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2018-19 Budget – Tax Measures
In his 2018-19 Budget, the Financial Secretary proposed a number of tax measures. The relevant legislation for the following tax measures was passed and gazetted:
- Reducing profits tax, salaries tax and tax under personal assessment for the year of assessment 2017/18
- Adjusting the tax bands and marginal tax rates
- Increasing allowances and introducing a personal disability allowance
- Raising the deduction ceiling for elderly residential care expenses
- Relaxing the requirement for election of Personal Assessment by married persons
- Introducing a tax deduction of qualified premium for eligible health insurance products under the Voluntary Health Insurance Scheme
- Tax concessions under Profits Tax
Highlights of the measures and implementation details are set out in the following paragraphs. Answers to frequently asked questions (FAQ) and illustrative examples showing how the above measures would reduce taxpayers' salaries tax and tax under personal assessment are also provided.
You may use the Tax Calculator provided by GovHK to calculate your salaries tax and tax under personal assessment.
Reducing profits tax, salaries tax and tax under personal assessment for the year of assessment 2017/18
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.
For profits tax, the ceiling of the tax reduction is applied to each business. For salaries tax, the ceiling is applied to each individual taxpayer; but for couples jointly assessed, the ceiling is applied to each couple. For personal assessment, single taxpayers will each be subject to the ceiling. Married couples must make their personal assessment election together and the ceiling will therefore apply to each couple.
The tax reduction is not applicable to property tax. Individuals with rental income, if eligible for personal assessment, may be able to enjoy such reduction under personal assessment.
A taxpayer who is separately chargeable to salaries tax and profits tax can enjoy tax reduction under each of the tax types. For a taxpayer having business profits or rental income and electing for personal assessment, the reduction will be based on the tax payable under personal assessment. It might be different from the amount of tax reduction he would get if he was not assessed under personal assessment. The exact position will need to be evaluated case by case. The Inland Revenue Department will check if the election will reduce the amount of tax payable in each case, and assess each taxpayer in the way most advantageous to him.
To apply for personal assessment, if eligible, the taxpayer should complete Part 6 of his tax return for individuals (BIR60) for the year of assessment 2017/18. Individuals having salaries income only, but no business profits and rental income, need not elect for personal assessment.
The reduction will reduce the amount of tax payable by taxpayers for the year of assessment 2017/18. Taxpayers should file their profits tax returns and tax returns for individuals for the year of assessment 2017/18 as usual. The Inland Revenue Department will effect the reduction in the final assessment. For any final assessment for 2017/18 issued before the enactment of the law, the Inland Revenue Department will make a reassessment. It is expected that the revised assessments, with the reduction duly reflected, will be issued starting from late July 2018. Taxpayers are not required to make any applications or enquiries to the Department.
The tax reduction will only be applicable to the final tax for the year of assessment 2017/18, but not to the provisional tax of the same year. The provisional tax paid will be applied to pay the final tax for the year of assessment 2017/18 and the provisional tax for the year of assessment 2018/19. Excess balance, if any, will be refunded.
Adjusting the tax bands and marginal tax rates
The width of tax bands is widened from $45,000 to $50,000 and the number of tax bands is increased from 4 to 5 with marginal tax rates of 2%, 6%, 10%, 14% and 17% commencing from the year of assessment 2018/19. Details are shown in the table below:
| 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% | ||
#Until superseded
Increasing allowances and introducing a personal disability allowance
The allowances are increased and a personal disability allowance is introduced commencing from the year of assessment 2018/19 with details as follows:
| 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 | |
| Personal Disability Allowance | Not applicable | 75,000 | |
#until superseded
Raising the deduction ceiling for elderly residential care expenses
The deduction ceiling for elderly residential care expenses is raised from $92,000 to $100,000 effective from the year of assessment 2018/19.
Relaxing the requirement for election of Personal Assessment by married persons
Commencing 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.
Introducing a tax deduction of qualified premium for eligible health insurance products under the Voluntary Health Insurance Scheme
From the year of assessment 2019/20, qualified premium paid for eligible health insurance products under the Voluntary Health Insurance Scheme are tax deductible. The annual tax ceiling of premium for tax deduction is $8,000 per insured person.
Implementation details relating to changes of tax bands and marginal tax rates, increasing allowances, raising deduction ceiling and introducing personal disability allowance for the year of assessment 2018/19
The Inland Revenue Department will automatically apply the new level of allowances and the new tax bands and marginal tax rates in calculating the 2018/19 provisional salaries tax. Taxpayers are only required to complete their tax returns for the year 2017/18 and they do not need to make separate applications. As for the raised deduction ceiling for elderly residential care expenses, please refer to FAQ 9 and 10 and Example 3 for the arrangement. As for the newly introduced personal disability allowance, please refer to FAQ 14 and 15 and Example 2 for the arrangement.
Tax concessions under Profits Tax
On profits tax, the types of qualified instruments under the qualifying debt instrument scheme are increased. In addition to instruments lodged and cleared by the Central Moneymarkets Unit of the Hong Kong Monetary Authority, debt securities listed on the Hong Kong Stock Exchange are now also eligible. The scope of tax exemption is also extended from debt instruments with an original maturity of not less than seven years to instruments of any duration. Separately, commencing from the year of assessment 2018/19, capital expenditure incurred by enterprises in procuring eligible efficient building installations and renewable energy devices are allowed for tax deduction in full in one year.