10 things to watch out for when...Completing your tax return
Deal with it: May is the month when those unmistakable green envelopes begin to filter into our post boxes. Resist the urge to throw it away in horror, or to hide it until you have the courage to face it. You have one month to fill it in and return it, or face the penalties.
Follow the rules: Red tape has an unfortunate habit of entangling those who do not follow its path exactly. A rate of not more than 15 per cent of your income must be paid to the Inland Revenue Department, with sliding rates in different cases. In exceptional circumstances, the tax department will allow late payment with a minimum 5 per cent surcharge.
Keep records: Always make a copy of any information submitted to the tax department, for protection in the case of discrepancy. Also, ensure that the file number on your return correlates with all other correspondence received.
Payment methods: Besides the traditional means of queuing up at the tax department or dropping a cheque in the payment box, these days tax can be paid by phone, automated teller machine or via the Internet. Net access is available through ESD Life public kiosks, although a HK$50 e-cert is needed to verify your signature. Promotional discount vouchers are being offered to encourage users.
Pay as you earn: The fact that tax is paid annually in Hong Kong, rather than as you earn, is a bugbear for many who do not have the discipline to save or who prefer to know they have been taxed at source. Civil servants can sign up for a save-as-you-earn scheme while the rest of us can purchase tax-return certificates, by automatic debit or whenever we are feeling flush. Interest is paid on the money put aside.
Pension contributions: Mandatory Provident Fund or Orso scheme contributions are tax deductible, up to a maximum of HK$12,000 a year.
Other deductions: If you have married, had a child or undergone some other life change in the past year, be sure to record it to qualify for deductions. A letter will be needed from the employer to claim back on rent. Estate duty is payable in the case of a death in the family. For other deductions, check the list of approved charities, note the costs of self-education and claim for dependents.
Special circumstances: Filling in a return becomes a little more complicated for those who own property or run a business. If a business has made a loss or interest is paid on a mortgage, there are benefits from a personal tax assessment rather than being taxed at the standard rate. While there is no capital gains tax in Hong Kong, share option gains are taxable.
Moving on and around: Settle your tax bill before leaving town and always inform the tax department if away for an extended period. If expanding professionally or personally into other countries, seek the advice of a tax professional as there usually is a liability to pay tax in the country in which gains are made.
Graphic: TRIGG1gwz
