This article is a friendly reminder to taxpayers who have individual tax filing obligations in Hong Kong.
On 2 May 2019, the Hong Kong Inland Revenue Department (“HK-IRD”) issued annual Individual Tax Returns (BIR 60) (“Tax Returns”) for the year of assessment 2018/19 to taxpayers for completion. Taxpayers are obliged to complete and file their Tax Returns to the HK-IRD within the stipulated deadline, irrespective of whether or not they had income earned during the year of assessment 2018/19.
Generally, the filing deadline of the Tax Returns is 3 June 2019. However, the deadline can be extended to a later date if the taxpayers:
- appoint an authorised tax representative to handle their tax return filing;
- have a sole-proprietorship business in Hong Kong; and/or
- file their Tax Returns electronically.
Please be aware that the HK-IRD may impose penalties and/or take prosecution actions against taxpayers who fail to file their Tax Returns by the due date.
Some Tips for Tax Return Filing
Performing individual tax return filing sometimes may not be simple as one may think. One has to note that completion of the Tax Returns incorrectly may potentially result into penal actions taken by the HK-IRD. On the other hand, if certain natures of remunerations, such as housing benefits, are structured properly, one may be able to enjoy tax beneficial treatments. We have therefore included some tips below which may be relevant and helpful for your tax return filing.
(i) Housing benefits
Housing benefits received by employees from their employers are generally subject to Hong Kong salaries tax unless an offshore/exemption claim on their employment income is allowed by the HK-IRD. Please note that in case employees are provided by their employers with a rent-free or rent-subsidised residence, instead of cash allowance, the taxable housing benefits will be calculated on a deemed basis (i.e. at a certain percent of the employees’ taxable employment income), which is usually more tax beneficial when compared to the scenario where the housing benefits are provided in the form of cash allowance (of which the taxable housing benefits will be the actual amount received).
Taxpayers are therefore advised to review the nature of the housing benefits, if any, offered by their employers and assess whether they are qualified for any tax beneficial treatments.
(ii) Share-related benefits
Share-related benefits, such as share options and share awards, received by employees from their employers are also generally regarded by the HK-IRD as income arising from employment, and hence liable to Hong Kong salaries tax.
There are certain tax issues in connection with the share-related benefits, such as timing and amount of the benefits being taxed, which are usually not straight forward. In particular, it is necessary to look at, amongst others, the share benefit schemes of the employers and the source of the employees’ employment when determining the tax consequences of the share-related benefits.
One of the scenarios is that the share options were granted to an employee when he/she was under a non-Hong Kong employment while the share options were subsequently vested and exercised by the employee when he/she was under a Hong Kong employment, under which part of the share-related benefits would potentially be not taxable in Hong Kong.
(iii) Tax exemption claim on employment income
Taxpayers are eligible to lodge a full or partial tax exemption claim on their employment income (e.g. 60-days exemption claim, time apportionment claim) if certain conditions are satisfied. Please be aware that the source of an employment of an employee is usually relevant when determining the eligibility of his/her tax exemption claim, and it is often not straight forward to determine the source of an employment. It is recommended to have the employment planned and structured well in advance in order to strengthen the claim of a non-Hong Kong sourced employment.
(iv) Tax deductions and allowances
Taxpayers may claim tax deductions and allowances subject to a deduction limit and provided that the eligible criteria can be met. Proper tax planning may therefore be necessary in order to maximise the tax deduction and allowance claimed.
(v) Qualifying premiums paid under a Voluntary Health Insurance Scheme (“VHIS”)
Starting from 1 April 2019, taxpayers are eligible to claim tax deduction for qualifying premiums paid under a VHIS for more than one insured person. Taxpayers can fill in the relevant particulars in their 2018/19 Tax Returns so that the HK-IRD can compute the 2019/20 provisional salaries tax accordingly. The ceiling for tax deduction is HKD 8,000 per insured person. The ceiling for total tax deduction is HKD 16,000 (capped at HKD 8,000 for the taxpayers themselves, HKD 6,000 and HKD 2,000 for his/her spouse and child respectively).
To conclude, Hong Kong individual tax return filings are not always a straight forward process. The above are only a few issues which may be relevant to your tax return filing. It is suggested to seek proper advice to ensure that the information provided in your Tax Return is accurate and complete so as to avoid any potential penalties and/or prosecutions for incorrect filing. Should you have any questions or difficulties with your tax return filing, please contact HKWJ Tax Law & Partners Limited by email at firstname.lastname@example.org or by telephone at +852 2804 0889 for assistance.