Enjoy tax deduction under Voluntary Health Insurance Scheme
Tax deduction for individual health insurance is only available for Certified Plans under Voluntary Health Insurance Scheme (VHIS) which has been implemented by the Government as from April 1, 2019. You can enjoy tax deduction for the current year of assessment 2019/20 by purchasing VHIS before March 31, 2020.
The maximum tax deductible amount of qualifying premium is HK$8,000 per insured person per annum without limit on the number of policies and insured persons
From the year of assessment 2019/20 onwards, taxpayers who purchase Certified Plans under VHIS for themselves or their specified relatives defined under the Inland Revenue Ordinance are eligible to apply for tax deduction. The tax deductible amount of qualifying premium is up to a maximum of HK$8,000 per insured person per year of assessment, and there is no limit on the number of policies and insured persons to claim tax deduction. However, the amount of premium qualifying for tax deduction (or tax-deductible amount) does not equal the amount of tax savings. The formula for calculating tax savings is as follows:
Amount of tax saved for each insured person= Tax deductible amount of qualifying premium (max. HK$8,000) x Tax rate (max. 17%)
Insurance companies’ obligation to facilitate claim for tax deduction
Insurance companies are required to provide proof of premium payment to assist policy holders to claim tax deduction for the qualifying premiums of Certified Plans. The premium payment date shown on the premium payment record will be the basis for determining which year of assessment is applicable to the premiums being claimed for tax deduction.
While tax deduction can reduce the spending on insurance premium in effect, it should not be taken as the only deciding factor to consider whether to buy a VHIS Certified Plan. You should also consider whether the benefit coverage of the Certified Plans fits your needs and budget, and compare product design and premiums of different insurance plans.
Migrate or stay? Understand the detailed arrangement first
If you have bought an individual indemnity hospital insurance plan on or before March 31, 2019, and your insurance company has participated in VHIS, you will have an opportunity to migrate from your existing plan to a VHIS Certified Plan. The timing of migration may depend on the renewal cycle of your existing insurance policy or other arrangements that your insurance company may offer.
The migration arrangement should take one of the following forms based on the offering of your insurance company:
- Direct renewal from your existing plan into a Certified Plan (i.e. same plan with VHIS features incorporated) at your policy renewal without re-underwriting (except in cases where the existing policy provisions do not provide renewal guarantee). If you refuse to accept, you may still stay insured with Standard Plan; or
- Beside your existing plan, you are given an option to change to a Certified Plan (different plan with VHIS features incorporated). In this case, you may be subject to re-underwriting and required to disclose your latest health conditions. If your enrolment is rejected or you refuse to accept the re-underwriting result, you may still stay insured with your existing plan.
Points to note before migration:
- Consider personal needs and budget
- Compare products and premiums
- Check if re-underwriting is required by insurance companies and the obligations of customers (e.g. disclosure of latest health conditions)
- Cancel the existing policy only after successful migration to VHIS Certified Plans