Thinking of buying a “Tax Reserve Certificate” before filing a tax return? How good is the interest-payable tax?

Tax season is here again. Many taxpayers have begun to plan how to file tax returns in the most favorable way, but in fact, the Hong Kong government has launched “Tax Reserve Certificates” that have both saving and tax payment functions to help taxpayers plan their tax and finances in the long run. This article will introduce the basic information of the tax reserve certificate and refer to the annual interest rate of the tax reserve certificate to see how favorable it is.

Tax Reserve Certificates in Hong Kong

As the name suggests, “Tax Reserve Certificates” are for the purpose of “saving and paying taxes”, hoping to help taxpayers have the function of saving at the same time when dealing with taxes. It is a hundred times better than borrowing tax loans. Habit.

Currently, the Hong Kong government has issued a total of two types of Tax Reserve Certificates “TRCs”, namely general Tax Reserve Certificates and Tax Reserve Certificates with “conditional holdover orders”. The former is for taxpayers to save for tax payment, while the latter is a payment guarantee that taxpayers have to provide for postponing tax payments after objecting to or appealing against tax assessments.

How to use tax reserve certificate?

General taxpayers can participate in the “Electronic Tax Reserve Certificate Scheme”; serving and retired civil servants can voluntarily participate in the “Earn-As-You-Go” scheme.

“Electronic Tax Reserve Certificate Scheme”

If you want to participate in the “Electronic Tax Reserve Certificate Scheme”, the taxpayer needs to complete the “Tax Reserve Certificate Account” application form (IR1306) and return it to the Inland Revenue Department for account opening. Once the account is opened, you can use the account number of the account. Purchase or redeem electronic tax reserve certificates. Each taxpayer is only allowed to open one tax reserve certificate account, and it cannot be opened jointly.

After opening a tax reserve certificate account, taxpayers can purchase a fixed monthly amount of tax reserve certificates with a face value of at least HKD300 and multiples of HKD 50. As long as the tax reserve certificate is used to clear the holder’s tax, interest can be obtained.

“Earn and Save” Plan

As for the “Earn-As-You-Save” scheme specially designed for civil servants, interested participants can submit an Authorization Form (General Form No. 605) within one month of the effective month to authorize the Director of Accounting Services to deduct monthly deductions from salaries or pensions A specified amount (same as HKD 300 or above and in multiples of HKD 50) is used to purchase tax reserve certificates, such as the form of “grain deduction” for tax storage.

How to buy Tax Reserve Certificates?

After opening an account in the above two ways, you can save tax in the following 6 ways, and the purchased tax reserve certificate will be automatically deposited into the tax reserve certificate account:

• Bank automatic transfer;

• Bank ATMs;

• Telephone PPS transfer;

• Transfer funds through online payment channels such as eTAX and PPS Online Services;

• by post to the Inland Revenue Department;

• Or visit the post office to buy a voucher.

What are the benefits of Tax Reserve Certificates?

“Automatic Tax Payment” Service

First, open a TRC account to enjoy comprehensive electronic services, including “Automatic Tax Payment” service. On the account holder’s tax due date, the Inland Revenue Department will automatically redeem the TRCs in your account on a first-come-first-served basis to pay the tax. Once the account balance is insufficient, the balance must still be paid on or before the tax payment date.

higher annual interest rate

Second, the annual interest rate on TRCs may generally be higher than the bank’s demand rate. The interest rate of tax reserve certificates refers to the average interest rate of 12-month time deposits of the three note-issuing banks and is reviewed on a monthly basis.

From June 7, 2021, the interest rate of tax reserve certificates will be 0.05% per annum, while the interest rate of general tax reserve certificates will be calculated according to the interest rate on the day of issue of the certificates. The maximum interest-bearing period is 36 months until the tax payment date.

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