2013-14 Budget - Tax Measures

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Individual taxpayers will get a one-off reduction of 75% of the final tax for the year of assessment 2012/13 in respect of profits tax, salaries tax and tax under personal assessment, subject to a ceiling of $10,000 per case. Furthermore, the following tax measures will be introduced from year of assessment 2013/14 onwards:

(a) Increase in child allowance as follows:

(b) Increase in the maximum allowable deduction for self-education expenses as follows:

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You only need to file, as usual, your 2012/13 tax return for individuals (BIR60) which will be issued in May this year. After enactment of the relevant legislation, IRD will effect the tax reduction in the final assessment for 2012/13 . If you are eligible to claim child allowance or the child allowance for new born child in the year of birth, the Department will apply the new allowances in calculating the 2013/14 provisional tax. For 2012/13 assessments issued before the legislative amendment, the Department will revise them after enactment of the legislation. It is expected that the excess tax paid, if any, will be refunded to taxpayers starting from late July 2013. There is no need for you to make a separate application.

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You are required to pay on time the 2nd instalment of the 2012/13 provisional tax falling due from April 2013. Otherwise, recovery action will be taken by IRD . Similar to previous occasions, the tax reduction is to reduce the 2012/13 final tax that will be charged and not relating to the 2012/13 provisional tax that has already been charged. Therefore, you are still required to pay the 2012/13 provisional tax as charged.

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As the tax reduction is to reduce the 2012/13 final tax that will be charged, the reduction will only be reflected in the notices of salaries tax assessment, profits tax assessment and personal assessment for 2012/13 that will be issued starting from the third quarter of 2013. The tax reduction is not applicable to the 2012/13 provisional tax. The provisional tax paid will be applied to pay the 2012/13 final tax and 2013/14 provisional tax. Excess balance, if any, will be refunded.

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You can use the tax computation program to calculate your 2012/13 and 2013/14 salaries tax and tax under personal assessment.

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Under personal assessment, all income of an individual taxpayer, including salaries income, will be aggregated to compute the tax payable. Hence, the amount of tax reduction for the year 2012/13 is 75% of the tax assessed under personal assessment and not the tax payable under salaries tax.

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Profits tax, salaries tax and tax under personal assessment for the year of assessment 2012/13 are reduced by 75%, subject to a ceiling of $10,000 per case. Under salaries tax, a husband and a wife are separately assessed. Each of them will get a tax reduction of 75%, subject to a ceiling of $10,000. However, under personal assessment, there is no separate taxation and only one assessment will be issued. Therefore, the tax reduction for the couple is 75%, capped at $10,000. Whether a taxpayer should apply for personal assessment will depend on his situation. When considering an election for personal assessment for the year of assessment 2012/13, taxpayers should take into account the factor that the tax reduction for each couple will be capped at $10,000. IRD will check each personal assessment election to see if it will reduce the amount of tax payable, and assess each taxpayer in the way most advantageous to him.

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For each business, you can get the tax reduction of 75% of the Profits Tax payable for 2012/13, subject to a ceiling of $10,000.

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You should state the actual amount of $90,000 paid in Part 4.3 of your 2012/13 tax return for individuals (BIR 60). The Assessor will allow the respective maximum deductions at $60,000 and $80,000 when computing your 2012/13 final salaries tax and 2013/14 provisional salaries tax liabilities.

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If the amount of self-education expenses paid for 2013/14 exceeds $60,000, you may apply in writing for holding over the 2013/14 provisional salaries tax upon receiving the assessment and notice for payment of provisional salaries tax. The application must be lodged not later than:

whichever is the later.

In recomputing the provisional salaries tax payable for 2013/14, the Assessor will not deduct $85,000 as the amount of self-education expenses but will restrict the deduction to $80,000.

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You can complete Part 8.2 of the 2012/13 tax return for individuals by providing details of your new born son. The Department will grant child allowance of $140,000 for that child when computing your 2013/14 provisional tax.