In the 2022-23 Budget, the Financial Secretary proposed a one-off reduction of 100% of the final tax for the year of assessment 2021/22 in respect of profits tax, salaries tax and tax under personal assessment, subject to a ceiling of $10,000 per case. The relevant legislation for the tax reduction was passed by the Legislative Council on 6 April 2022 and gazetted on 14 April 2022.

You only need to file your Tax Return - Individuals (BIR60) for the year of assessment 2021/22 as usual. IRD will effect the tax reduction in the final assessment for the year of assessment 2021/22 (hereinafter called "2021/22 assessment"). For 2021/22 assessments issued before the legislative amendment, IRD will revise them and there is no need for you to make a separate application.

You are required to pay on time the 2021/22 provisional tax.  Otherwise, recovery action will be taken by IRD.  Similar to previous occasions, the tax reduction is to reduce the 2021/22 final tax that will be charged and not the 2021/22 provisional tax that has already been charged.  Therefore, you are still required to pay the 2021/22 provisional tax as charged.

As the tax reduction is to reduce the 2021/22 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 the year of assessment 2021/22.  The tax reduction is not applicable to the 2021/22 provisional tax.  The provisional tax paid will be applied to settle the 2021/22 final tax and 2022/23 provisional tax.  Excess balance, if any, will be refunded.

You may use the Tax Calculator provided in GovHK to calculate your 2021/22 salaries tax and tax under personal assessment.

Under personal assessment, all income of an individual taxpayer, including salaries income and business profits, will be aggregated to compute the tax payable.  Hence, the amount of tax reduction for the year of assessment 2021/22 is 100% of the tax assessed under personal assessment (subject to a ceiling of $10,000) and not the tax payable under salaries tax and profits tax.

Profits tax, salaries tax and tax under personal assessment for the year of assessment 2021/22 are reduced by 100%, subject to a ceiling of $10,000 per case.  Under salaries tax, a married couple are separately assessed.  Each of them will get a tax reduction of 100%, subject to a ceiling of $10,000.  From the year of assessment 2018/19, the requirement for the election of personal assessment is relaxed by allowing married persons the option to elect for personal assessment separately (hereinafter called "Separate PA").  Under Separate PA, a married couple are separately assessed. Each of them will get a reduction of 100% of the tax assessed under their own personal assessment, subject to a ceiling of $10,000.  If the taxpayer elects for personal assessment jointly with his / her spouse, the tax reduction for the couple is 100% of their total tax assessed under personal assessment, capped at $10,000.  Whether a taxpayer should apply for personal assessment jointly with his / her spouse will depend on his / her own situation.  When considering an election for personal assessment for the year of assessment 2021/22, taxpayers should take into account the factor that the tax reduction for personal assessment jointly elected by a couple will be capped at $10,000.  You may use the Tax Calculator provided in GovHK to calculate the tax payable under different scenarios for the year of assessment 2021/22.

For each business, you can get the tax reduction of 100% of the profits tax payable for the year of assessment 2021/22, subject to a ceiling of $10,000.

The profits tax reduction proposed in the 2022-23 Budget also applies to companies (including corporations and partnership businesses). Companies will get a one-off reduction of 100% of the final profits tax for the year of assessment 2021/22, subject to a ceiling of $10,000 per case.

A taxpayer chargeable to salaries tax or tax charged under personal assessment is eligible to claim deduction of the rent paid by him / her as a tenant under a qualifying tenancy of domestic premises.

A taxpayer may be allowed deduction of rent paid by his / her spouse (who is not living apart from the taxpayer) as a tenant under a qualifying tenancy of domestic premises. 

To qualify for the deduction, the domestic premises must be a building or any part of such a building that is not prohibited by or pursuant to any law or any specified instrument from being used for residential purposes.  The premises must also be used by the taxpayer as his / her principal place of residence. 

If the qualifying tenancy is procured in respect of any domestic premises and a car parking space, and the car parking space is not sublet, the car parking space will be taken to be part and parcel of the domestic premises for the purposes of the deduction.

A qualifying tenancy of domestic premises is a tenancy (or sub-tenancy) in writing in respect of the right to the exclusive use of the premises that is stamped within the meaning of the Stamp Duty Ordinance (Cap. 117), or under which the right is given by the Government (or the Financial Secretary Incorporated as an agent of the Government) at a rent of a fair market value.

In general, the amount of deduction allowable to a taxpayer for a year of assessment will be the amount of rent paid under a qualifying tenancy for the year of assessment, or the deduction ceiling for the tenancy for the year of assessment, whichever is less.

If the taxpayer is married and not living apart from his / her spouse, the total amount of deduction allowable to the taxpayer or the taxpayer’s spouse (or both of them) will be the amount of rent paid under the tenancy for the year of assessment, or the deduction ceiling for the tenancy for the year of assessment, whichever is less.

The deduction ceiling for each year of assessment is $100,000.

Please refer to the illustrative examples to understand how the amount of allowable deduction is to be computed under different scenarios.

The principle set out in the answer in Item 13 above for determining the total amount of deduction allowable to the taxpayer or the taxpayer’s spouse (or both of them) will apply to that part of the year of assessment when the taxpayer is married.

The rent paid under the tenancy will be taken to have been paid by the co-tenants in equal shares, whilst the deduction ceiling will be reduced in proportion to the number of co-tenants.

The deduction ceiling will be reduced in proportion to the contractual period that falls within the year of assessment.

The amount of deduction allowable to the taxpayer for the year of assessment will be the aggregate of the amount determined in accordance with the principle set out in the answer in Item 13 above for each of the tenancies.

No, there is no limit for the years of entitlement.

In the following circumstances, a deduction for domestic rent is not allowable:

The taxpayer should retain documentary evidence showing that the premises was used as his / her place of residence such as utility bills (including water, electricity and gas bills) and resident card.  The taxpayer is not required to provide the above documents when filing his / her tax return.  However, he / she should retain the documents for verification by the Inland Revenue Department.

A taxpayer’s principal place of residence has to be decided on the facts of each case, including the periods and pattern that the taxpayer and his / her family members have resided in all places of residence.  Generally, the place of residence in which the taxpayer and his / her family have spent the majority of their time is taken as their principal place of residence.

The bill on tax deductions for domestic rent will be introduced into the Legislative Council in the second quarter of 2022, with the aim of securing its passage within the current legislative session. The legislation is intended to apply to the year of assessment commencing on 1 April 2022 and to all subsequent years of assessment.

If you are eligible for domestic rent deduction, you can provide the amount claimed for deduction for the year of assessment 2022/23 in Part 10A of your Tax Return – Individuals for the year of assessment 2021/22.  To understand whether you are eligible for the deduction and how the amount of allowable deduction is to be computed in accordance with the relevant bill, you can refer to the deduction rules and illustrative examples.  Upon the coming into operation of the relevant ordinance, the Inland Revenue Department will take into account the deduction claim in assessing the provisional salaries tax for the year of assessment 2022/23.

If you do not provide the above information in Part 10A of your Tax Return – Individuals for the year of assessment 2021/22, you can still, after receipt of the salaries tax demand note, apply for the holding over of payment of the provisional salaries tax for the year of assessment 2022/23 in respect of the deduction.  The time limit for the application is 28 days before the due date for payment of the provisional tax, or 14 days after the date of the notice for payment of the provisional tax, whichever is later.

You can provide the total amount of rent that was paid in relation to the year of assessment 2022/23 (i.e. $240,000 × 12／24 = $120,000) in Part 10A of the tax return.  The maximum amount of deduction allowable to you is $100,000.

As you have not yet entered into a tenancy at the time of submission of your Tax Return – Individuals for the year of assessment 2021/22, you should not fill in Part 10A of the tax return.  After you have entered into a qualifying tenancy for the flat and subject to the coming into operation of the relevant amendment ordinance, you can, upon receipt of your salaries tax demand note, apply for the holding over of payment of the provisional salaries tax for the year of assessment 2022/23 in respect of the deduction within the prescribed time limit. 

You can provide the amount of rent paid in relation to the period from 1 April 2022 to the last date on which you reside in the relevant place of residence before departure from Hong Kong in Part 10A of the tax return.  You are also required to submit a copy of the tenancy and evidence of rent payments for verification by the Inland Revenue Department.

If the relevant amendment ordinance comes into operation when your assessment for the year of assessment 2022/23 is raised, your claim for deduction of domestic rent will be taken into account.  Otherwise, the deduction will not be allowed in the assessment.  If you want to pursue the claim, you can object to the assessment by giving a notice in writing within one month after the date of the notice of assessment.  The Inland Revenue Department will consider your objection upon the coming into operation of the relevant amendment ordinance.