Do I need to file a tax return when I receive funding from the Anti-epidemic Fund? How do employers and employees file tax returns for related subsidies?

On 29 May 2020, the Exemption from Salaries Tax and Profits Tax (Anti-epidemic Fund) Order came into effect. Exemptions and concessions from salaries tax and profits tax are provided to eligible individuals and businesses for assistance.

Introduction

“In view of the unprecedented challenges brought about by the COVID-19 epidemic, the Government has established an Anti-epidemic Fund… Some measures have no tax consequences, while other measures involve tax liabilities under the Inland Revenue Ordinance.”

When launching relevant incentives such as the Anti-epidemic Fund, the Government spokesman mentioned that tax assistance will benefit enterprises or individuals, and the beneficiaries will be exempted from paying profits tax and salaries tax in respect of the assistance. The first year of assessment and all subsequent years of assessment.

Salaries Tax Exemption

According to the “Exemption from Salaries Tax and Profits Tax (Anti-epidemic Fund) Order”, any employee or individual who receives the following three rounds of funds from the Anti-epidemic Fund projects and “further capital injection” can be exempted from payment of Salaries tax on relevant amounts, including:

• Monthly hardship allowance for cleaning and security guards working in private homes, buildings;

• Monthly allowances for cleaning, toilet attendants, and security workers under government and HA contracts;

• Grants for eligible registered construction workers;

• Grants for registered construction workers registered inspectors, and licensed plumbers;

• Subsidy for school bus drivers, school private light bus drivers;

• Subsidies for drivers of coaches mainly transporting passengers;

• Subsidy for nucleic acid testing of Hong Kong cross-boundary goods vehicle drivers;

• Subsidy for schools to act as mentors, coaches, trainers, and operators of interest classes;

• Subsidies from national sports associations, sports organizations, and coaches;

• Grants for staff of travel agents licensed tour guides, and tour escorts whose main business is tour guides and tour escorts;

• Grants from salesperson’s licensees and estate agents;

• Grants from SFC-licensed persons;

• Ex-gratia payments for affected part-time staff due to the closure of venues under the Leisure and Cultural Services Department.

Profits Tax Exemption

According to the “Exemption from Salaries Tax and Profits Tax (Anti-epidemic Fund) Order”, any enterprise receiving funds from the three rounds of anti-epidemic fund projects can be exempted from paying profits tax on the relevant payments, including retail and service industries:

• Sales proceeds from the sale of masks to the government (Local Mask Production Subsidy Scheme);

• Income from technology companies’ applied technology solutions;

• Reimbursement for price discounts provided by oil companies to taxis and public light buses;

• Administration fees from oil companies, MPF trustees, government and Housing Authority service contractors, and sports organizations for the implementation of relevant fund projects;

• Reimbursement for landlords offering “rent relief” to tenants;

• Fees charged by companies, mediators, and arbitrators for providing online dispute resolution services under the COVID-19 Online Dispute Resolution Scheme.

Do employers and employees need to declare receipts from the Anti-epidemic Fund when filing tax returns?

Neither employers nor employees are required to report relevant tax-exempt subsidies, grants, or allowances on their tax returns.

If a business or individual has already filed a tax return, it can notify the Inland Revenue Department in writing to amend the relevant information, and the employer may be required to file an “amended” employer tax return for the employee.

For more information on the tax treatment of the Anti-epidemic Fund, please refer to the “Summary of Arrangements”. As for the relevant measures for the new round of funds, tax treatment arrangements will continue to be made in accordance with the same principles.

The above information is for reference only. If you have any questions about the Anti-epidemic Fund and tax returns, we welcome your inquiries.