(Source : news.gov.hk)
LCQ20: Dependent parent/grandparent allowance
Following is a question by the Hon Lau Kong-wah and a written reply by the Secretary for Financial Services and the Treasury, Mr Frederick Ma, in the Legislative Council today (June 7):
Under the Inland Revenue Ordinance (Cap. 112), a person chargeable to Salaries Tax may claim dependent parent/grandparent allowance in respect of his or her parent/grandparent, or his or her co-residing spouse's parent/grandparent, who is maintained by that person and is ordinarily resident in Hong Kong. In this connection, will the Government inform this Council:
(a) of the definition of being "ordinarily resident in Hong Kong";
(b) given that an increasing number of retired elderly dependants have moved to live in the Mainland, whether the authorities will consider relaxing the relevant residence requirement; if not, of the justifications for that;
(c) whether the authorities will consider permitting such allowance in respect of the same dependant to be equally apportioned among two or more eligible claimants; if not, of the reasons for that; and
(d) of the evidence that the authorities may, during their spot checks of claims for such allowance, require the claimants to show that the dependants concerned were maintained by them during the relevant year of assessment, and whether the authorities have reviewed if this requirement is reasonable?
(a) "Ordinarily resident in Hong Kong" is not defined in the Inland Revenue Ordinance (IRO). The Inland Revenue Department (IRD) handles the relevant cases according to general legal principles.
In deciding whether dependent parents/grandparents are ordinarily resident in Hong Kong, the IRD will consider their social and economic ties with Hong Kong. Objective factors for consideration include:
(1) the number of days they stay in Hong Kong;
(2) whether they have a fixed abode in Hong Kong;
(3) whether they own properties overseas for residential purpose;
(4) whether they have a job or carry on business in Hong Kong or overseas; and
(5) whether their principal family members reside in Hong Kong or overseas.
Generally speaking, dependent parents/grandparents who reside overseas on a long-term basis and stay in Hong Kong for a limited number of days for visiting relatives only will not be regarded by the IRD as ordinarily resident in Hong Kong even if they are holders of Hong Kong Permanent ID Cards.
(b) According to the existing IRO, the definitions of parents and grandparents are rather broad. Apart from the natural father/mother of a taxpayer or his/her spouse (including deceased spouse), the step parents and adopted parents are also included in the definition of parents. As for the definition of grandparents, it includes natural grandparents, adoptive grandparents and step grandparents. In other words, a taxpayer can claim dependent parent/grandparent allowance in respect of a number of dependants. If the requirement of "ordinarily resident in Hong Kong " is waived, that means a taxpayer can claim allowance in respect of any dependent parent/grandparent living overseas. It would be very difficult to verify the relationship between the taxpayer and the dependant, whether the dependant has been maintained by the taxpayer, whether there are more than one taxpayer claiming the allowance in respect of the same dependant, and whether the dependant is still alive. As it would be difficult for the IRD to verify the authenticity of the information, the allowance might be subject to abuse, which would lead to a loss in tax revenue.
For the above reasons, we have no plan to waive the requirement that the dependants must be ordinarily residents in Hong Kong.
(c) If we allow the dependent parent/grandparent allowance in respect of the same dependant to be shared by two or more eligible claimants, verification of such claims will become more complicated and difficult. Therefore, we do not intend to change the requirement at present.
(d) In checking claims for such allowance, the IRD will require taxpayers who claim to be residing with their dependants to provide documents (such as monthly bank statements) in proof of the dependants' residential addresses. Taxpayers who claim to have contributed towards the maintenance of the dependants must set out details of their contributions to the maintenance. If necessary, the IRD may check the records of their bank accounts or verify from the circumstantial evidence the maintenance information provided by the taxpayers. Generally speaking, the IRD will not require taxpayers to submit the bills and receipts in respect of the daily expenses of their dependants.
The IRD will check the information provided by taxpayer against its computer records. In addition, the IRD will request other government departments such as the Immigration Department, Social Welfare Department and Housing Department to provide the relevant information so as to verify whether the information provided by taxpayer is correct.
To prevent abuse of the dependent parent and grandparent allowances, the IRD will review this checking method from time to time so that the checks will be conducted without being abused and causing any inconvenience to the public. We consider the existing practice reasonable.
Ends/Wednesday, June 7, 2006
Issued at HKT 11:55