CentreO Blog

In order to attract global investment and expat genius to Hong Kong. Hong Kong not only offers an attractive tax regime for corporation and entrepreneurs.  Moreover, it also has a competitive low taxation scheme for personal income tax on Hong Kong Salary tax. Correspondingly, salaries Tax referred to Personal Income Tax as well.

Firstly, what is assessment year?

Hong Kong set a year of assessment runs from 1 April to 31 March of the following year. For example, 1 April 2020 to 31 March 2021 

Secondly, what is Provisional Salaries Tax?

Provisional Salaries Tax for a year is usually based on the income less the allowances of the preceding year. 

Thirdly, how to calculate your Salary Tax?

Personal Income can be assessed by Progressive Rate on your net chargeable income. Or at Standard Rate on your Net Income, whichever is lower.

Progressive Rate

Net Chargeable Income = Total Income – Deductions – Allowances

Standard Rate

Net Income = Total Income – Deductions

 

1. Allowances Table:

Allowances	2020/21 Onwards $
Basic Allowance	132,000
Married Person’s Allowance	264,000
Child Allowance (Each)	120,000
Dependent Brother or Sister (Each)	37,500
Dependent Parent & Grandparent Allowance (Each)
Ø   Aged 60 or over	50,000
Ø   Aged 55 and below 60	25,000
Single Parent Allowance	132,000
Personal Disability Allowance	75,000
Disable Dependent Allowance (Each)	75,000

 

2. Deductions Table:

Deductions	2020/21 Onwards $
Expenses of Self-Education	100,000
Elderly Residential Care Expenses	100,000
Home Loan Interest	100,000
Mandatory Contributions to Recognized Retirement Schemes	18,000
Qualifying Premiums Paid under Voluntary Health Insurance Scheme (VHIS) Policy (For each insured person)	8,000
Qualifying Annuity Premiums and Tax Deductible MPF Voluntary Contributions	60,000
Approved Charitable Donations	35%

 

3. Calculation of Tax Payable:

	Net Chargeable	Rate
On the First	$50,000	2%
On the Next	$50,000	6%
On the Next	$50,000	10%
On the Next	$50,000	14%
Remainder		17%
Standard Rates of Tax		15%

For further information, please contact us. 

You may want to read: HONG KONG PERSONAL TAX ALLOWANCE FOR 2020/2021

QUESTION 1:

My company in the UK paid a medical plan for a Hong Kong Employee, does it help to claim deductions on tax purpose under a Hong Kong Limited Company?

ANSWER 1:

No, insurance plan in the UK is not a deductible expense under Hong Kong Profit Tax. Firstly, the expense is not paying for trading purposes. Secondly, it is difficult to explain the relationship between Healthcare in the UK and the profit generated in Hong Kong.

QUESTION 2:

How can I book the insurance expense under a Hong Kong Limited Company?

ANSWER 2:

Yes, the simplest way is booking the insurance expense as the company’s expense if the amount is small.

 

For further information, please contact us.

You may want to read: WHAT TO DO WHEN I RECEIVE A PROFIT TAX RETURN?

Xero accounting software helps make your sales and invoice process easy to manage. Even to issue invoice to your clients from your mobile phone and getting paid is a fast and seamless process.

We are going to show you how to issue an invoice to your client from your mobile phone

1.Download “XERO” from App Store

2. Open the app

3. Sign in your XERO account

4. On the Dashboard, Click “+” on the Top Right Corner

5. Click “Create Invoice”

6. Who for it? – Select your customer name from the scroll bar

7. Click on the invoice date

8. Select a due date

9. Tax type 

10. Select “Add an item”, then choose “Select Products or Services” or “Enter a New Description”. 

11. Select an item from your list.

If there is only 1 item, then choose “Done”. If you need to add more item, then  “Add another item” and repeat Step 10. Same method to choose “Select Products or Services” or “Enter a New Description”

12. Check with the “Quantity” and “Price” is it correct

13. If no more item wants to add, click “SAVE”

14. If you have a receipt, click “Attach files”, select “Take Photo”, “Choose Photo”, “Choose from Xero Files” or “Choose from Files” from the pop-up bar.

15. Press “SAVE” then you can select “Send”, “Approve” “Save” from the pop-up bar.

15. If you selected “Approve” or “Send”, you can find your invoice in unpaid invoice.

16. Your invoice located in the unpaid folder

For further information, please contact us.

You may want to read: EASILY GET BILLS AND RECEIPTS INTO XERO VIA HUBDOC

PayPal offers a faster, more secure way to pay online. It serves as an electronic alternative to traditional banks. Many e-commerce providers uses Paypal as one of the payment solutions.  In order to ensure each transaction details are booked properly for your accounting and auditing, you are also required to download the Paypal statement each month.

 

Why you need to download PayPal Statement? 

PayPal is an online payments system to support online money transfers, and serves as an electronic alternative to traditional bank. Similarly, we need to submit the PayPal monthly statement as a operating record for accounting and auditing purpose. 

How to download PayPal Statement? 

You can download your PayPal monthly statement into CSV or PDF file for accounting and auditing use. The advantage of CSV file is it can be opened in any spreadsheet program such as Microsoft Excel.

1. Go to Activity
2. Click Statement on the right of the page, then click Monthly
3. Select the month
4. Click Request for PDF or CSV file format
5. When the file is ready. Press download 

For further information, please contact us. 

You may want to read: CHECKLIST FOR ACCOUNTING AND AUDITING IN HONG KONG

 

No matter what stage of your business is currently at, tax filing, account and auditing are the major aspects you have to pay attention. You can’t underestimate the outcome if you fail to report on time. Therefore, it is very important to decide when is your financial year end as your first audit.

When do you need to submit your first audit?

If you have formed a HK company, you will receive your first Profit Tax Return around 18 months after the date of your incorporation. So, you need to well prepare for your accounting records. And then submit your first audit report together with the completed tax return to IRD within 3 months submission period. Thereafter, you will receive your Profit Tax Return once a year. Hence, you have to prepare your accounting records and audit report every year. 

What documents you have to get ready?

1. Invoice – copy of all issued sales invoices
2. Expenses – copy of expenses and bills
3. bank statements – copy of company bank statements and corporate / business credit card statements
4. Contracts signed – including sales /purchase / service agreements and tenancy agreements
5. Employee details- employment contracts, HKID or passport, residential address

For further information, please contact us. 

You may want to read: CHECKLIST FOR ACCOUNTING AND AUDITING IN HONG KONG