What is “Personal Assessment”? Is this tax assessment really more tax-efficient and better for you?

What is

Have you seen the option “Personal Assessment” in your tax return? What exactly is “Personal Assessment”? Who is it suitable for? If you are a proprietor with a business or an owner of a rental property, “Personal Assessment” may bring you more tax benefits, but if you don’t know the details, this article will help you understand “Personal Assessment”.

What is personal assessment?

Newcomers to the workplace who are new to tax treatment may only know three types of taxes under the Inland Revenue Ordinance: “salaries tax”, which is the first for wage earners, “profits tax” based on business profits, and “property tax” based on property income. “.

However, in the tax declaration process, it is not the only option to declare the tax separately item by item. If the taxpayer is the proprietor of the business or the owner of the rental property, he can consider “personal assessment”. Tax relief arrangement to pay tax.

On the contrary, if the taxpayer only has salaries tax income, there is basically no need to consider the option of “personal assessment”.

Are there really benefits to personal assessment?

In short, the benefit of “Personal Assessment” is to provide business owners and rental property owners with a “consolidated income” tax option, allowing them to enjoy a more cost-effective than the standard rates of profits tax and property tax. More favorable tax plan. Those who choose “Personal Assessment” can also claim at least 9 deductions and allowances, including:

• Interest payable on borrowings to earn property income (deductible not to exceed the net assessable value of the property);

• Recognize charitable donations;

• Residential care expenses for the elderly;

• home loan interest;

• Eligible premiums paid under the VHIS policy;

• Qualifying annuity premiums and tax-deductible MPF voluntary contributions;

• business losses during the year of assessment;

• Calculation of losses for previous years under the method of personal assessment;

• Personal allowances.

However, in practice, “personal assessment” is not necessarily the most tax-efficient tax option, depending on the taxpayer’s income in that year, especially since the top marginal tax rate of the progressive tax rate is higher than the standard tax rate 2%, those with higher incomes may not benefit. However, you can rest assured that even if the taxpayer has to pay more tax due to the declaration of “Personal Assessment”, the Inland Revenue Department will still help you calculate the most favorable plan according to the situation, and issue tax assessments separately in a classified tax manner. notice.

How to apply for “Personal Assessment”?

It’s very simple, you can choose “Personal Assessment” in part 7 of your tax return for individuals (BIR60), or when you file an application (IR76C).

Joint assessment under Personal Assessment with the spouse?

If married persons (not living apart) wish and either of them is eligible for personal assessment, they can opt for joint personal assessment with their spouses, and the total income of both parties will be It will be aggregated into the total joint income for tax assessment. Conversely, if there is no joint assessment, the couple will generally share their total income after deductions on a pro-rata basis.

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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