Tax deductions for qualifying annuity premiums and tax deductible MPF voluntary contributions

Number of qualifying deferred annuity policy

Taxpayer purchased two qualified deferred annuity policies for himself and paid the qualifying annuity premiums of $30,000 and $20,000 respectively. Can taxpayer claim deductions for the premiums paid for two policies in the same year of assessment?

Yes. Taxpayer may claim deduction for qualifying annuity premiums paid under one or more than one policy. However, the deduction allowable to the taxpayer should not exceed the aggregate of qualifying annuity premiums and deductible MPF voluntary contributions actually paid; or the specified maximum deduction of $60,000, whichever is lower.

The annuitant must be HKID card holder

Taxpayer purchased a qualifying annuity policy for his spouse who is not a HKID card holder. Taxpayer paid qualifying premiums of $20,000 and $30,000 on 1 June 2023 and 1 June 2024. Taxpayer’s spouse was issued a HKID card on 1 August 2024. Can taxpayer claim deduction in the years of assessment 2023/24 and 2024/25?

To be deductible, the annuitant must be an HKID card holder at any time during the year of assessment. As taxpayer’s spouse is not an HKID card holder in the year of assessment 2023/24, no deduction would be allowed. In the year of assessment 2024/25, taxpayer’s spouse is an HKID card holder at some time during the year of assessment, deduction of $30,000 would be allowed.

Claim for deduction by married persons

Taxpayer purchased two qualified deferred annuity policies, one for self and one for spouse. Taxpayer paid the qualifying annuity premiums of $40,000 and $30,000 respectively. Can taxpayer claim deductions for the premiums paid under the two policies in the same year of assessment?

Taxpayer can claim deduction for qualifying annuity premiums paid under more than one policy. However, the maximum deduction for each taxpayer is $60,000, so taxpayer can only claim $60,000 deduction for qualifying annuity premiums paid instead of $70,000.

Taxpayer purchased a qualified deferred annuity policy for his spouse and paid premiums of $40,000 and $30,000 on 1 June 2023 and 1 June 2024 respectively. They got divorced on 1 February 2024. Can taxpayer claim deduction for the premiums paid under that policy?

As the annuitant was taxpayer’s spouse at some time during the year of assessment 2023/24, qualifying annuity premiums of $40,000 paid on 1 June 2023 would be fully allowed to the taxpayer. However, in the year of assessment 2024/25, the requirement of an annuitant is not satisfied (i.e. the annuitant is not the taxpayer’s spouse at any time during the year of assessment), premiums of $30,000 paid would not be allowed.

Taxpayer purchased a qualified deferred annuity policy for himself and paid the premiums of $60,000. Can taxpayer’s spouse claim deduction for the premiums of $60,000 paid under that policy? Can they each claim deduction of $40,000 and $20,000 respectively?

Yes. If the qualifying annuity premium is paid by taxpayer or his spouse not living apart, both of them can claim deduction for the premiums paid. Taxpayer’s spouse may either claim deduction for the whole premiums paid of $60,000 or in accordance with the agreement reached by them. However, the total deduction allowable to the couple should not exceed the qualifying annuity premiums actually paid.

Taxpayer has salaries income in year of assessment 2023/24. Taxpayer’s spouse has no income chargeable to tax (i.e. salaries income, rental income and business income). Each of them purchased a qualified deferred annuity policy and paid premiums of $60,000. Other than the $60,000 premiums paid for his/her own qualified deferred annuity policy, can taxpayer also claim deduction for the premiums paid by his spouse?

As taxpayer’s spouse has no income chargeable to tax (i.e. salaries income, rental income and business income), they are not eligible to elect joint assessment or elect personal assessment jointly. Therefore, the maximum amount of deduction allowable to the taxpayer is the individual limit of $60,000. As taxpayer's spouse does not have any income chargeable to tax, no deduction can be allowed to him / her.

Refund of qualifying annuity premiums

On 25 March 2024, taxpayer purchased two qualifying deferred annuity policies and paid total premiums of $60,000. Taxpayer cancelled the first policy during the cooling-off period and total premium of $20,000 was refunded. Which amount can taxpayer claim for deduction in year of assessment 2023/24?

The deductible amount is net of the refunded premiums. So taxpayer can only claim deduction of $40,000 in year of assessment 2023/24.

Deduction order for qualifying annuity premiums and TVC

During the year of assessment of 2023/24, taxpayer paid qualifying annuity premiums of $50,000 and a tax deductible MPF voluntary contribution of $40,000, for a total exceeding the specified maximum deduction of $60,000. In this case, what is the deduction order?

If taxpayer paid both qualifying annuity premiums and tax deductible MPF voluntary contribution, deduction of $40,000 for tax deductible MPF voluntary contribution should be firstly allowed, and the remaining of $20,000 will be allowed for deduction of qualifying annuity premiums, with the aggregate not exceeding the specified maximum deduction of $60,000.

Others

Taxpayer purchased a qualifying deferred annuity policy and the premiums of $40,000 were due and payable on 31 March 2024. Taxpayer paid premiums of $30,000 on or before the due date and settled the outstanding premiums on 5 April 2024. What is the amount of deduction can taxpayer claim in year of assessment 2023/24?

Deduction is only allowed for qualifying annuity premiums paid in a year of assessment. Qualifying annuity premiums of $30,000 paid by taxpayer during the year of assessment 2023/24 would be allowable. The remaining balance would be allowable in year of assessment 2024/25.