PRESS RELEASE

(Source : Information Services Department)

     Following is a question by the Hon Edmund Wong and a written reply by the Secretary for Financial Services and the Treasury, Mr Christopher Hui, in the Legislative Council today (April 16):
 
Question:
 
     Under the Inland Revenue Ordinance (Cap. 112), an individual who is either ordinarily resident in Hong Kong or a temporary resident may elect for personal assessment on the individual's income, thereby becoming eligible for the basic personal allowance and other related tax concessions (personal tax concessions). However, there are views that such tax policy has rendered certain elderly people who have moved to reside in the Mainland for retirement and rely solely on rental income from letting properties in Hong Kong for their livelihood not being eligible for personal tax concessions. This, to a certain extent, deviates from the Government's policy direction of encouraging elderly people to retire in the Mainland. In this connection, will the Government inform this Council:
 
(1) whether, in the past three years, the Inland Revenue Department has received enquiries or requests for assistance from retired elderly people who have moved to reside in the Mainland and rely solely on rental income from letting properties in Hong Kong for their livelihood due to their ineligibility for personal tax concessions; if so, of the number of such cases, as well as the highest and average amounts of tax involved in such cases;
 
(2) whether the authorities will consider introducing property tax relief measures for elderly people who have no income other than rental income from letting properties in Hong Kong and have moved to reside in the Mainland; and
 
(3) whether the authorities will comprehensively review the tax and cash welfare policies for the elderly and, on the premise of preventing abuse, allow those elderly people who choose to retire in the Mainland to enjoy essentially the same tax and cash welfare policies as those retiring in Hong Kong, so as to prevent tax policies from deviating from the policy direction of encouraging elderly people to retire in the Mainland, and to help promote retirement in the Mainland among elderly people; if so, of the details; if not, the reasons for that?

Reply:
 
President,
 
     Hong Kong has all along adopted a territorial source principle in the collection of profits tax, salaries tax, and property tax. At the same time, the Inland Revenue Ordinance provides for several allowances, deduction items and reliefs. Different eligibility criteria have been established for them, including territorial restriction for taxpayers, to meet their policy intents and to address the risk of abuse during implementation.
 
     Personal assessment is a tax relief arrangement under the Inland Revenue Ordinance. It allows proprietors or partners who operate a business to earn profits, as well as property owners who rent out properties to earn rental income to claim the deductions under salaries tax and calculate their tax amount at the progressive rates of salaries tax, thereby reducing their tax liability. One of the conditions for electing personal assessment is that the individual must be either "ordinarily resident in Hong Kong" or a "temporary resident". If an individual is "ordinarily resident in Hong Kong", it means that he/she resides in Hong Kong voluntarily and for a settled purpose (such as for education, business, employment or family etc.) with sufficient degree of continuity. A "temporary resident" means an individual who stays in Hong Kong for a period or a number of periods amounting to more than 180 days during the year of assessment for which the election is made, or for a period or periods amounting to more than 300 days in two consecutive years of assessment, one of which is the year of assessment for which the election is made.
 
     Having consulted the Labour and Welfare Bureau, the replies to the questions raised by the Hon Edmund Wong are as follows:
 
(1) The Inland Revenue Department handles a large number of inquiries from taxpayers regarding tax assessments, deductions, allowances, etc. through various channels such as telephone, email, mail, and counter services every year. They do not keep records by the types of inquiries.
 
(2) and (3) The inclusion of the condition of being "ordinarily resident in Hong Kong" or a "temporary resident" under personal assessment is in line with Hong Kong's territorial source principle of taxation. If such condition is relaxed to cover elderly persons who have relocated to the Mainland and have no income other than the rental income from Hong Kong properties, it would be difficult for the Inland Revenue Department to verify the information on their residence and income in the Mainland, and thus to ascertain their eligibility. It could easily lead to abuse of the relief measure. For the same reason, the Government has no plan to introduce property tax relief for these elderly persons.
 
     The Government has put in place portable arrangements for all cash assistance schemes targeting Hong Kong elderly persons. The arrangements facilitate Hong Kong elderly persons' retirement in Guangdong and Fujian Provinces. The relevant arrangements cover the Old Age Allowance for Hong Kong elderly persons aged 70 or above; the Old Age Living Allowance for Hong Kong elderly persons aged 65 or above in need of financial assistance; and the Portable Comprehensive Social Security Assistance Scheme which provides cash assistance to Hong Kong elderly persons who cannot support themselves financially.