Hong Kong SAR
Outgoings and expenses other than those of a domestic, private or capital nature are allowable under salaries tax insofar as they are incurred wholly, exclusively, and necessarily in the production of income subject to salaries tax. In practice, very few expenses can meet the above restrictive requirements.
Some business travel expenses (excluding private travel expenses such as home to place of work) and entertainment expenses may qualify for deduction under salaries tax subject to the restrictive requirements above. Depreciation allowances may be allowed on capital expenditure incurred on plant and machinery where the use of which is essential in the production of assessable income.
A few concessionary deductions are specifically provided for under the Inland Revenue Ordinance.
Qualifying premiums paid under the Voluntary Health Insurance Scheme (VHIS)
Qualifying premiums paid under the Hong Kong SAR government’s VHIS are allowed for deduction starting from the year of assessment 2019/20. The maximum amount to be deducted in respect of qualifying premiums paid for each insured person for each year is HKD 8,000, with no cap on the number of insured persons for whom the taxpayer is eligible for claiming the concessionary deductions in a given year of assessment.
Charitable donations made in cash to approved charitable institutions are allowable if the aggregated amount for a year of assessment is not less than HKD 100. For year of assessment 2020/21, the deduction for charitable donations is restricted to 35% of the assessable income after allowable deductions of the year of assessment.
Elderly residential care expenses
Elderly residential care expenses paid to a residential care home in respect of a parent or grandparent of a taxpayer or spouse are deductible up to a maximum of HKD 100,000 for each tax year for each parent or grandparent for year of assessment 2020/21.
A deduction is allowed for self-education expenses paid for employment-related courses. The maximum amount of deduction allowed for each tax year is HKD 100,000 for year of assessment 2020/21.
Mandatory contributions to an MPF scheme and contributions to other retirement schemes
Mandatory contributions to an MPF scheme and contributions to other recognised occupational retirement schemes are deductible up to a maximum of HKD 18,000 for year of assessment 2020/21.
Voluntary contributions to an MPF scheme and qualifying annuity premiums
Effective from year of assessment 2019/20, a deduction is allowed for (i) employee’s MPF voluntary contributions made to a designated MPF account and (ii) qualifying annuity premiums paid for a qualifying deferred annuity policy (essentially those policies certified by the Insurance Authority).
The maximum total tax deduction allowed for (i) and (ii) above is HKD 60,000 for each year of assessment.
If an employee is entitled to tax deduction for both qualifying annuity premiums and MPF voluntary contributions for a year of assessment, deductions will firstly be allowed for MPF voluntary contributions and then for qualifying annuity premiums.
Home loan interest expenses
Home loan interest paid can be deducted by a person if the property is owned by that person and is occupied by that person as their place of residence during the year of assessment. The place or residence must be situated in Hong Kong SAR in order to qualify for the deduction. The maximum deduction for each tax year is HKD 100,000 for 20 years of assessment.
There is no blanket or standard deduction although a few concessionary deductions are available (see Concessionary deductions above for more information).
Under salaries tax and personal assessment (if elected), allowances are granted for each taxpayer provided that the applicable conditions for the allowances are satisfied. The amounts allowed for year of assessment 2020/21 are shown below.
|Personal allowances||2020/21 (HKD)|
|Basic allowance (for single persons) (1)||132,000|
|Married person’s allowance (for married couples) (1)||264,000|
|Child allowances (2):|
|1st to 9th child (each):|
|Year of birth||240,000|
|Dependent parent or grandparent allowance (each):|
|Aged 60 or above:|
|Not residing with taxpayer||50,000|
|Residing with taxpayer throughout the tax year||100,000|
|Aged 55 to 59:|
|Not residing with taxpayer||25,000|
|Residing with taxpayer throughout the tax year||50,000|
|Dependent brother or sister allowance (for whom no child allowance is claimed)||37,500|
|Single parent allowance (for single parent with sole or predominant care of a child)||132,000|
|Disabled dependant allowance (in addition to any allowances already granted for the disabled person)||75,000|
|Personal disability allowance (in addition to any allowances already granted for the disabled person)||75,000|
- If a married couple both have income chargeable to salaries tax and no joint assessment or personal assessment is elected, they are taxed as two single persons and each will be entitled to the basic allowance. The married allowance is given only if one spouse has no income liable to salaries tax, or where joint assessment or personal assessment is elected by the couple.
- Child allowances are only available to one of the spouses of a married couple. The couple must state which spouse will claim the child allowance.
Business expenses incurred for producing assessable profits are allowable under profits tax (see Profits tax in the Other taxes section for more information).
Business losses may be used to offset against assessable business profits from the same trade under profits tax. If an individual elects personal assessment (see the Tax administration section for more information), business losses can be used to offset employment income or business profits from other trades. Capital losses are not allowable under either salaries tax or profits tax.
Fine and penalties
Fine and penalties are not deductible as they do not meet the conditions of being incurred wholly, exclusively and necessarily in the production of income subject to salaries tax.