Record Keeping
1.Section 51C of the Inland Revenue Ordinance requires every person carrying on a trade, profession or business in Hong Kong to keep sufficient records in the English or Chinese language of his income and expenditure to enable the assessable profits to be readily ascertained.
2.Such records shall be retained for a period of not less than 7 years.
3.Failure to comply with the requirements of the Ordinance without reasonable excuse may be liable to a maximum fine of $100,000.
4.The records prescribed in the Ordinance include :-
a. books of accounts recording receipts and payments, or income and expenditure;
b. vouchers, bank statements, invoices, receipts;
c. records of the assets and liabilities of the person in relation to that trade, profession or business;
d. records of all entries from day to day of all sums of money received and expended in relation to that trade, profession or business;
e. where that trade, profession or business involves dealing in goods -
i. a record of all goods purchased, and all goods sold in the carrying on of that trade, profession or business showing the goods, and the sellers and buyers in sufficient detail to enable the Commissioner to readily verify the quantities and values of the goods and the identities of the sellers and buyers, and all invoices relating thereto;
ii. statements of trading stock held by the person at the end of the accounting period and all records of stocktakings from which any such statement of trading stock has been prepared;
f. where that trade, profession or business involves the provision of services, records of the services provided in sufficient detail to enable the Commissioner to readily verify the entries.
The Scope of the Charge
This tax is imposed on all income arising in or derived from Hong Kong from
an office, employment or pension. In deciding whether income “arises in or is derived from
Hong Kong”, it is necessary to establish where the employment, i.e. the source of income, is
located. “Income arising in or derived from Hong Kong from any employment” includes all
income derived from services rendered in Hong Kong, without in any way limiting the
meaning of the expression. Special provisions in the IRO apply to crews of ships and
aircrafts who visit Hong Kong for short spans of time and persons who have paid tax of
substantially the same nature as Hong Kong Salaries Tax in any territory outside Hong Kong.
“Income from any office or employment” includes all forms of income and
perquisites from an employer and others. Holiday journey benefits, award of shares and
share option gain are chargeable income. For share option gains, the gain will be taxable
when the option is exercised, assigned or released. Even if the share option is exercised
after the employee has ceased the employment, the gain is still taxable.
Income also includes “rental value” in respect of a place of residence provided
rent-free by the employer or an associated corporation of the employer (including cases of
reimbursements of rent paid by employees directly to their landlords). If the place of
residence provided is a flat or a serviced apartment, the “rental value” to be included in the
assessment is 10% of the total income (after deducting outgoings (except expenses of
self-education), depreciation, etc.) from the employer and the associated corporation of the
employer. Taxpayer may elect to substitute the rental value at 10% with the rateable value.
If the place of residence is in a hotel, hostel or boarding house, the rental value is 8%
(accommodation with no more than 2 rooms) or 4% (accommodation with no more than one
room) of the total income after appropriate deductions. If the employer provided a flat and
specified that it was to be shared by more than one employee, the computation of the rental
value is the same as that for a hotel, hostel or boarding house.
The Scope of the Charge
Property Tax is charged on the owners of land and/or buildings in Hong Kong
and is computed at the standard rate on the net assessable value of the property. The
standard rate is 15% from the year of assessment 2010/11 onwards.
The Basis of Assessment
The assessable value is computed by reference to the actual consideration
payable to the owner in respect of the right of use of the property. Examples of
consideration to be included in the assessable value are gross rent received or receivable,
payment for the right of use of premises under licence, lump sum premium, service charges
or management fees paid to the owner, and the owner’s expenditure (e.g. repairs) borne by
the tenant. The net assessable value is the assessable value (after deduction of rates agreed
to be paid and paid by the owner and irrecoverable rent, but not other payments e.g.
government rent and management fee) less a 20% statutory allowance for repairs and
outgoings. However, any sums previously deducted as irrecoverable and then recovered
should be treated as consideration in the year of recovery.
Properties for Owner’s Business Use
A corporation letting property in Hong Kong is regarded as carrying on
business in Hong Kong and should be subject to profits tax in respect of its property income.
However, if the income from property chargeable to Property Tax is included in the
taxpayer’s profits for Profits Tax purposes, or if the property owned by the taxpayer is
occupied by him/her for producing chargeable profits, the amount of Property Tax paid will
be set off against the amount of Profits Tax payable. Any excess Property Tax paid will be
refunded. As an alternative, corporations carrying on a trade, profession or business in
Hong Kong, on application made in writing to the Commissioner, may be exempt from
paying Property Tax which would otherwise be set off against their Profits Tax.
Allowances
You are entitled to the basic allowance and may be eligible to claim other allowances provided that the prescribed conditions are satisfied. Here you can learn about these allowances and how they might reduce your tax burden.
Basic Allowance
You are entitled to the basic allowance unless you are married and have been granted the married person’s allowance for the year. You do not have to lodge a claim for this allowance.
Married Person’s Allowance
You can claim the married person’s allowance in any year of assessment if you are married at any time during that year, and
•are not living apart; or are living apart from your spouse but are maintaining or supporting your spouse; AND
•your spouse did not have any income chargeable to salaries tax; or you and your spouse have elected joint assessment; or you and your spouse have elected personal assessment.
“Marriage” in the context of the Inland Revenue Ordinance (IRO), refers to a heterosexual marriage between a man and a woman. “Spouse” is defined in section 2 of the IRO as a husband or a wife. A “husband” is a married man and a “wife” is a married woman.
Child Allowance
You can claim the child allowance if, during a year of assessment, you maintain an unmarried child, who was:
•under 18 years old; or
•of or over 18 but under 25 years old, and receiving full time education at a university, college, school or other similar educational establishment; or
•of or over 18 years old and was, because of physical or mental disability, unable to work.
A “child” means:
•your own child, adopted child or step child; or
•the child / adopted child / step child of your spouse or former spouse.
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