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It is That Time of the Year – Filing of Hong Kong Individual Tax Returns 

Taxpayers in Hong Kong have tax filing obligations, and this will act as a reminder to them to do just that. Annual Individual Tax Returns were issued for assessment to taxpayers for completion by the Hong Kong Inland Revenue Department (HK-IRD) on May 2, 2019. Within a specified deadline, the taxpayers in Hong Kong are under obligation to complete and file their tax returns regardless of whether they earned income or not during the year of assessment, that is, 2018/19.

Filing Deadline

The filing deadline of the tax return is June 3, 2019, but the deadline can be extended further especially if:

  • Taxpayers appoint a representative to handle the filing of their returns
  • Taxpayer’s business is a sole proprietorship in Hong Kong
  • Taxpayers file their Returns electronically

The HK-IRD has authority to prosecute or penalize taxpayers who do not file returns within the stipulated deadline period.

Tips For Tax Return Filing

Sometimes when one may have trouble when they want to file their Hong Kong offshore tax returns. Mistakes and incorrect filing can occur, and some errors may result in penalties imposed on you by the authorities. Knowledge on how to structure individual remunerations like housing benefits properly can help you to enjoy tax benefits. The following are suggestions you can certainly incorporate when you are filing your tax returns:

 

  • Housing Benefits

 

Housing benefits that you receive from your employer are subject to Hong-Kong tax apart from cases where they are considered offshore. Sometimes employees have a rent-free or rent-subsidized residence as a provision by their employer. They receive this in place of a cash allowance. For such cases, the taxable housing benefits are calculated on a deemed basis, from the employees’ taxable employment income. The process favors you as a taxpayer because it is more beneficial this way than when the housing benefits are in the form of cash, whereby the tax will cover the total amount received for housing benefits. Reviewing the nature of the housing benefits to discover whether they qualify for tax beneficial treatments is the first step to enjoying these benefits.

 

  • Share Related Benefits

 

Share related benefits include share options and share rewards, which are from employers to employees and are usually regarded as income arising from employment by the HK-IRD. The shares are liable for taxation in Hong-Kong as they are part of the salary.

Specific tax issues relating to share-related benefits arise. These issues include the timing and the number of benefits being taxed. Determining taxes on share-related benefits necessitates that the share benefit schemes of employers and the sources of employees’ employment are looked into.

A scenario where share options were granted to an employee while they were in Hong Kong employment while the share options were subsequently vested and exercised by the employee when they are underemployment in Hong Kong, in such a case part of the share-related benefits would have the potential of not being taxed in Hong Kong.

 

  • Tax Exemption Claim on Employment Income

 

If certain Hong Kong offshore conditions are satisfied, taxpayers can lodge a full or partial tax exemption claim on their income. It can be, for example, a 60-days exemption claim, which is a time apportionment claim. The source of employment is important here when you want to determine if you are eligible to claim you’re exempt from tax. The process of determining the source of employment is never straight forward or simple. Having a structure of the employment in advance is a good plan so that you may have solid chances of the tax exemption claim when you present it as a non-Hong Kong kind of employment.

 

  • Tax Deductions and Allowances

 

If you are a taxpayer, you can also claim tax deductions and allowances that are subject to deduction limits. If you follow the right criteria, you can be legible for such deductions and allowances. To maximize tax deductions and allowances, you have to plan for it beforehand before claiming them.

 

  • Qualifying Premiums Paid under a Voluntary Health Insurance Scheme (VHIS)

 

As from April 1, 2019, taxpayers in Hong Kong taxpayers can claim a tax deduction for qualifying premiums paid under VHIS for insured persons. The taxpayers are all eligible to claim such reductions. They can fill in details in their 2018/19 tax returns, following this; the HK-IRD will compute the 2019/20 provisional salaries tax for these taxpayers. The deduction goes up to HKD 8,000 per person provided they are insured. The highest total tax deduction is HDK 6,000 for his or her spouse and HKD 2,000 for his or her child.

In conclusion, the Individual tax return filings in Hong Kong may be a little complicated. The process is not a straight line. The above-discussed issues may be relevant to your experience, and they will help you to understand what you need to do in such scenarios during your tax returns filing. To ensure that the information you give while you are filing your returns is accurate, ensure that you get professional advice. It is better to take such a precaution to avoid conflicts with the involved authorities who may subject you to penalties that will only cost you unplanned for expenses. 

 

About the author

Gary Johnson

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