Supporting People and Enterprises
Reducing profits tax, salaries tax and tax under personal assessment for the year of assessment 2023/24
Subject to a $3,000 cap per case, the Financial Secretary suggested a one-time 100% reduction in profits tax, salaries tax, and tax under personal assessment for the assessment year 2023/2024.
Each business is subject to the maximum tax reduction for profits tax. Whereas the ceiling on salaries tax applies to each individual taxpayer, it applies to each married couple who is jointly assessed (i.e., capped at $3,000 in total). Each taxpayer, whether single or married, who chooses to make a personal assessment independent of their spouse is subject to the ceiling. The married couple’s tax reduction is limited to $3,000 if they choose to elect for personal assessment jointly.
Property taxes are not covered by the proposed tax cut. If qualified for personal assessment, those who earn rental income might be able to benefit from this reduction.
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.
Eligible taxpayers must complete Part 7 of their individual tax return (BIR60) for the assessment year 2023/2024 in order to elect for personal assessment. Only those with salary income—those without business profits or rental income—need not choose to participate in the personal evaluation process.
The amount of tax that taxpayers will owe for the assessment year 2023/2024 will be decreased by the suggested reduction. For the assessment year 2023/2024, 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.
Only the final tax for the assessment year 2023/2024 will be subject to the proposed tax cut; the provisional tax for that year will not be. Therefore, even with the suggested reduction mechanism, taxpayers are still expected to pay their provisional tax on time. The final tax for the assessment year 2023/2024 and the provisional tax for the assessment year 2024/2025 will be paid with the provisional tax that was paid. Any remaining balance will be reimbursed.
