Tax measures proposed in 2018-19 Budget
In his Budget delivered today (February 28), the Financial Secretary proposed a number of tax measures.
The tax reduction will reduce the amount of tax payable by taxpayers for the year of assessment 2017-18. Taxpayers should file their profits tax returns and tax returns for individuals for the year of assessment 2017-18, to be issued in the coming April and May respectively, as usual. Upon enactment of the relevant legislation, the Inland Revenue Department will effect the reduction in the final assessment. We expect that the tax bills, with the reduction duly reflected, will be issued starting from about late July 2018. As usual, profits tax and personal assessment bills will fall due starting from November this year, and salaries tax in January 2019.
The proposed tax reduction will only be applicable to the final tax for the year of assessment 2017-18, but not to the provisional tax of the same year. Therefore, despite the proposed reduction, taxpayers are still required to pay the provisional tax on time as stipulated in the demand notes that have been issued to them. In accordance with the Inland Revenue Ordinance, the provisional tax paid will be applied in payment of the final tax for the year of assessment 2017-18 and provisional tax for the year of assessment 2018-19. Excess balance, if any, will be refunded.
The proposed tax reduction is not applicable to property tax. Nevertheless, individuals with rental income, if eligible for personal assessment, may be able to enjoy such reduction under personal assessment.
For taxpayers electing for personal assessment, the reduction will be based on their tax payable under personal assessment. It might be different from the amount of reduction they would get if they were not assessed under personal assessment. The exact position will need to be evaluated case by case. Individuals with business or rental income may elect for personal assessment in their tax returns for the year of assessment 2017-18. The department will check if the election will reduce the amount of tax payable in each case, and assess each taxpayer in the way most advantageous to him/her.
In addition to the one-off tax reduction, the Financial Secretary proposed to widen and increase the number of the tax bands and adjust the marginal tax rates for salaries tax; introduce a personal disability allowance; increase the basic and additional child allowances; increase the dependent parent/grandparent allowance and additional allowance; and raise the deduction ceiling for elderly residential care expenses. Furthermore, it is proposed to remove the current restriction and allow husband and wife the option to decide whether to elect for personal assessment separately. These measures will be effective from the year of assessment 2018-19 upon enactment of the relevant legislation.
The Financial Secretary also proposed to provide a tax deduction for people who purchase eligible health insurance products for themselves or their dependants under the Voluntary Health Insurance Scheme. This measure will be implemented from the year of assessment following the passage of the relevant legislative amendments.
On profits tax, the Government will amend the qualifying debt instrument scheme to increase the types of qualified instruments. In addition to instruments lodged and cleared by the Central Moneymarkets Unit of the Hong Kong Monetary Authority, debt securities listed on the Hong Kong Stock Exchange will also become eligible. The Government will also extend the scope of tax exemption from debt instruments with an original maturity of not less than seven years to instruments of any duration. Separately, the Government will enhance tax concessions for capital expenditure incurred by enterprises in procuring eligible efficient building installations and renewable energy devices by allowing tax deduction to be claimed in full in one year instead of the current time frame of five years.
The above proposed tax measures will be effected by amending the Inland Revenue Ordinance. Details of the proposals and examples of tax calculations are available on the website of the Inland Revenue Department (www.ird.gov.hk) for the public's reference. They can also be obtained through fax hotline 2598 6001.
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