Maximizing Your Individual Tax Return in Hong Kong

Did you know that over 7.5 million people live in Hong Kong? This means millions of people are filing individual tax returns each year. Not to mention, there are businesses headquartered in the area that file taxes too.

If you’ve struggled to make the right claims and pay more taxes than necessary, this is the guide for you. Start tax planning early by using these tips to maximize your individual tax return.

Choose Your Tax Rate

To maximize your individual tax return in Hong Kong, you can choose to be taxed at a flat rate of 15% or a progressive rate that goes up after allowances, deductions, etc.

The progressive rate goes up to 17% and is best for those in a low to medium income bracket. Higher earners tend to go with the flat 15% rate.

Ask for a Personal Assessment

Anyone can ask the IRD for a personal assessment of their taxes. This is a particularly beneficial technique for those who pay profits and property taxes.

The purpose of this involves tax exemption claims. For example, an individual can claim loan interest on rental properties or offset a loss of their business.

There is nothing to lose when asking for a personal assessment because anyone can get one. If the IRD finds you receive no benefit through your personal assessment, they will tax you normally.

Break up Your Tax Payments

Instead of deducting tax per quarter or per month, the Inland Revenue will tax you at the end of the year. As a result, you might have to pay a large lump sum tax when you file your individual tax return at the end of the financial year.

To avoid this daunting tax return status, you can opt to make regular payments throughout the year through tax reserve certificates that are set against your tax bill.

Ask your bank how you can automate regular tax payments to avoid the large end-of-the-year lump sum.

Hold Over Provisional Tax

If you are set to retire at the end of the year or if you own a business that is projected to make less revenue, you can ask the IRD to hold over your provisional tax.

Those in Hong Kong who expect to earn less than 90% of what they did the year before can apply for this. The IRD may hold some or all of your provisional tax for that year.

The Hong Kong Government website will tell you more about holding over your provisional tax to maximize your individual tax return.

Maximize Your Individual Tax Return

If you are a primary resident in Hong Kong, you have to pay taxes at the end of the year just like everyone else. However, there are ways you can maximize your individual tax return to get the most out of your tax deductions and benefits.

Choose a tax rate that fits your needs, ask for a personal assessment, and break up your tax payments throughout the year. Ask the IRD to hold over your provisional tax if you had a rough year.

Use this guide to file your individual tax return and read the other posts on our blog.

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