Tax arrangements under the epidemic: Can subsidies income received for “Anti-epidemic Fund” be exempted from filing tax returns?

The epidemic has been going on for a long time. Under the premise of a poor economy, the tax season tax bill/tax return is coming again, and many employers and employees of enterprises will be troubled by this. If you don’t know what’s good, you may wonder, do you need to file tax returns for the “anti-epidemic fund” you received earlier? And once faced with tax turnover difficulties, is there any other remedy?

Can I be exempted from filing tax returns for the “Anti-epidemic Fund”?

In response to the epidemic situation, the Hong Kong government has implemented the The Exemption from Salaries Tax and Profits Tax (Anti-epidemic Fund) Order referred to as “the Exemption Order”, from 29 May 2020, which is applicable to the year of assessment commencing on 1 April 2019 and salaries tax and profits tax chargeable for all subsequent years of assessment.

According to the above-mentioned exemption order, different affected enterprises can be exempted from paying salaries tax and profits tax according to the project grants, allowances or other financial assistance they have received from the Anti-epidemic Fund.

When calculating assessable profits, non-capital expenditures earned by enterprises can still be deducted before tax even if the funds for paying the expenses come from the Anti-epidemic Fund. It should be noted that when an employee receives wages from the employer due to the subsidy of the Employment Support Scheme, it should still be the employment income and still need to pay salaries tax.

Moreover, certain designated funds of the Anti-epidemic Fund cannot be exempted and still have tax consequences, including:

• Proceeds from orders received from government and/or NGOs under the Local Mask Production Subsidy Scheme;

• Payments to businesses for providing applied technology solutions, such as reusable masks;

• To pay the government and the Hong Kong Housing Authority service contractor the administration fee for the disbursement of the subsidy;

• Reimbursement to oil companies for providing discounts on LPG prices to taxis and public light buses and payment of related administrative fees;

• reimbursement to Hong Kong Cyberport Management Limited for the provision of rental relief;

• Reimbursement of rent relief payments to owners or operators of arts venues;

• Pay MPF trustees administrative fees for implementing the Employment Support Scheme;

• Grants to the eBRAM Center to cover initial establishment expenses and fees of mediators and arbitrators;

• Pay administrative fees to national sports associations and sports organisations for the implementation of the fund scheme;

• Administrative fees paid to service providers operating the Beauty Salon, Massage Parlor and Party Room Subsidy Scheme.

Having financial difficulties? Consider paying tax in instalments

Once taxpayers face financial difficulties and cannot pay taxes on time, they may consider applying for instalment payment.

Taxpayers in need can apply for instalment payment due to financial difficulties as long as they are before the tax payment deadline. As a consideration, the Inland Revenue Department will generally levy a surcharge of not more than 5% on the unpaid tax on the tax payment deadline date; and the unpaid tax and 5 % surcharge, a surcharge of not more than 10% will be imposed.

However, based on the experience of the previous year of assessment, the Inland Revenue Department exempted the above-mentioned “surcharge on installment payments” for the 2019/20 year of assessment for salaries tax and profits tax, with a limit of one year. If the taxpayer has paid the first instalment of the tax bill on time on the tax payment deadline date, and is approved to pay the second instalment of the tax bill, the maximum exemption for one year will be determined by the amount of the second instalment of the tax bill. from the date of tax payment.

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