Tax Hong Kong Client Alert Legco Approves Tax Reliefs for Individuals, Businesses and Families with Children On 9 July 2015, the Hong Kong Legislative Council passed an amendment to the Inland Revenue Ordinance that gives effect to two major tax reliefs proposed in the 2015-16 Budget. The first is a one-off reduction of salaries tax, tax under personal assessment and profits tax for the year of assessment 2014/15 by up to HK$20,000 per case. The second is an increase of the child allowance by HK$30,000 for each child. One-off reduction of salaries tax, tax under personal assessment and profit tax Salaries tax, tax under personal assessment and profits tax for the year of assessment 2014/15 will be reduced by 75%, subject to a ceiling of HK$20,000. The one-off tax reduction will be reflected in the taxpayers’ final tax payable for the year of assessment 2014/15 and application for the tax reduction is not required. Increase of the child allowance The amendment increases the child allowance under salaries tax and tax under personal assessment from the current HK$70,000 to HK$100,000 for each child. The additional one-off child allowance in the year of birth is also increased from the current HK$70,000 to HK$100,000 for each child. The increases will take effect from the year of assessment 2015/16 onwards. The IRD will apply the enhanced basic and additional child allowance, if applicable, when calculating the provisional tax for the year of assessment 2015/16. Financial and economic implications of this amendment It is estimated that the increases in child allowances will involve $2 billion a year as revenue forgone. As for the one-off reduction of salaries tax, tax under personal assessment and profits tax for the year of assessment 2014/15, the estimated one-off revenue forgone is $17.7 billion. The Hong Kong Government expects that these tax reliefs will help relieve the financial burden of taxpayers in general and families with children in particular, and possibly generate some mild stimulus to consumer spending. The one-off reduction of profits tax will allow enterprises, especially small and medium ones, to have more disposable funds for reinvestment. July 2015 Beijing Suite 3401, China World Office 2 China World Trade Centre 1 Jianguomenwai Dajie Beijing 100004, PRC T: +86 10 6535 3800 F: +86 10 6505 2309 Hong Kong 14/F Hutchison House 10 Harcourt Road Central, Hong Kong T: +852 2846 1888 F: +852 2845 0476 Shanghai Unit 1601, Jin Mao Tower 88 Century Avenue, Pudong Shanghai 200121, PRC T: +86 21 6105 8558 F: +86 21 5047 0020 www.bakermckenzie.com To find out more about how we can add value to your business, please contact: Steven Sieker +852 2846 1048 firstname.lastname@example.org Pierre Chan +852 2846 1560 email@example.com Josephine Chuk +852 2846 1644 firstname.lastname@example.org Noam Noked +852 2846 2116 email@example.com This publication has been prepared for clients and professional associates of Baker & McKenzie. Whilst every effort has been made to ensure accuracy, this publication is not an exhaustive analysis of the area of law discussed. Baker & McKenzie cannot accept responsibility for any loss incurred by any person acting or refraining from action as a result of the material in this publication. If you require any advice concerning individual problems or other expert assistance, we recommend that you consult a competent professional adviser. Unsubscribe To unsubscribe from our mailing list or to change your communication preferences, please contact firstname.lastname@example.org. © 2015 Baker & McKenzie. All rights reserved. Baker & McKenzie International is a Swiss Verein with member law firms around the world. In accordance with the common terminology used in professional service organizations, reference to a “partner” means a person who is a partner, or equivalent, in such a law firm. Similarly, reference to an “office” means an office of any such law firm.