Hong Kong to Return 75% of Salaries Tax to 1.5 Million Taxpayers

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Jun. 10 – The Hong Kong Legislative Council passed the Inland Revenue (Amendment) (No.3) Bill on June 8, confirming that individual taxpayers in Hong Kong will see a 75 percent deduction in salaries tax and tax under personal assessment payable for the year of assessment 2010/2011. The total reduction of each case will be subject to HK$6,000.

The new Bill, making amendments to the Inland Revenue Ordinance (Cap.112), aims to share more fortune with taxpayers, since the Hong Kong government’s fiscal conditions are better than expected, undersecretary for Financial Services and the Treasury Bureau Julia Leung Fung-yee says. The implementation of the new Bill will benefit around 1.5 million taxpayers in Hong Kong, but bring down the government’s tax revenue by around HK$5.3 billion.

In addition to reducing the salaries tax and tax under personal assessment payable for the year of assessment 2010/11 by 75 percent, the new Bill has also increased the maximum amount of elderly and children care expenses deductible from assessable income.

  • The maximum amount of elderly residential care expenses deductible from assessable income is increased from HK$60,000 to HK$72,000
  • The amounts of dependent parent allowance and additional dependent parent allowance granted in respect of a parent under Section 30(1A) of the Inland Revenue Ordinance (55 to 59 years old) are both increased from HK$15,000 to HK$18,000
  • The amounts of dependent grandparent allowance and additional dependent grandparent allowance granted in respect of a grandparent under Section 30A(1) of the Ordinance (60 years old and above) are increased from HK$30,000 to HK$36,000
  • The amounts of dependent grandparent allowance and additional dependent grandparent allowance granted in respect of a grandparent under Section 30A(1A) of the Ordinance (55 to 59 years old) are both increased from HK$15,000 to HK$18,000
  • The amount of child allowance granted in respect of a child is increased from HK$50,000 to HK$60,000, and the maximum amount of such allowances granted to a person is increased from HK$450,000 to HK$540,000
  • The amount of additional child allowance granted in respect of a child in the year of assessment in which the child is born is increased from HK$50,000 to HK$60,000, and the maximum amount of such allowances granted to a person is increased from HK$450,000 to HK$540,000

According to Leung, these increases, which take effect for the year of assessment 2011/12 and subsequent years of assessment, will reduce the annual revenue of the Hong Kong government by approximately HK$1.2 billion but will also lessen the burdens of around 710,000 taxpayers who need to take care of their parents, grandparents and children.

A recent commentary in the Shanghai-based Dongfang Daily points out the Hong Kong tax return shows a different perception of government-people relations from the mainland’s communist government. While the mainland believes a wealthier government which centralizes the national fortune will benefit its people better, Hong Kong attempts to return an appropriate portion of fortune to the masses. Hong Kong hopes to reduce their burdens, stimulate consumption, and achieve a win-win government-people relationship.

This article is also available on Dezan Shira & Associates’ online business resource library. To view the article, and other regulatory updates, please click here.

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