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【Entrepreneurs Must-Read】Hong Kong Profits Tax Guide 2024
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If you have income subject to Profits Tax or Property Tax, Persona Assessment could provide you with tax relief opportunities. This article will introduce the key points of Personal Assessment, including application criteria, methods, deadlines, and deductible items, helping you file your taxes seamlessly and without worries.
Introduction to Persona Assessment
Unlike Salaries Tax, Profits Tax, and Property Tax (the three direct taxes), Persona Assessment is not a tax item itself but rather an assessment method aimed at reducing the tax liabilities for certain taxpayers. Persona Assessment applies to taxpayers who are liable for Profits Tax and/or Property Tax, but not to those who are only required to pay Salaries Tax
Application Criteria
- Aged 18 or above, or under 18 but with no living parents.
- Ordinarily residing in Hong Kong or being a temporary resident of Hong Kong.
Application Method
- Complete Part 7 of the Individual Tax Return (BIR60) or form IR76C.
- Married individuals can choose to apply for Persona Assessment separately or jointly with their spouse.
- If Salaries Tax is assessed on a joint basis, both spouses must jointly apply for Persona Assessment.
Application Deadline
- Within two years after the end of the relevant tax year (e.g., the deadline for the 2021/22 tax year is March 31, 2024).
- Or within two months after the issue date of the tax assessment notice for the relevant tax year.
Deductible Items
- Mortgage loan interest paid for generating property income (deduction capped at the net assessable value of the property).
- Approved charitable donations.
- Residential care expenses for the elderly (starting from the 1998/99 tax year).
- Home loan interest (starting from the 1998/99 tax year).
- Business losses incurred during the relevant tax year.
- Loss carried forward from previous years under the Persona Assessment method.
- Personal allowances, including basic, married person's, child, dependent parent, and disabled dependent allowances.
Tax Calculation
Assume that A has a business loss of HK$150,000 and received a salary income of HK$500,000 in the same year. The following shows the tax payable with and without opting for Persona Assessment.
Without Persona Assessment:
| Salary Income | $500,000 |
| Less (-): Basic Allowance | $132,000 |
| Net Chargeable Income | $368,000 |
| Tax Payable (at progressive rates) | $44,560 |
| Less (-): Tax Reduction | $3,000 |
| Salaries Tax Payable | $41,560 |
| Business Loss | $(-150,000) |
| Profits Tax Payable | $0 |
| Total Tax Payable | $41,560 |
With Persona Assessment:
| Salary Income | $500,000 |
| Business Loss | $(-150,000) |
| Total Income | $350,000 |
| Less (-): Basic Allowance | $132,000 |
| Net Chargeable Income | $218,000 |
| Tax Payable (at progressive rates) | $19,060 |
| Less (-): Tax Reduction | $3,000 |
| Total Tax Payable | $16,060 |
Married Persons Opting for Persona Assessment
Married individuals can choose to apply for Persona Assessment separately or jointly with their spouse. If you and your spouse jointly opt for Persona Assessment, both of you must have income subject to assessment. If Salaries Tax is assessed on a joint basis, you must jointly apply for Persona Assessment.
If a married couple chooses to be assessed jointly under Persona Assessment, their respective total incomes, after appropriate deductions, will be aggregated as their joint total income for tax assessment purposes.
Conclusion
Leveraging tax assessment methods like Persona Assessment can significantly reduce your tax liabilities. Engaging a professional accountant can provide you with the most suitable tax solutions, alleviating your tax filing concerns. OneStart Business Centre offers accounting, auditing, and tax filing services. Our professional team, with years of experience, is dedicated to serving you. To learn more about our services, please call 3575 6888 or WhatsApp our business consultants at OneStart.
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