After a year of hard work, you may wish to reduce the tax payment amount as much as possible. The HKSAR Government introduced 3 tax deductions in the year of assessment 2019/20, including Voluntary Health Insurance Scheme (“VHIS”) Certified Plan, MPF Tax Deductible Voluntary Contributions (“TVC”) and Qualifying Deferred Annuity Policy (“QDAP”). However, Hong Kong taxpayers indeed may not have full understanding on the benefits of these eligible products. How much do you know about them?
Tax deductions are applicable to qualifying premiums paid under the Voluntary Health Insurance Scheme (VHIS) Policy, premiums paid under a Qualifying Deferred Annuity Policy (“QDAP”) and MPF tax deductible voluntary contributions (TVC). These products are the allowable tax deductions based on your actual spending. They on one hand offer you protections and on the other hand up to HKD68,000 tax deduction per tax assessment year (the maximum tax deduction for qualifying premiums paid under VHIS certified plans for each insured person is HKD8,000 per tax assessment year; and the combined tax deductions for QDAP and MPF TVC is HKD60,000 per each tax assessment year.)
The qualifying premiums paid under a certified VHIS plan for yourself or specified relatives are eligible for a potential tax deduction. The maximum deduction for each insured person is HKD8,000 and there is no cap on the number of specified relatives. In other words, you are allowed with more potential tax deduction if you purchase a certified policy for more specified relatives. Yet be cautious about the payment terms and your affordability to avoid overloading merely for potential tax deductions.
What are specified relatives under VHIS policy?
Specified relatives refer to
Please refer to the definition of specified relatives as set out in the Inland Revenue Ordinance (Cap. 112).
A stable retirement life is what everyone is hope for. Not just does MPF TVC can help build up your retirement pot, but also enjoy potential tax deductions. The maximum MPF TVC tax deductible amount for a tax assessment year is HKD60,000 (this is an aggregate of QDAP and MPF TVC). However, investment involves risks, and with a longer investment period, contributors can only withdraw the TVC account balance at the age of 65 or when you meet other withdrawal requirements, so it should be considered.
Qualifying Deferred Annuity Policy (QDAP) gives you peace of mind by offering a steady income stream to support daily expenses for your retirement life. The qualified annuity premiums may also be eligible for tax deductions up to HKD60,000 in a tax assessment year (tax deduction limits share with MPF TVC). If you and your spouse are both taxpayers with income chargeable to tax, you would be able to enjoy an aggregated maximum deductions of HKD120,000.
If you are paying qualifying annuity premium for QDAP and also making contribution to MPF TVC in a year of assessment, what will be the deduction order if the total exceeds the specified maximum deduction limit of HKD60,000? Tax deduction for TVC goes first followed by QDAP qualifying annuity premium, up to the maximum deduction of HKD60,000.
Lodging a claim is easy, simply claim on your Tax Return - Individuals form will do. If you would like to know the latest official announcements about Hong Kong tax deductions, please visit Inland Revenue Department website.
We provide insurance and MPF products eligible for tax deduction, fitting your needs in every aspect. If you would like to know more about the product details and examples, visit our Insurance plans and MPF scheme for tax savings.
Besides getting potential tax deductions with VHIS, QDAP and MPF TVC, pay your tax wisely by enjoying credit card tax payment promotions from various banks during the tax season. Paying tax by credit card is easy via Personal e-Banking, and get a chance to earn extra cards rewards upon successful registration of Tax Payment Promotion. After making an online tax payment by credit card, you can even follow the simple steps of applying for Credit Card Tax Instalment Plan right afterwards.
Also want some financial flexibility? You may go for a tax loan. Interest rate for a tax loan is generally lower than for other personal loan products. You may consider applying for a tax loan to cover your tax payment while improving your cash flow to achieve your plans. Married couple applying for tax loans together may enjoy an even lower interest rate with the combined loan amount.
To borrow or not to borrow? Borrow only if you can repay!