Tax obligations in Hong Kong can be quite puzzling, especially for persons with many sources of income. One of the possible ways to simplify your responsibilities concerning taxes is personal assessment. This blog will guide you how personal assessment computation, who is eligible, advantages, and the application process.
What is Personal Assessment?
Personal assessment permits you to mix your assets of profits for the reason of calculating your tax liability. Income from homes, salaries, and agencies is blended to offer your overall taxable earnings, which can then be reduced by allowances and deductions.
This is an attractive option if your combined tax liability is less than the separate tax assessments
Eligibility for Personal Assessment in Hong Kong
To qualify for personal assessment, you must meet the following criteria:
- Be a resident of Hong Kong and at least 18 years old.
- Have assessable income from property, employment, or business in Hong Kong.
- File your tax return before deadline.
How Personal Assessment Computation Works
The process for personal assessment computation includes the following major steps:
- Aggregation of Income
Sum up all your assessable incomes, such as:
- Property income, including rental income
- Salaries income
- Profits from sole proprietorships
- Deductions and Allowances
Apply allowable deductions, including:
- Approved charitable donations
- Home loan interest
- Elderly residential care expenses
- Application of Tax Rate
Tax is calculated on the basis of either progressive rates or a standard rate. IRD grants the option yielding a lower liability.
Advantages of Electing Personal Assessment
Here’s why you may want to elect for personal assessment:
Lower tax liability: More often than not, a consolidation yields lower taxes than that from separate taxation.
Take advantage of Deductions: Make use of those deductions that might not be possible under different heads of tax.
Flexible Joint Assessment: Husband and wife can apply for joint assessment to achieve the maximum tax benefits.
How to Apply for Personal Assessment
To apply for personal assessment, follow the following process:
File a Tax Return: File your annual tax return using the IRD‘s e-Tax system or paper form.
Indicate Your Choice: Indicate your choice by ticking in the box provided for personal assessment on the form.
Submit Supporting Documents: Submit supporting papers of income, allowable deduction, and declarations.
Example of Personal Assessment Computation
Here’s an example:
Assume:
Rental income: HKD 200,000
Salaries income: HKD 300,000
Deductible expenses: HKD 50,000
Steps:
Aggregate income: HKD 200,000 + HKD 300,000 = HKD 500,000
Apply deductions: HKD 500,000 – HKD 50,000 = HKD 450,000
Compute tax using progressive rates or standard rate.
Frequently Asked Questions
- Is personal assessment compulsory?
No, it is optional and should only be opted for if it will benefit your tax position.
- Can I switch back to separate taxation after opting for personal assessment?
Yes, you can revoke your choice before IRD issue the final assessment.
- What is the deadline for applying for personal assessment?
You must apply within the tax filing deadline for the relevant assessment year.
Get Help from Professionals
Hong Kong provides personal assessment as a convenient and probably less expensive option in computing one’s annual taxes, provided the certain requirements are met. Consolidate your income and maximize the deductions to have better control over your taxes.
Consult with Fastlane HR for extra particular data personal assessment and tax planning in Hong Kong.