The Budget 2023 has been released. Apart from relief measures for people’s livelihood, there are also many tax concessions, but they are less favourable than in previous years when there was an epidemic. These include lowering the salaries tax and personal assessment rates to $6,000. Financial Secretary Paul Chan also proposed to increase the basic child allowance and the additional tax credit for the year of birth tax from $120,000 to $130,000 with effect from the 2023/24 financial year. Below is a summary of the key points.
Reduction of profits tax, salaries tax and tax under personal assessment for the year of assessment 2022/23, subject to a ceiling of $6,000
The Financial Secretary has proposed a one-off reduction in profits tax, salaries tax and tax under personal assessment for the year of assessment 2022/23, subject to a ceiling of $6,000 per case.
For profits tax, the reduction will be capped on a per-business basis, while for salaries tax, it will be capped on an individual basis, with a cumulative tax credit of up to $6,000 for married persons.
For personal assessment, the relief is capped on an individual basis for unmarried persons and is cumulative up to a maximum of $6,000 for married persons. If you have business profits or rental income and choose to be taxed under personal assessment, you can get the relief but it does not apply to property tax.
How do I pay both Salaries Tax and Profits Tax?
If a taxpayer is required to pay both Salaries Tax and Profits Tax, he/she is entitled to a reduction in both Salaries Tax and Profits Tax and can complete Part 7 of the Individual Tax Return (BIR60) for the year of assessment 2022/23.
Taxpayers are not required to apply or make enquiries to IRD, but are required to complete the Profits Tax and Individual Tax Return for the year of assessment 2022/23 as usual. The taxpayer will still be required to pay the provisional tax for the final assessment for the year of assessment 2022/23 and the provisional tax for the year of assessment 2023/24.
Do I need to apply for an increase in the child allowance to $130,000?
Upon enactment of the legislation, the Inland Revenue Department will automatically calculate the provisional salaries tax for the year of assessment 2023/24 based on the new child allowance.
The Financial Secretary proposes to increase the basic child allowance for each child and the additional child allowance for the year of birth of a child from the current $120,000 to $130,000 with effect from the year of assessment 2023/24, giving a total allowance of $260,000 per child for the year of birth and $130,000 for subsequent years.
Applications for provisional salaries tax for the year of assessment 2023/24 can be made in writing after the birth of the child and must provide the date of birth of the child and on
(a) 28 days before the due date for payment of provisional tax or
(b) within 14 days after the date of issue of the notice of provisional tax payment, whichever is later.
When filing the Individual Tax Return for the year of assessment 2023/24, you will need to fill in the child’s information again in order to claim the child allowance.
The above information is for reference only. If you have any queries or information about filing tax returns (personal tax returns, corporate tax returns, accountant tax returns), you are welcome to contact our professional advisors and we will provide you with a free quote and consultation service in due course.