Tax deductions can be a puzzle, especially with benefits like Hong Kong’s Voluntary Health Insurance Scheme (VHIS). And as an employer, are you aware of how VHIS can improve the health of your employees and how your HR processes can help with such essential deductions? This guide aims to simplify the VHIS tax deduction.
We will tell you what it is, who can take advantage of it, and how to claim it.
Most importantly, we will tell you how FastLane HR’s HR services can assist you in utilizing this scheme effectively for your company and your employees. This will make you compliant and efficient in your work.
Understanding the VHIS Tax Deduction: The Basics for Employees and Employers
The Hong Kong government launched the Voluntary Health Insurance Scheme (VHIS) in a bid to persuade people to use private medical services and reduce the burden on public hospitals. Among the finest benefits to individuals is the significant tax relief provided.
What Qualifies for Deduction?
You can offset taxes paid on premiums for Certified Plans under VHIS only. These include both Standard Plans and Flexi Plans with some government stipulations. It should be noted that you cannot offset premiums for medical insurance policies that are not VHIS.
Who is Eligible?
You can claim the VHIS tax deduction if:
The policyholder himself.
Their spouse (if not divorced).
It matters to families that the policyholder or their spouse can also receive deductions for premiums paid for their respective relatives. These are the children, parents, grandparents, and siblings. These relatives have to fulfill some conditions to qualify, such as being less than 18 years old or a full-time student, or a parent/grandparent who is at least 55 years old, or qualifies for a disability allowance.
Deduction Limit:
There is a generous annual maximum of HK$8,000 for each covered individual. The silver lining is that there is no upper limit on the number of specific relatives that a taxpayer may claim, so one taxpayer might be able to claim several HK$8,000 allowances for his or her relatives.
How the Deduction Works (Simplified):
The VHIS tax deduction lowers your taxable income that is chargeable to Salaries Tax. For each dollar of VHIS premiums paid by you (subject to a limit of HK$8,000 per individual), your taxable income is reduced, so you have less tax to pay.
The Benefits of VHIS to Employees' Health (Beyond Tax Relief)
The VHIS tax deduction is a straightforward financial benefit, but the scheme provides even more. It plays a substantial role in employee well-being and renders your employee benefits package in Hong Kong more appealing.
Enhanced Medical Protection: VHIS provides cover for a broad spectrum of hospitalization and surgical expenses in private health establishments, offering workers greater choice and quicker access to medical treatment.
Guaranteed Renewal: Unlike some private medical plans, VHIS Certified Plans have guaranteed renewal up to 100 years of age. This offers long-term protection and peace of mind for employees and their dependents when it comes to future medical costs.
Pre-existing Condition Coverage: VHIS plans cover certain pre-existing medical conditions after a waiting period. This is a big benefit for the majority of people who may find it difficult to get affordable insurance.
Less Stress: Being able to receive good health care at lower costs reduces anxiety for employees and their families. They can focus more on their work and lives.
As an employer, actively promoting and informing your staff about VHIS shows how concerned you are about their health and financial well-being.
How to Claim the VHIS Tax Deduction (A Step-by-Step Guide)
It is straightforward to get the VHIS tax deduction, though attention to detail is necessary for VHIS regulations.
- Gathering Required Documents:
The most important document is your VHIS premium receipt or yearly statement from your VHIS insurer. The statement will specify the total VHIS premiums you have paid in the year of assessment. You do not usually have to file these documents together with your tax return, but you should keep them for at least six years in case you need them in future or the Inland Revenue Department (IRD) asks for them.
- Submission of the Tax Form – Individuals (BIR60):
In your personal tax return (BIR60 form), there’s a box to complete “Approved annuities and deferred annuity premiums / Qualifying deferred annuity premiums / VHIS premiums.” Just put the total amount of qualifying VHIS premiums you’ve paid for yourself and your dependants in the appropriate box. Keep in mind that there’s a limit of HK$8,000 per insured person.
Key Considerations
Payment Timelines: Secure premium payment within the correct assessment year (i.e., for the 2024/25 assessment year, premium payment must be made on or before March 31, 2025).
Married Couples: When both partners are taxpayers, they must decide between them who claims what. A premium can only be claimed by one partner, even if it’s for more than one designated family member.
Refunds after Deduction: If you are refunded premiums after a deduction in a prior year, you will need to notify the IRD.
Common Pitfalls to Avoid
You are only entitled to claim premiums on plans that are VHIS-certified.
Exceeding the HK$8,000 threshold: Keep in mind the threshold for each individual, regardless of the actual premium expense.
Not Keeping Records: Retain your premium statements at all times for audit purposes.
HR Role in Facilitating VHIS Tax Deductions
For employers, knowledge of the VHIS tax deduction is not only for helping individual employees; it is also for good HR practice and tax compliance. Your HR department has a critical role in enabling employees to access and know these benefits without any difficulty.
Why HR Needs to Know VHIS:
Answering Employee Inquiries: HR is usually the first point of contact that employees go to with inquiries about benefits and tax issues.
Promoting VHIS: By explaining the benefits of VHIS clearly, HR can help increase employee interest in the benefits the company offers or supports.
Ensuring Internal Policies Assist with Claims: HR can assist employees in obtaining their premium payment records without difficulty when they need them for tax filings.
How HR Services by FastLane HR Can Help Your Company
Managing benefits and tax compliance doesn’t have to be a burden. FastLane HR supports companies in:
- Integrating VHIS into your employee benefits strategy
- Providing compliance-ready payroll and tax documents
- Educating staff on claim procedures and benefits
- Automating e-filing and HR workflows for efficiency
- Our all-in-one HR solution ensures your team focuses on business growth, not paperwork.
Conclusion
The VHIS tax deduction is a great opportunity for individuals to save on taxes while obtaining quality healthcare coverage. For employers, learning about and promoting VHIS is a simple but powerful step towards healthier employees and competitive benefits. Don’t get tax deductions or staff benefits mixed up.
FastLane HR simplifies these processes for you with our full HR services, so you’re always playing by the rules, being efficient, and having a more supported and engaged team.