An instruction manual for tax return filing

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Look out for the green envelope from the Inland Revenue Department (IRD) requesting that you file your tax returns in the months of May and June. After the notification is issued, these returns must be filed within a month (a one-month extension will be granted automatically if the return is filed online). Even seasoned taxpayers, as well as newcomers to the job, could have worries about the paperwork and reporting due to the approaching deadline. Allow us to provide you with a quick overview of salaries tax and important considerations for submitting your return.

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The income tax on workers

Put simply, salary tax must be paid by those hired to fill jobs generated in Hong Kong or derived from it. The “letting value” of the housing supplied by employers, as well as the pensions received by retirees, commissions, bonuses, and discretionary awards that workers get, are all subject to taxation. Tax is only due on the amount remaining after certain deductions and exemptions are applied, assuming you qualify for them.

Most workers are subject to progressive tax rates

The amount of salary tax that must be paid is determined by either a standard rate (which is subject to deductions but not allowances) on the income you make during the tax year, which runs from April 1 to March 31 of the following year, or by progressive rates based on net total income (after deductions and allowances), whichever is lower.

The tax computed using the progressive tax rates is less than the normal rate for the vast majority of working people. Employee taxes are therefore often assessed at a progressive rate. High income individuals are often subject to the standard rate.

The tax return will be mailed by the IRD in May or June.

It is necessary for employers and workers to submit their assessments to the IRD independently. Employers are required to disclose the employee’s income and personal details to the IRD by submitting the Employer’s Return of Remuneration and Pensions. A copy of this report will be sent to you by your employer. Once you have the information, check it.

Employee tax returns are typically mailed out by the IRD in May or June. However, you can obtain the tax return later if you have recently entered the employment. You do not have to file your tax return or pay salary tax if your income is less than the allowable amounts. You must still file your return within the allotted time even if you get the tax return from the IRD. To save time and file your tax return online effortlessly, you can apply for the IRD’s eTax Account.

What costs are exempt from taxes?

The following are all deductible: costs associated with self-education, authorized charity contributions, required payments to recognized retirement plans, interest on home loans, costs associated with providing residential care for the elderly, qualifying premiums paid under policies covered by voluntary health insurance schemes, qualifying annuity premiums and tax-deductible MPF voluntary contributions, deductions for domestic rentals, etc. The papers do not have to be included to your tax return when you claim for the deductions; nevertheless, you must retain them for a minimum of six years in case the IRD requests that you present them.

Remember to submit your allowance claims.

You are entitled to a basic allowance for each tax year, which is provided immediately and doesn’t need to be claimed. Furthermore, you are eligible to receive family and dependant allowances. These include the allowance for a married person, a kid, a dependent brother or sister, a dependent parent, a dependent grandparent, a single parent, and a disabled dependent. It is not necessary for you to send the tax return and supporting documentation with the claim. But you should hold onto that proof in case it comes up for validation.

Reduction of taxes

Although the government has been granting tax reductions for the previous few years, they are not permanent measures.

Please refer to the allowances, deductions, and tax rate table released by the IRD for further information about tax reduction, deductions, and allowances.

Getting ready to pay your taxes

To find out how much you will have to pay, use the IRD’s Tax Calculator.

The Demand for Salaries Tax is typically released by the IRD in the second part of the year. Tax payments are often made in two installments: the first in January and the second in April.

You may use the Savings Goal Calculator to meet your savings goals and set aside a certain amount of money each month to help with tax preparation. An alternative is to employ tax reserve certificates issued by the government to accumulate funds for paying taxes.