This report covers several tax measures impacting individuals and their employers in the recently released Hong Kong Budget.
The Hong Kong financial secretary announced a large estimated fiscal surplus in his Budget speech on Wednesday, 28 February 2018.1 This large surplus enabled him to propose a number of measures aimed at reducing the tax burden on individuals.
With respect to Salaries Tax – which is charged on income arising in or derived from Hong Kong from an office or employment or a pension – these measures include a one-off reduction, increases in several personal allowances, and the widening and adjusting of the progressive rate bands. The Financial Secretary also provided details of the deduction for medical contributions mentioned in last year’s Budget.2
For a full analysis of the Budget see “Hong Kong Budget Summary 2018-2019,” a publication of the KPMG International member firm in Hong Kong. Also visit the Hong Kong member firm’s dedicated Budget site.
The proposed relief measures for 2018-19 and the tax reduction for 2017-18 will reduce the tax payable by employees in Hong Kong. This could mean lower international assignment costs for employers.
The proposals may necessitate adjustments to tax equalisation and tax protection calculations for 2017-18 and estimates for 2018-19.
International assignment cost projections and budgets for assignments to and from Hong Kong may need to be reconsidered in light of the changes in the budget, once they come into effect.
The Financial Secretary has proposed a one-off reduction of 75 percent of Salaries Tax (and tax under personal assessment) for 2017-18, subject to a ceiling of HKD 30,000. The reduction will be reflected in the final tax payable for 2017-18.
The tax charge for 2017-18 and 2018-19 is the lower of the:
|First HKD 45,000||2%||900||First HKD 50,000||2%||1,000|
|Next HKD 45,000||7%||3,150||Next HKD 50,000||6%||3,000|
|Next HKD 45,000||12%||5,400||Next HKD 50,000||10%||5,000|
|Balance||17%||Next HKD 50,000||14%||7,000|
[HKD 1 = EUR 0.104 | HKD 1 = USD 0.1275 | HKD 1 = GBP 0.0916]
The standard rate of Salaries Tax for 2017-18 and 2018-19 is 15 percent.
The Financial Secretary proposed increases to the child allowance and to the dependent parent / grandparent allowances. He also proposed introducing a personal disability allowance for eligible taxpayers. Personal allowances are considered when calculating the tax payable at the progressive rates.
The personal allowances for 2017-18 and 2018-19 are set out below:
|2017-18 HKD||2018-19 HKD|
|Child allowance||1st to 9th child (each)|
|Year of birth||200,000||240,000|
|Dependent parent / grandparent allowance||Aged 60 or over||46,000||50,000|
|Aged 55 to 59||23,000||25,000|
|Additional dependent parent / grandparent allowance||Aged 60 or over||46,000||50,000|
|Aged 55 to 59||23,000||25,000|
|Disabled dependant (spouse / child / parent / grandparent / brother / sister) allowance||75,000||75,000|
|Dependent brother / sister allowance||37,500||37,500|
Applying the above Salaries Tax rates and allowances, a family of four would have to earn more than HKD 5,184,000 in 2018-19 before paying tax at the standard rate.
The following items are deductible in determining a person’s liability to Salaries Tax:
Legislative proposals do not generally become law until their enactment and may be modified by the Legislative Council before enactment.
1 For the text of the budget speech (in English), and related documentation and videos, click here.
2 For coverage of last year’s budget, see GMS Flash Alert 2017-046 (8 March 2017).
The information contained in this newsletter was submitted by the KPMG International member firm in Hong Kong.
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