Unlike many other countries, tax is not automatically deducted from your salary in Hong Kong. The tax year runs from April 1 to March 31, and returns are typically sent out in May. Individuals are given one month to file these with the Inland Revenue Department, and bills need to be settled between December and March the following year to avoid a penalty. It’s not the most exciting of conversations, but it is one that can cause some serious confusion – so much so that entire careers have been forged in helping people untangle their own messes. Save yourself the trouble and find out all you need to know right here.
I’m newly self-employed, does this change the way I file a tax return?
Yes. If you are self-employed, you will need to notify the Inland Revenue Department of your earnings in writing. Business owners are required to keep records dating back at least seven years.
I’m married, are my spouse and I required to file a joint tax return?
You can choose to file separate taxes and to be assessed as individuals or to file for joint assessment. With a joint assessment, you will only receive one bill (typically addressed to the higher earner), but if you choose to file for a joint assessment, you can also benefit from a married persons allowance.
Why is my first bill so big?
You can be taxed the full amount for the year that has recently passed, and also be asked to pay a provisional amount for the tax year ahead. But while this can be a blow to your savings, it does mean that the following bill will be significantly lower.
How much of my income should I set aside?
Luckily, income tax is low in Hong Kong (capped at 17 percent), but that doesn’t mean you shouldn’t set aside some money in advance. The IRD has an online tax calculator to help provide a rough estimate of your bill, and you can use this to plan how to save accordingly for the year ahead.
I wasn’t employed for the entire tax year. Do I still need to pay?
If you made more than $132,000 (the basic allowance for individuals) between April 1, 2018 and March 31, 2019 – no matter what duration you were employed – you will be required to pay income tax. If you started work after April 1, you will be taxed based on your actual earnings during the tax year.
I missed the deadline to file my return. What happens now?
If there are extenuating circumstances, you can request an extension and file your return at an agreed upon date with the Inland Revenue Department. Under section 80(2) of the Inland Revenue Ordinance, any person found to make an incorrect return or who fails to submit their return in time (without written consent from the IRD) is liable to a fine of $10,000, and payments of up to treble the original taxable amount.
What receipts should I be keeping?
Keep receipts of anything you intend to claim as tax-deductible, from charitable donations, rent receipts from your landlord, education expenses such as language courses, and more. It’s also advisable to keep copies of previous tax bills, which you will need if you apply for permanent residency.
I’ve noticed a mistake, but the forms have already been submitted. What do I do?
You can inform the Inland Revenue Department of any errors or provide them with additional information in writing or through the eTax system (only accessible to existing taxpayers). Failure to report an incorrect statement can result in financial penalties, so it’s always wise to double check your form.
What tax breaks can I take advantage of?
Luckily for Hongkongers, there are several generous tax breaks and deductions to take advantage of. All taxpayers are entitled to a basic allowance and deductions for any money attributed to the Mandatory Provident Fund (MPF), while there are also married persons allowances and exemptions for elderly residential care costs. You can also declare any charitable donations and self-education expenses as deductions. The IRD website provides a list of all deductibles.
I didn’t save for this. What are my options?
You can opt to settle your bill in instalments, but a surcharge of up to five percent may be applied. This can increase to up to 10 percent if the bill is not settled within six months of the due date. Several banks also offer personal tax loans and repayment programmes.
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