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Employers or employees claim deductions from retirement plan contributions

Taxpayers operating businesses in Hong Kong will be required to make contributions to accredited schemes as a result of employing staff. If the contribution is used to generate the assessable profits of the business, and in all circumstances it is not excessive, that part of the contribution shall be deemed to be used wholly and exclusively for the carrying on of the business. These contributions include the following:

• Contributions to funds established by recognized ORSO schemes, other than annual contributions. Pursuant to section 16(1) of the Inland Revenue Ordinance, only 20% of these contributions are deemed to be expenses during the basis period for which the payment was actually paid, and the remaining 80% are deemed to be for the following four Average deduction for each successive year of the tax year.

• Premiums paid to insurance contracts under recognized ORSO schemes, other than annual premiums.

• Make regular mandatory and voluntary contributions to MPF schemes that are deductible under Section 16(1) of the Inland Revenue Ordinance, subject to the provisions of Section 17(1)(h) of the Inland Revenue Ordinance, the deduction shall not exceed the total 15% of salary.

In addition to reporting employee salaries, taxpayers as employers are also required to declare the accrued benefits of employees receiving salaries tax from MPF schemes or occupational retirement schemes.

Whether the taxpayer is an employee or self-employed, contributions are made under the Mandatory Provident Fund Schemes Ordinance or a recognis^ed ORSO scheme. Under the Mandatory Provident Fund Scheme, if the taxpayer is an employee, he can claim to deduct the contributions made from the assessable income. If the taxpayer is self-employed, he can claim to deduct the contributions made from the assessable profits. An employee (whether employed by several employers) or a self-employed person can claim deductions for contributions up to the limit set for each year of assessment.

In addition, the taxpayer may not participate in the Mandatory Provident Fund scheme, but participate in an approved occupational retirement scheme that has been exempted by the Mandatory Provident Fund Schemes Authority, and this contribution is also tax deductible, but not more than the mandatory provident fund calculated under the MPF Ordinance. The claimed deduction is up to a cap set for each year of assessment.

The above information is for reference only. If you have any questions about tax declaration and accounting, we welcome your inquiries.

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