The tax system in Hong Kong is territorial, which means that you pay tax on the income that you receive in Hong Kong. The income in employment, offices as well as pensions is subjected to salaries tax which is among the biggest personal taxes in the city.
To bring the system more on par, the Inland Revenue Department (IRD) provides a number of salary tax allowances that can reduce your taxable income. If you are a business owner, employee, or expatriate in Hong Kong, this blog can give accurate answers for your questions.
What are Salary Tax Allowances?
Allowances on salaries tax allowances are allowances that will diminish the amount of income which is subject to the salaries tax. The IRD does not tax all your earnings, rather it offers some exemptions or allowances based on the personal situations like in the event that you are married, have dependents or your education expenses.
This system makes sure that the tax payers are not overworked, especially the ones with family or dependent obligations.
Can Salary Tax Allowances in Hong Kong Be Claimed?
These allowances can be claimed by both local and foreign workers, but the income obtained by either group is compensated by their jobs in Hong Kong.
To qualify:
- You have to be a tax resident or be under a Hong Kong employment contract.
- Your revenue should be earned within or in Hong Kong.
It is also applicable to foreign workers who work in Hong Kong most of their time (60+ days per year) as they have a chance to receive some of the allowances.
Frequently Claimed Salary Tax Allowances
We will discuss the major allowances that can be sourced out by individuals in Hong Kong in the coming 2024/25 assessment year.
- Basic Allowance
Basic allowance is allowed to every taxpayer.
- Amount: HKD 132,000 per year
- It implies that your initial HKD 132,000 of earnings is free of taxation.
- Married Person’s Allowance
You can claim the Married Person allowance in case you are married and your spouse does not enjoy chargeable income.
- Amount: HKD 264,000 per year
- You have to be married all through the year of assessment, and not apart.
- Child Allowance
The allowance of each child can be claimed by parents or guardians.
- Value: HKD 130,000 per child (and another HKD 130,000 during the year of birth)
- Claiming is limited to one parent.
- Dependent Parent or Grandparent Allowance
You are entitled to this in case you are supporting a parent or grandparent who is:
- 60 or older or under 60 years old, but disabled, and
- Normally has his residence in Hong Kong.
Amount: HKD 50,000 each dependent parent/grandparent.
HKD 100,000 in case they are living with you throughout the whole year.
- Dependent Brother or Sister Allowance
Where you have a dependent sibling (less than 18, or less than 25 and in full-time education, or disabled):
- HKD 37500 per dependent sibling.
- Single Parent Allowance
This allowance can be availed by single parents who have at least one child and not married or living with a spouse.
Amount: HKD 132,000 per year
- Disabled Dependant Allowance
Taxpayers having a dependent (disabled child, parent, grandparent, sibling) are entitled to:
Value: HKD 75,000 per impaired dependent.
Other Deductions that cut Salary Tax
In addition to allowances, Hong Kong offers deductions that enable to further cut your taxable income. These include:
Mandatory Provident Fund (MPF) Contributions: HKD 18,000 /year
Self-Education Expenses: Up to HKD 100, 000
Charitable Contributions: Your assessable income to the extent of 35 percent.
Home Loan Interest: up to HKD 100,000 per annum (not more than 20 years).
Premiums of Voluntary Health Insurance Scheme (VHIS): As much as HKD 8,000 per insured individual.
Such deductions can be availed in addition to allowances to the maximum.
Claiming Salary Tax Allowances in Hongkong
These allowances are claimable when you are filling in your Individual Tax Return (Form IR56B / IR56E).
Here’s how:
- Eligibility of checks on all allowances.
- Gather paper work e.g. birth certificates, marriage certificates, proof of support or medical records of the disabled dependents.
- Fill in the online tax return using the eTAX website by the IRD.
- Jurisdictional, Submit prior to the due date (usually during early June each year).
FastLane HR would help to check and confirm your eligibility, fill in your forms properly and maximize deductions.
Some of The Most Frequent Mistakes That Taxpayers Make
A great number of people do not make any savings or pay penalties because of:
- Claiming on behalf of the non-resident dependents that fall outside the eligibility criteria.
- Redundant claims by both the spouses.
- Omission of supporting documentation of dependent or deduction claims.
- Failure to meet the deadline of filing tax.
The benefit of having a tax expert such as FastLane HR to do your claims is that they are valid and accurate and that they are optimized.
Why FastLane HR in Hong Kong as Tax Service provider?
The IRD system of taxing salary may be tedious to navigate particularly to expatriates or SME owners with many obligations to attend to.
At FastLane HR, the professional staff offers:
- Individual tax consultancy based on your business or employment arrangement.
- Full service salary tax filing and compliance.
- Advice on tax deductions and allowances that can be used to reduce liabilities.
- There should be efficient coordination between HR and accounting functions resulting in efficiency and precision.
We want to make you stay within the game, whilst ensuring that you benefit as much as possible in terms of tax deductions, save time and money.
Key Takeaways
Hong Kong has various salary tax allowances to the people and households.
- Claiming allowances due to you can save greatly on the taxable income.
- Both the local and foreign workers are beneficiaries when their income is generated in Hongkong.
By cooperating with FastLane HR, there is confidence that the taxes are going to be properly filed, and the highest tax exemption is going to be achieved.
Contact FastLane HR
Would you like to maximize your salary tax allowances in Hong Kong?
Allow the tax professionals of FastLane HR to file accurately and meticulously.
Get in touch and make an appointment to see how we can make your tax process less difficult.