In his 2020-21 Budget, the Financial Secretary proposed the following concessionary measures, all of which require legislative amendments before implementation.
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 proposed measures would reduce taxpayers’ salaries tax and tax under personal assessment are also provided.
You may use the Tax Calculator provided in GovHK to calculate your salaries tax and tax under personal assessment if the above proposals are implemented.
Reducing profits tax, salaries tax and tax under personal assessment for the year of assessment 2019/20
The Financial Secretary proposed a one-off reduction of profits tax, salaries tax and tax under personal assessment for the year of assessment 2019/20 by 100%, subject to a ceiling of $20,000 per case. This measure will be effected by amending the Inland Revenue Ordinance.
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 married couples jointly assessed, the ceiling is applied to each married couple (i.e. capped at $20,000 in total). For personal assessment, the ceiling is applied to each single taxpayer or married person who elects for personal assessment separately from his/her spouse. If a taxpayer elects for personal assessment jointly with his/her spouse, the tax reduction is capped at $20,000 for the married couple.
The proposed 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/she would get if he/she was not assessed under personal assessment. The exact position will need to be evaluated case by case.
To apply for personal assessment, if eligible, the taxpayer should complete Part 7 of his/her tax return for individuals (BIR60) for the year of assessment 2019/20. Individuals having salaries income only, but no business profits and rental income, need not elect for personal assessment.
The proposed reduction will reduce taxpayers’ amount of tax payable for the year of assessment 2019/20. Taxpayers should file their profits tax returns and tax returns for individuals for the year of assessment 2019/20, as usual. Upon enactment of the relevant legislation, the Inland Revenue Department will effect the reduction in the final assessment. For any final assessment for 2019/20 issued before the enactment of the law, the Inland Revenue Department will make a reassessment after the enactment. Taxpayers are not required to make any applications or enquiries to the Department.
The proposed tax reduction will only be applicable to the final tax for the year of assessment 2019/20, but not to the provisional tax of the same year. Therefore, taxpayers are still required to pay their provisional tax on time despite the proposed reduction. The provisional tax paid will be applied to pay the final tax for the year of assessment 2019/20 and the provisional tax for the year of assessment 2020/21. Excess balance, if any, will be refunded.
Waiving business registration fees for 2020-21
The Financial Secretary proposed to waive business registration fees for the year 2020-21.