Q & A for "e-Seminar for Individual Taxpayers"

If your child is over 18 but under 25, child allowance can be granted to you only if your child is receiving full time education at any time during the year of assessment. In your case, you can claim child allowance for the year of assessment 2023/24 in view of the fact that your son was receiving full time education during April 2023 to June 2023.

At monthly salary of $10,000, if you make contributions to a Mandatory Provident Fund Scheme ("MPF Scheme"), your mandatory contribution would amount to $500 per month. In this situation, you may claim deduction for MPF in the amount of $6,000 ($500 x 12 months). Any contribution exceeding 5% of your salary would be regarded as voluntary contributions to the MPF Scheme and not deductible for tax purposes.

For ORSO Schemes, there is no mandatory contribution. Hence, you are allowed to opt to contribute from 0 to 10% of your monthly salary. The law allows ORSO Scheme participants to get the same tax deductions as MPF Scheme participants. So, you will get tax deductions of $6,000, namely, $500 per month for 12 months.

As you received the sum of $36,000 during the basis period for the year of assessment 2023/24, you should report that sum in your tax return for the year of assessment 2023/24 as follows:

However, this sum of $36,000 was in fact earned during the year of assessment 2022/23. You may, if you wish, apply to have it related back to the year of assessment 2022/23. Upon receipt of your application for relating back, the Assessor will issue to you an additional assessment for year of assessment 2022/23. Since income will not be assessed twice, the sum of $36,000 will not be assessed as income for 2023/24.

Please note that you are empowered to choose against which type of income your business losses would be set off. If you and your spouse have not elected for Personal Assessment for 2022/23, business losses for that year will be set-off against the 2023/24 profits of the same business, that is, under Profits Tax. If you have elected for Personal Assessment for 2022/23, the loss will be set-off against the other income of you and your spouse´s for the elected year.

From what you said, you had not elected for Personal Assessment for 2022/23, and so the loss of $210,000 incurred by you for carrying on sole proprietorship "Business A" in 2022/23 can only be carried forward for set-off against future profits of "Business A" (i.e., under Profits Tax) and cannot be used to set-off against your or your spouse´s other sources of income for 2022/23 or for subsequent years.

Generally speaking, the rule for deducting business losses under Personal Assessment is that you may deduct

Hence, if you had elected for Personal Assessment for 2022/23 and neither you nor your spouse had other sources of income, there would be unutilized loss in the amount of $210,000 to be carried forward to 2023/24, under Personal Assessment. The residue of $28,000 can be further carried forward for set-off against the future income of you or your spouse under Personal Assessment.

Are you aware of the fact that payment of rates is based on "Rateable Value"? The "Rateable Value" of a property is determined by the Rating & Valuation Department and is not arrived at arithmetically.

Normally you do not have to complete this item in Section 5 of the Appendix of your tax return. You only do so when you want to substitute "Rateable Value" for "Rental Value" (RV) and in this event you should put down the "Rateable Value" as shown in the Rates Demand Note of the property concerned.

If your employer had provided you with a place of residence, the RV of that place of residence should be included in your Assessable Income. Depending on the type of accommodation provided, the RV is calculated at 4%, 8% or 10% of your total net income after deducting outgoings and expenses (except expenses of self-education). Where your employer has provided you with a residential property, you may elect to include the "Rateable Value" of the property instead of the RV, if to do so can reduce the amount of Salaries Tax to be paid.

To be eligible for Dependent Brother or Dependent Sister Allowance, you must maintain an unmarried brother or sister and this brother or sister

In your case, you can get deduction for Dependent Brother Allowance if

Before admitting your claim, the Assessor may require you to produce documentary evidence, such as doctor's certificate, to substantiate that your brother is physically unfit for work.

Any married couple may elect for joint assessment under Salaries Tax, irrespective of resident status. The point to note for joint assessment is that both spouses have income assessable to Hong Kong Salaries Tax for the year of election. If your spouse does not earn any income chargeable to Hong Kong Salaries Tax, you may claim Married Person's Allowance.

To be eligible for Dependent Parent Allowance, the taxpayer must have maintained at any time during the year a parent who

• is ordinarily residing in Hong Kong;
• is age over 55; and
• has either resided with him/her for a continuous period of no less than 6 months or has received from him/her not less than $12,000 in money towards her maintenance during the year.

To be eligible for the allowance, all of the above conditions must be fulfilled. As your mother is residing with you in Canada, you cannot get the Dependent Parent Allowance.

Continuing Education Fund (CEF) is set up by the Government to encourage people in continuous study. Any payment from CEF is not a chargeable income, as it is not derived from any office or employment. On the other hand, deductible self-education expenses do not include any reimbursement from employers or other parties. A taxpayer can only claim deductions for the actual amount of self-education expenses paid. In this case, this taxpayer should inform the IRD in writing about the reimbursement of course fee of $10,000 as soon as he received it in the year of assessment 2024/25. The IRD will issue an additional salaries tax assessment for the year of assessment 2023/24 to him to adjust the amount of self-education expenses previously granted.

In general, all outgoings and expenses wholly, exclusively and necessarily incurred in the production of assessable income are deductible. Those that are of a domestic, private or capital nature are not. The "wholly, exclusively and necessarily" and "in the production of" rules are very stringent. A more detailed discussion can be found in the Departmental Interpretation and Practice Note No. 9.

It should be noted that in order for an expenditure to be deductible, there must be a "perceived connection" between the expense and the assessable income. The outlay is not deductible if it is paid merely to enable a person to acquire employment. A distinction must be drawn between "an expense incurred in gaining income" [for example, the cost of travelling from home to the place of work] and "an expense incurred necessarily for the purpose of gaining it".

There is a well-settled line of cases which hold that indemnity insurance is not incurred "in the production of" assessable income, even if the employer requires such an indemnity insurance to be taken out by the taxpayer. The test is not whether the employer imposes the expense but whether the duties do: in the sense that the duties cannot be performed without incurring it.

Under a strict interpretation of law [Paragraph 10 above refers], these fees and subscriptions are not deductible.

However, if registration with a certain body is required by law, e.g., a medical doctor is required by law to register with the Medical Council and obtain an annual practicing certificate before he is able to practise, deduction of these fees are allowed by extra-statutory concession.

On the other hand, where the holding of a professional qualification is a prerequisite of employment and where the retention of membership and keeping abreast of current developments in the particular specialty are of regular use and benefit in the performance of duties, the subscription paid to no more than one professional association is allowed by extra-statutory concession.