and tax charged under personal assessment, subject to a ceiling of $6,000. Under salaries tax, a husband and a wife are allowed separate assessment; each of them gets a tax reduction subject to a ceiling of $6,000. However, under personal assessment, there is no separate taxation and only one assessment will be issued; therefore, the ceiling for the couple is $6,000. Whether a taxpayer should apply for personal assessment will depend on his situation. In the year of assessment 2009/10, taxpayers should also take into account the factor that the tax reduction for each couple will be capped at $6,000 when considering their personal assessment election. The Inland Revenue Department will check in each case if the personal assessment election will reduce the amount of tax payable, and assess each taxpayer in the way most advantageous to him.