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Salaries tax reduction of $10,000, how does employment get the most tax benefit?

The severe epidemic and the tax filing season have made many taxpayers sigh and bewildered. Fortunately, in the Budget announced by the Financial Secretary recently, it announced that salaries tax and personal assessment will be reduced by 100% for the year of assessment 2021/22, with a ceiling of 10,000 It is expected that more than 2.01 million people will benefit, and the relevant measures will also reduce the revenue of the government by hkd13.1 billion. For ordinary salaries earners, how to fully enjoy tax benefits, this article will calculate for you a practical example.

What is the monthly salary to enjoy the $10,000 salaries tax deduction?

As the Hong Kong government announced this tax year, taxpayers will be able to enjoy salaries tax relief up to a maximum of HK$10,000. So, how much monthly salary income can “enjoy” this tax benefit?

Please do not panic, the answer has been calculated. As long as your monthly salary is HK$25,363, which is equivalent to an annual income of HK$304,360, your tax payable for this tax year is zero, so you can say that you don’t have to pay any tax.

Now take a single person as an example. His annual salary is HK$306,000, and his monthly salary is HK$25,500. How much salaries tax he needs to pay for the year of assessment 2021/22 under the condition that he only enjoys basic allowances:

First of all, out of his total income of $306,000, the allowances he can enjoy are:

Basic Allowance – HK$132,000;

Mandatory MPF Contribution – HK$15,300,

Based on the progressive tax rate, the tax for the above example in the current tax year is HK$10,218, and after deducting the new salaries tax concession cap of HK$10,000, the final tax payable will be HK$218.

For those who enjoy the parental allowance, a monthly salary of $42,300 can be fully deducted from salaries tax

In the previous example, we took the single person as an example. This time, we will take as an example a working child who supports 2 parents aged 60 or above. Since the taxpayer in the example is entitled to the “Dependent Parent Allowance” of HK$200,000, the threshold for exhausting the salaries tax deduction is lowered. After calculation, as long as the taxpayer with a monthly income of HK$42,258 is equivalent to the annual income of $507,100 Hong Kong dollars are not subject to tax in this tax year.

For the convenience of calculation, we calculate the monthly salary of $42,300. Among his total income of $507,600, the tax-free allowance he can enjoy:

Basic Allowance – HK$132,000;

Mandatory MPF Contribution – HK$18,000;

Dependent Parent Allowance – HKD 200,000,

Therefore, based on the marginal tax rate, the tax for the above example in the current tax year is HK$10,064, and after deducting the new salaries tax concession cap of HK$10,000, the final tax payable will be HK$64.

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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