Individual Tax Return
The Hong Kong Inland Revenue Department or simply the Hong Kong Tax Authority (“IRD”) has now issued individual (salaries) tax returns for the tax year 2022/23 (yes, that green envelope) for completion.
Here are some tax tips for your individual tax return filing 2022/23.
Tax Filing & Informing Obligations
The filing due date of the 2022/23 individual tax returns will be 2 June 2023. An extension of 1 month will be given automatically if the return is filed electronically or if a tax representative (say our firm) is appointed to handle the tax return filing.
Further extension will be allowed for sole proprietors of unincorporated businesses, the deadline for their submission is 2 August 2023. An extension of 1 month will be given automatically if the return is filed electronically.
Once the tax returns are issued, individuals are obliged to complete and submit the tax returns to the IRD by the filing due date, irrespective of whether they have income derived or not and whether they reside in Hong Kong or not.
Late filing of the individual tax returns will potentially result into a penalty, issuance of estimated tax assessments and/or prosecution actions to be taken by the IRD.
In addition, individuals have to complete their tax returns with care since provision of incorrect, incomplete or inconsistent information to the IRD can potentially result into enquiries or even penal/prosecution actions by the IRD.
In case an individual, such as a new taxpayer in Hong Kong, does not receive the 2022/23 individual tax return from the IRD, they are obliged to voluntarily inform the IRD in writing of their tax chargeability and request for issuance of the tax return. Failure to comply with this informing obligation may also result into penal and/or prosecution actions by the IRD.
Tax Exemption Claims for Individual Tax Returns
Individuals are obliged to report their relevant income in their individual tax returns. In case certain conditions for tax exemption claims, such as time apportionment claim, 60-days tax exemption claim, can be met, individuals are required to lodge the tax claim in their individual tax returns and provide the relevant information therein.
For example, an expatriate who is employed by a company overseas and assigned to Hong Kong to work may qualify for a time apportionment claim, under which only income attributable to his/her employment services rendered from out of Hong Kong shall be taxable under Hong Kong salaries tax. Usually, the employment has to be satisfied as a non-Hong Kong sourced employment in order to qualify for a time apportionment claim, which shall be determined by looking at a number of facts and circumstances.
In addition, if an individual stays in Hong Kong for not more than 60 days in a tax year, his/her employment income may be entitled to full exemption claim in Hong Kong, provided that he/she qualifies as a visitor to Hong Kong.
Moreover, if an individual is a pilot or a seafarer, his/her employment income can potentially be fully tax exempted in Hong Kong if he/she is present in Hong Kong for not more than 60 days in a tax year and a total of 120 days for two consecutive tax years, one of which is the tax year concerned. Please note that the transit days in Hong Kong are counted as days present in Hong Kong.
What about personal assessment?
Personal assessment is a calculation method for tax, which may reduce the tax liability for certain individual taxpayers.
It could be interesting for taxpayers that are subject to Profits Tax and/or Property Tax and/or Salaries Tax.
However, if you are only subject to Salaries Tax, there is no merit in choosing personal assessment.
It is possible for one to reduce his/her tax liabilities with a well-thought tax plan put in place at an early stage. For example, the most common type of tax planning opportunity is the provision of tax-efficient fringe benefits to directors or employees e.g. provision of housing benefits.
In addition, there are different tax deductions and allowances available under the Hong Kong tax regimes and the availability of them depends on the circumstances of the taxpayer. As such, early tax planning may also avail you of the opportunity to claim such tax deductions and allowances in your next tax filing.
Besides these tips, HKWJ Tax Law & Partners can assist you with your individual salaries tax filing and tax planning by conducting a tax review or filing the tax return for you. Don’t hesitate to reach out to us via the form below for more information.