What are Dependent Allowances for Parents and Grandparents that are given to an Employee from Employer of an Incorporate HK Company?


In this blog we will explore dependent allowances that are given to a person in Hong Kong if certain conditions are fulfilled. These conditions are equally applicable on either person or his/her spouse. We will discuss dependent grandparent allowance, additional allowance and dependent brother / sister allowance under Section 30 B of Hong Kong tax law.

Dependent Allowance

‘His/Her partner or parent of the person’ means:

  • Under the Section 30 (4) (b) (i) of Hong Kong tax law, a parent whose marriage with his/her partner of that person or person himself/herself is child;  
  • Under Section 30 (4) (b) (ii) of Hong Kong tax law, parent who adopted his/her partner or the claimant and accepted in a manner provided under the Hong Kong law; 
  • Under the Section 30 (4) (b) (iii) of Hong Kong tax law, a step-parent of his/her partner of the person or by that person himself / herself;
  • Under the Section 30 (4) (b) (iv), the natural father or mother of his/her partner of the person or by that person himself / herself; or
  • Under the Section 30 (4) (b) (iv), a parent of the deceased partner of the applicant as defined earlier;

Under the Section 30 (3) (b), for each parent maintained, an additional dependent parent allowance was granted if the applicant was living with the parent, continuously throughout the assessment year, not in greed of some valuable consideration.

It was observed in accordance with the Section 30 (5), a parent’s dependent parent allowance and additional dependent parent allowance was granted to only one individual. CIR has valid reason to believe that, in respect of the same parent for the same assessment year two or more persons are eligible to claim such a dependent parent allowance. Under the Section 33 (2), the CIR would not consider any claim from the applicants until it is satisfied that, applicant have agreed on the person that would be entitled to claim the above discussed allowance in that assessment year. In order to decide that who would be entitled to claim the dependent parent allowance the CIR would sought out an agreement between applicants. There is no division of such allowance so at a time only one person having business in Hong Kong or working for an employer that have set up company in HK can claim such allowance for parent. The claim for deduction should not be consider by the CIR if there is no agreement at all between CIR and applicants.

It was noted by the board of revenue in order to interpret the phrase ‘reason to believe’ in the case D 2/13 that ‘it is insisted by modern approach to statutory interpretation that purpose and context should be considered at first place and due to this reason the meanings of phrases and words in the condition of one ordinance may not mandatory be appropriate to same phrases or words in another ordinance’.

The definition of ‘Test’ according to board of revenue is that:

  • First whether that view is believed by CIR at hearing.
  • Then whether it can be stated by board of revenue that, in order to maintain the view up to the cessation of the hearing the CIR is unreasonable objectively.

In a case D 82/07, it was observed that, the sister of T was granted with dependent parent’s allowance in respect to the parents of T. T also claimed for this dependent parent allowance but it was rejected by board of revenue department. Because T was unable to satisfy the CIR that he and her sister nominated him to claim this allowance for the concerned assessment year.

In each case the question of fact that should be decided that, whether a parent of a person is a typical resident in Hong Kong. In a case D 20/83 it was observed that parent of a taxpayer resided in the Canada and worked for offshore company incorporation. The parents used to come to Hong Kong but for the purpose of visits only. When the dependent parent allowance was claimed by the son of these parent it was denied due to the reason that the fact that Hong Kong identity card was held by him he had right to live in Hong Kong was not held conclusive.

In D 7/10, it was observed that claim of T for dependent parent allowance was not allowed by Inland Revenue department. The ground of judgement was that, during the period of their stay in Hong Kong the parents of T were visitors. It was held by board of revenue department that T should be granted with dependent parent allowance. During the relevant assessment year, the parents of T had chosen to stay in Hong kong voluntarily for a settled purpose. And that settled purpose was to help T in order to look after their grandson. That purpose had a sufficient stamina. In fact, the parents of T had same immigration record of both entry and exit after and before the relevant assessment year. Whole period that were considered by board of revenue department were about their Hong Kong stay lawfully. Although a certain regulatory was shown for each stay that remained just for a short time period. Moreover, they had stayed for over 200 days in Hong Kong during the whole assessment year. And it was being indicated by all the facts that Hong Kong was also their place of residence and typical living other than their home that was in Mainland. They had become typical members the community as like other grandparents who were caring about the children of their son(s) / daughter(s). Although the Hong Kong might not have regarded as their ‘real home’, or their intention of long-term future or expectations of their might change, such considerations were not relevant. There is no such requirement for the claim of dependent parent allowance by one partner.         

Allowance for Dependent Grandparent

The conditions for claiming dependent parent allowance and dependent grandparent allowance are similar.

Who are entitled to claim?

In the assessment year, to claim a dependent grandparent allowance a person having own business or working for an employer who have set up company in HK is eligible, if he/she or his/her partner, not being a partner living away from him/her, a grandparent or grandparent of his/her partner is maintained by him /her in that assessment year and that the grandparent was residing resident in Hong Kong ordinarily and:

 

  • Having age 60 or more than 60;or
  • To claim an allowance under the Government`s Disability Allowance Scheme in accordance with the Section 30 A (1) with having age less than 60.

If a grandparent is having age between 55 to 59 at any time during the assessment year then a dependent grandparent allowance is also available for him / her with effect from year 2005 to 06 while under the Government`s Disability Allowance Scheme, he / she is not eligible for any allowance.

By a person or his/her partner a grandparent shall be treated as being maintained by him / her. If the conditions are fulfilled similar to those of a dependent parent.

Additional Allowance

To an applicant working for local or offshore company incorporation, an additional allowance would be granted if the dependent grandparent for whom he / she claims a dependent grandparent allowance was residing with him for the assessment year, otherwise under the Section 30 A (3) (b) of Hong kong tax law, than for full valuable consideration, with him/her continuously throughout the assessment year.  

Meaning Of `Living with`    

In respect of his mother, T claimed additional dependent parent allowance in the case D 30/07. In property owned by mother and late father of T, his mother resided in that property. The property that was owned by the T and his wife was being used as their residence. In terms of walking distance Property C was about seven minutes away from Property G. As living of T with his mother extended beyond the flats, T argued that he should be granted with additional dependent parent allowance. Appeal of T was dismissed because his mother did not live with him. Later, Inter alia, it was held by Board, that:

  • The word `living with` mean that same residence with the taxpayer as an employee or incorporate HK company was shared by the parents. The word `living with` refer to the fact that in the same residence the parent and the taxpayer lived; or in the other words, a common place of shared residence.  
  • Further, residence or common residence shared by the parents and taxpayer must be one that have no prior rights to live or reside in. If in his own property the parent lives, but agreed that taxpayer could live with him. In term of consideration he would get no benefits. The Section 30 (3) (b), does not allow taxpayer to claim additional dependent parent allowance.      

The Meaning of Grandparent or Grandparent of his/her Partner

The meanings of grandparent or grandparent of his/her partner in relation to a person is that:

  • A natural grandparent of a person, or his/her partner.
  • A step-grandfather / step-grandmother a person or his/her partner (whether step-parent or adoptive parent of a person or his/her partner, a step-father / step-mother or natural parent of a person or his/her partner or a natural parent’s adoptive parent).
  • An adoptive-grandfather / adoptive-grandmother a person or his/her partner (whether step-parent or adoptive parent of a person or his/her partner, an adoptive -father / adoptive -mother or natural parent of a person or his/her partner or a natural parent’s adoptive parent).
  • In case of a spouse that was dead in near past, a person who would have been the grandfather / grandmother of the spouse of person by reason of as discussed in earlier points if the partner was living, under Section 30A (4) (b).

Under Section 33 (1A), in respect of the same dependent person, a DGA and a DPA shall not be awarded in an assessment year.

  • It is necessary for CIR to not consider any claim as long as it is not satisfied that the applicants have agreed on the allowances that shall be claimed in the assessment year, in case if CIR has reason to trust that there are persons that are eligible to claim a DGA and DPA in the same assessment year in respect of same dependent person, as taken from Section 30A (4) (b).

Allowance provided to Dependent Sister or Brother under Section 30 B

In order for a person or his/her partner to be eligible to claim a dependent brother or dependent sister allowance (DBSA) it is mandatory for them to maintain an unmarried brother / sister or an unmarried brother / unmarried sister of his/her partner in the assessment year. And the person so maintained in the assessment year at any time was:

  • Having age less than 18 years.
  • Having age more than 18 years but less than 25 years and was receiving the full time basis regular education from school, college, university or other similar establishments for education.
  • Having age more than 18 years and was inappropriate for physical or mental work due to respective disability.

The brother / sister of a person or brother / sister of his/her partner is only served as maintained by a person or his/her partner in a case the person or his/her partner had principal or sole care of the sister or brother or of the brother / sister of person’s partner at any time during an assessment year.

The allowances that are discussed in this blog are obtained by a taxpayer if described conditions are fulfilled, so before company formation HK a taxpayer of Hong Kong should be familiar with such allowances and other pros and cons of Hong Kong tax law to avoid any future inconvenience.

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