Reducing Profits Tax, Salaries Tax and Tax under Personal Assessment for the Year of Assessment 2024/25
The Financial Secretary proposed a one-off reduction of profits tax, salaries tax and tax under personal assessment for the year of assessment 2024/25 by 100%, subject to a ceiling of $1,500 per case.
For profits tax, the ceiling of the proposed tax reduction is applied to each business. For salaries tax, the ceiling is applied to each individual taxpayer; but for married couples jointly assessed, the ceiling is applied to each married couple (i.e. capped at $1,500 in total). For personal assessment, the ceiling is applied to each single taxpayer or married person who elects for personal assessment separately from his/her spouse. If a taxpayer elects for personal assessment jointly with his/her spouse, the tax reduction is capped at $1,500 for the married couple.
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.
A taxpayer who is separately chargeable to salaries tax and profits tax can enjoy the proposed tax reduction under each of the tax types. For a taxpayer having business profits or rental income and electing for personal assessment, the reduction will be based on the tax payable under personal assessment. It might be different from the amount of tax reduction he/she would get if he/she was not assessed under personal assessment. The exact position will need to be assessed case by case.
To elect for personal assessment, eligible taxpayers should complete Part 7 of his/her tax return for individuals (BIR60) for the year of assessment 2024/25. Individuals having salaries income only, but no business profits and rental income, need not elect for personal assessment.
The proposed reduction will reduce taxpayers’ amount of tax payable for the year of assessment 2024/25. Taxpayers should file their profits tax returns and tax returns for individuals for the year of assessment 2024/25 as usual. Upon enactment of the relevant legislation, the Inland Revenue Department will effect the reduction in the final assessment. For any final assessment for the year of assessment 2024/25 issued before the enactment of the law, the Inland Revenue Department will make a reassessment after the enactment. Taxpayers are not required to make any applications to the Department.
The proposed tax reduction will only be applicable to the final tax for the year of assessment 2024/25, but not to the provisional tax of the same year. Therefore, taxpayers are still required to pay their provisional tax on time. The provisional tax paid will be applied to pay the final tax for the year of assessment 2024/25 and the provisional tax for the year of assessment 2025/26. Excess balance, if any, will be refunded.
