Complete Guide to Tax and Tax Loans in Hong Kong
First time paying tax and not sure how to do so? Wants to apply for a tax extension?Did you know there are ways to earn rebates when paying tax? This Complete Guide on Tax by MoneySmart covers everything that you need to know.
(Click here to read the Chinese version 點擊此處閱讀中文版 交稅攻略)
Why do we need to pay tax?
Tax is used to help funding government spending on public services such as medical, education, housing and the welfare system, etc.
When do we need to pay tax?
| Month | What to expect? | |
|---|---|---|
| May- June | Individuals Tax Returns for 2019/2020 issued | |
| June- July | Return the Tax Return within 1 month from the date of issue on or before 2 July 2020 | |
| October | Notice of Assessment issued | |
| Jan next year | 1st tax payment | |
| April next year | 2nd tax payment |
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How can I pay tax in Hong Kong?
| Payment Method | Details | |
|---|---|---|
| Credit Card | Pay your tax bill through online banking or mobile apps by credit cards. Some credit cards even offer rebates for tax payment. | |
| FPS | Pay your tax bill through a mobile banking app or e-wallet that supports Government FPS bill payments simply by scanning the QR code on the IRD bills. | |
| PPS | Pay your tax bill through the PPS hotline at 18031, online or “PPS on Mobile”. The merchant code for IRD is “10”. | |
| ATM | Pay at any ATM with the “Bill Payment” signage or the “JET PAYMENT” logo and pay by selecting the “Bill Payment” function and enter your account number and payment amount. | |
| Online Banking | Login to your online banking, select bill payment and enter payment amount. | |
| e-Cheque / e-Cashier Order | Visit the “Pay e-Cheque” portal government website, select Inland Revenue Department and the relevant bill type, enter the bill information and then upload e-Cheque in order to make payment. | |
| Post | Cheque needs to be crossed and made payable to “The Government of the Hong Kong Special Administrative Region” or “The Government of the HKSAR”. | |
| Convenience Stores | Present the barcode on the IRD bills at any 7-Eleven Convenience Store, Circle K Convenience Store, VanGO Convenience Store and China Resources Vanguard Supermarket in Hong Kong and make bill payments. Please note that you can only make payments up to HK$5,000 per transaction. |
Can I pay tax by credit card?
Tax payment can be made by credit cards. Some banks like HSBC, Hang Seng, Citibank, etc usually offer attractive cashbacks/ miles when you make tax payments using designated credit cards. If you want to get the most of these offers, please stay tuned to MoneySmart’s website. We will provide you with the latest information to save you time and money!
How Salaries Tax is computed in Hong Kong?
| Net chargeable income | Rate | Tax | |
|---|---|---|---|
| On the First | HK$50,000 | 2% | HK$1,000 |
| On the Next | HK$50,000 | 6% | HK$3,000 |
| HK100,000 | HK$4,000 | ||
| On the Next | HK$50,000 | 10% | HK$5,000 |
| HK$150,000 | HK$9,000 | ||
| On the Next | HK$50,000 | 14% | HK$7,000 |
| HK$200,000 | HK$16,000 | ||
| Remainder | 17% |
Who has to pay tax? Do expats need to pay tax in Hong Kong?
An employee is subject to salaries tax if his or her salary is sourced in Hong Kong, even for non-residents or non-permanent residents.
What can I do if I do not have enough money to pay tax?
If you do not have enough money to pay tax, you can apply for tax loan or tax relief to reduce the immediate tax burden. Tax loan refers to loans offered by banks or lending companies to help tax payers to pay tax. However, there is actually no limit on how to utilize the tax loan borrowed. Some people use them for purposes such as weddings and home renovation.
How to apply for tax extension?
You need to apply in writing. Taxpayer is required to download and complete the relevant parts of the Form IR1121 and send it to the Inland Revenue Department by post. You can apply for tax relief on one of the following grounds:
- Entitled to a new allowance
- Your net chargeable income is likely to be less than 90% of the net chargeable income for the preceding year
- You have assessed to provisional salary tax and have paid or are likely to pay for tax-deductible expenses
- You have ceased to derive income chargeable to salaries tax
- You have objected to your salaries tax assessment
Difference between tax loan and personal loan
| Tax Loan | Personal Loan | |
|---|---|---|
| Application Period | Between October to April next year | 365 days a year |
| Repayment Period | 12 months | Up to 72 months |
| Interest Rate | Lower than P Loan | Higher than Tax Loan |
| Loan Amount | 10-12x monthly salary | 18-20x monthly salary |
Things you should know about Tax Loas in Hong Kong
1. APR
Knowing the APR (instead of interest rate) of different loan products can help you compare the costs of taking out a tax loan.
2. Terms and Conditions
It is important to understand that the special interest rate is only applicable to a designated loan amount and repayment period.
3. Promotion Period
Interest free periods are usually only applicable to the first few months of the repayment period but not the entire period.
4. Interest Rate will be Affected by Credit Rating
Interest rate of tax loan is lower than that of personal loan, but the final interest rate is subject to your credit rating.
5. Tax Loan is not only for Tax Payment
Tax loan is not only used for tax payment. It can be used for home furnishing, wedding, education, etc.
6. New Customers Offers/ Online Offers
New customers usually enjoy additional offers. What’s more, some lenders provide online exclusive offers
Compare Tax Loans in Hong Kong
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Tax and Tax Loan FAQ
What happens if I miss the tax deadline?
- If you fail to pay your tax on time, the Commissioner of Inland Revenue has the right to initiate recovery actions which include imposing a 5% surcharge on the entire balance of the demand notice, taking legal action, etc.
What is the interest rate of a tax loan?
- The tax loan interest is usually lower than personal loans. For example, Citi Tax Season Loan offers as low as 1.78% APR.
What is a tax loan?
- A Tax loan is a loan used to pay income tax bills and reduce the impact of penalties as a result of late or non-payment of tax bills.
When is the tax loan launched?
- Tax loan is usually launched between October- April next year. If you don’t want to miss these offers, please stay tuned to MoneySmart’s website.
