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  • Writer's pictureMichael Chan - Bida & Co.

Reducing profits tax, salaries tax & tax under personal assessment for the year of assessment 22/23

The Financial Secretary has suggested a one-time reduction in profits tax, salaries tax, and personal assessment tax for the 2022/23 assessment year, capped at $6,000 per case.

For profits tax, the reduction ceiling applies to each business, while for salaries tax, the ceiling applies to each individual taxpayer. However, for married couples who file taxes jointly, the ceiling applies to each couple, with a total cap of $6,000. For personal assessment, the ceiling applies to each single taxpayer or married person who elects for personal assessment separately from their spouse. If a taxpayer chooses to file for personal assessment jointly with their spouse, the reduction ceiling is capped at $6,000 for the couple.

This proposed tax reduction does not apply to property tax. However, individuals with rental income may still be eligible for the reduction if they qualify for personal assessment.

Taxpayers who are separately chargeable for salaries tax and profits tax can enjoy the reduction for both types of tax. For those with business profits or rental income who elect for personal assessment, the reduction is based on the tax payable under personal assessment, which may differ from the reduction they would receive if not assessed under personal assessment. Each case must be evaluated individually.

Eligible taxpayers can elect for personal assessment by completing Part 7 of their tax return for individuals (BIR60) for the 2022/23 assessment year. Those with only salaries income need not elect for personal assessment.

The proposed reduction will decrease the amount of tax payable for the 2022/23 assessment year. Taxpayers should file their profits tax returns and tax returns for individuals as usual, and the Inland Revenue Department will effect the reduction in the final assessment once the relevant legislation is enacted. For any final assessment issued before the enactment of the law, the department will reassess and make any necessary adjustments. No application or enquiry to the department is required.

The proposed tax reduction only applies to the final tax for the 2022/23 assessment year, not to the provisional tax of the same year. Taxpayers must still pay their provisional tax on time, and any excess balance will be refunded and applied to pay the final tax for the 2022/23 assessment year and the provisional tax for the 2023/24 assessment year. ☎️Tel: (852) 2813 5163

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