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Introduction
Despite Hong Kong having a simpler tax system than most developed countries, it pays not to go into auto-pilot mode when filling in taxes; you should know you can cut your bill with a few simple steps.
Things to consider
– Claim home loan interest allowance.
– Create a housing deduction: If you receive housing allowance from your employer, ask them to repackage it as a reimbursement. So you pay rent to your landlord, and your employer reimburses this amount to your pay packet, as if it were paying a housing allowance.
– Know your regimen: Hongkongers can chose to be taxed either at a flat tax of 15 per cent, or at a mildly progressive rate that rises to 17 per cent after various allowances and deductions. Generally, the people in the top income bracket do better with the flat tax, while low to medium income earners gain with the progressive system.
– Deduct your charitable donations and MPF: Donations to recognised charitable are tax-exempt as long as the total donation is not more than 35 per cent of assessable income.
– Don’t forget your children: You can claim allowances for the year of birth of your child and this continues for all other years. Taxpayers can also claim allowances on other dependents including siblings, parents, and grandparents.
– Apply to hold over provisional tax: If you’re expecting a big drop in income (say, more than 10%), you can apply for holding over all or part of your provisional tax.
– Consider a personal assessment: If you pay both profits and property tax, a personal assessment might be the way to go. Anyone can ask for personal assessment, which is a combined assessment of all the income chargeable to salaries, profits and property.
– Make sure you get a tax clearance before leaving Hong Kong: Any taxpayer leaving Hong Kong should notify Inland Revenue and settle all applicable taxes before departure. This is key because your employer will be obliged to hold back the last payment until they get clearance.
Summary
Effective tax strategies for expats can help you make the most out of your money. Hong Kong has a low tax rate and filling in returns is easy compared to the labyrinth of rules and deductions in the US, Canada, UK or Australia. This simpler system allows for the typical expat to take advantage of these benefits whilst residing in Hong Kong.
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