Reducing Profit Tax, Salary Tax, and Tax Under Personal Assessment for 2023/24
The Financial Secretary proposed a one-off reduction of profits tax, salaries tax and tax under personal assessment for the year of assessment 2023/24 by 100%, subject to a ceiling of $3,000 per case.
The maximum tax decrease for profits tax is applied to every business. The cap on salary tax is applied to each individual taxpayer; however, in the case of jointly assessed married couples, the cap is applied to each married pair (i.e., capped at $3,000 in total). Each taxpayer who chooses to make a personal assessment independent of their spouse, whether they are married or not, is subject to the ceiling. The tax savings for a married couple who chooses to elect for joint personal assessment is limited to $3,000.
The proposed tax reduction is not applicable to property tax. Individuals with rental income, if eligible for personal assessment, may be able to enjoy such reduction under personal assessment.
Under each tax type, a taxpayer who is separately liable for profits tax and salaries tax can benefit from a tax decrease. The reduction will be determined by the tax that will be owed under personal assessment for a taxpayer who chooses to opt for personal assessment and has company earnings or rental income. It may differ from the tax savings the person would receive if they were not evaluated under personal assessment. The precise role will have to be assessed on an individual basis. To elect for personal assessment, eligible taxpayers should complete Part 7 of his/her tax return for individuals (BIR60) for the year of assessment 2023/24. Individuals having salaries income only, but no business profits and rental income, need not elect for personal assessment.
The amount of tax that taxpayers will owe for the assessment year 2023/24 will be decreased by the suggested reduction. For the assessment year 2023/24, taxpayers are expected to file their individual tax returns and profits tax returns as usual. The Inland Revenue Department will reduce the final assessment after the applicable law is enacted. The Inland Revenue Department will examine any final assessments for the assessment year 2023/2024 that were issued prior to the law’s enactment upon its enactment. The Department does not require any applications or inquiries from taxpayers.
The tentative tax for the assessment year 2023/24 will not be subject to the proposed tax cut; it will only apply to the final tax for that year. As such, in spite of the suggested lowering strategy, taxpayers are still obligated to pay their provisional tax on time. In order to pay the final tax for the assessment year 2023/24 and the provisional tax for the assessment year 2024/25, the provisional tax that was paid will be applied.
