In the following blog we will explore the provisional salaries tax, its different aspects as holding-over payment of provisional tax, grounds for hold-over and salaries tax on a married couple. We will also have discussion on the different allowances that can be claimed by any one partner depending upon the nomination from the couple.
Salaries Tax at Provisional Level
Under Section 63B (1) of Hong Kong tax law, if a person rendering Hong Kong incorporation services is allowable to salaries tax then where applicable, he is also liable to pay provisional salaries tax. The provisional salaries tax amount depends on the amount of:
Payment of Provisional Tax as Holding-Over
An application can be written for the holding-over of the payment of provisional tax. This application should be submitted with CIR not later than:
Which one among above defined points is later in accordance with Section 63E (1) (a).
The grounds on which hold-over application is dependent must be specified in the application as discussed in Section 63E (1) of Hong Kong tax law.
Grounds for Hold-Over at Provisional Tax
On any of grounds given below, a claimant can be made for holding over provisional salaries tax:
Also the business registration certificate Hong Kong is necessary for a business to get registered with Tax department. Business would only be legal if it would have that certificate.
Husband and Wife Salaries Tax
If marriage of a man is according to the meanings that are defined under Section (2) (1) of Hong Kong law, then such person is called husband.
If marriage of a women is according to the meanings that are defined under Section (2) (1) of Hong Kong law, then such women is called wife.
The definition of marriage is as:
Husband and Wife not living together
A husband and wife shall be judged for purposes of tax when they are living separate:
Separate Taxation (if both Earning)
If a husband and wife have separate incomes that is allowable or assessable under Hong Kong tax law, then these would be assessed separately as if both are unmarried persons. For the assessment to be joint, they should be elected and eligible. Under Section 10 (1) of Hong Kong tax law, separate taxation is mandatory for each partner to his / her own return on income. This income can be from pension or office or employment. Also each partner has to pay his / her own tax on salaries, claim allowances that are personal by himself / herself and receive his / her own assessment record.
In accordance with Section 28 (1), under separate taxation a basic allowance for an individual is granted to each partner individually.
Only one partner can claim the child allowance at a time.
In accordance with Section 31 (3), it is duty of each couple to nominate that who can claim allowances for all of their children. Without the assent of the CIT parent cannot revoke the nomination that is made in any assessment year under Section 31 (4).
Giving an example, Mr. and Mrs. Chan were a married couple. Both of them were getting salary from company having Hong Kong business formation. They also had two children having age six and eight respectively. In respect of these children, anyone among the couple can be elected to claim for the allowances of children under separate taxation policy of Hong Kong. And one key thing to remember here is that it is not possible for Ms. Chan to claim the allowances for one child and Mr. Chan to claim the allowances for other child under this separate taxation policy.
Dependent Grandparent and Parent Allowance
In contrast with the child allowance, in case of a married couple the dependent grandparent allowance and dependent parent allowance is eligible for one or more parents which can be claimed by any partner.
Deductions in Concessionary
Charitable donations that are approved and made by any partner of married couple can be claimed as the deduction in the assessment of other partner. But there should be no double claim for the same amount, as taken from Section 26C (1) of Hong Kong tax law.
Elderly residential care expenses, in respect of one or more parents that are eligible, the residential care expenses can be claimed by either the husband or wife.
Interest for home loan, a partner working for Hong Kong business formation company who is judged to have paid the interest is eligible to claim the deduction. But in case if that partner has no income or profit that is assessable under the Inland Revenue ordinances then other partner can be nominated by his / her to claim the deduction.
Salary Tax Computation under Separate Taxation
For the assessment year 2015 to 16 the format to compute the salaries tax of a married couple under separate taxation policy of Hong Kong is given below:
Name of Individual
Assessable income $ X $X
Less: allowable expenses = $ (X) $ (X)
Net assessable income (NAI) $ X $X
Less: concessionary deductions:
Charitable donations that were approved (limited to 35% of NAI
Before the losses b / f and self-education expenses) $ X $ X
Expenses for residential care $ X $ X
Interest for Home Loan $ X $ X
Contribution to recognized retirement scheme $ X $ X
$ (X) $ (X)
After concessionary deductions NAI is $ X $ X
Less: Personal allowances
Dependent parent allowance $ X $ X
Dependent grandparent allowance $ X $ X
Dependent sister or brother $ X $ X
Basic $ X $ X
Child $ X $ X
Disabled parent $ X $ X
$ (X) $ (X)
Net chargeable income $ X $ X
Salaries tax $ X $ X ------------- --------------
Less tax reduction (if applicable) $ (X) $ (X) ------------- --------------
Payable salaries tax $ X $ X
Election’s Time Limit
In case of year the time limit for election is 1 year after the assessment year that is in question while in case of time limit for one month it is after the date on which assessment of salaries tax has become conclusive and final, whichever is later under Section 70 of Hong Kong tax law.
Depending upon the reasonable circumstances considered by the CIR it may grant the extension in time for submitting election, taken from Section 11 (B) of Hong Kong tax law.
Partner that is Responsible to pay Tax on Salaries
In case of the joint assessment the partners that are entitled to pay tax is as under:
The most integral part of the process of election is nomination of a partner that is chargeable. And according to DIPN 18 any variation in the nomination will lead to the withdrawal of election.
Deceased Husband or Wife
Election’s Withdrawal for Joint Assessment
The net assessable income includes losses, expenses for self-education, assessable income less outgoing and expenses, allowances for depreciation etc. These described net assessable income of each partner shall be confirmed separately under the joint assessment. The reference for this statement is taken from Section 10 (1).
Then these net assessable incomes are sum up. The given below expenses are deductible from that sums: