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SALARY TAX

Introduction

This tax is imposed on all income arising in or derived from Hong Kong from an office or employment or any pension.

"Income arising in or derived from Hong Kong" includes all income derived from services rendered in Hong Kong. Special provisions apply to seamen, airmen and other persons who visit Hong Kong for short periods and also to those who have paid tax of substantially the same nature as HK Salaries Tax in any territory outside Hong Kong.

Income includes, inter alia, the value of quarters provided rent free by an employer or the excess of this value over the rent actually paid by the employee to his employer for the quarters. The value of quarters to be included in assessment is 10% on total income (after deducting outgoings, depreciation, etc.) from the employer or any person associated with the employer. Where an employer refunds all or part of the rent paid by an employee, the place of residence is deemed to have been provided by the employer either rent free or for an amount equal to the difference between the rent paid and the amount refunded.

Liability to Salaries Tax is based on the actual income of the year of assessment with a charge being made for Provisional Salaries Tax to be paid in the year of assessment itself. Provisional tax paid in respect of a year of assessment is applied firstly against the Salaries Tax payable on the income of that year of assessment when assessed in the following year. Any excess is then applied against the Provisional Tax liability for that following year. Provisional Salaries Tax for a year is based on the income less allowances of the preceding year unless there was no income of a full year in the preceding year in which event the Provisional Charge is based on the estimated income for the full year less allowances of the year of assessment itself.

Each married person is individually responsible for all aspects of his/her own salaries tax affairs including lodgement of returns and payment of tax assessed. However, if the overall tax liability of any married couple is greater than it would have otherwise been under the aggregation system (under which income from the married couple are jointly assessed), they may elect to be jointly assessed.

Salary Tax Rates

A person's income from an office, employment or any pension, less allowable expenses, charitable donations and personal allowances (see below), is chargeable to salaries tax at the following progressive rates:

2001/2002	Rates	2000/2001	Rates
First $35,000 at	2%	First $35,000 at	2%
Next $35,000 at	7%	Next $35,000 at	7%
Next $35,000 at	12%	Next $35,000 at	12%
On the remainder	17%	On the remainder	17%

The maximum tax payable is, however, limited to tax at the standard rate of 15% on the person's income from employment less allowable expenses and charitable donations, but without a deduction for personal allowances.

Personal Allowances

Item	2001/2002HK$	2000/2001HK$
Basic allowance	108,000	108,000
Married persons allowance	216,000	216,000
Child allowances
1st and 2nd child (each)	30,000	30,000
3rd to 9th child (each)	15,000	15,000
Dependent parent / grandparent allowance
not residing with taxpayer	30,000	30,000
residing with taxpayer	60,000	60,000
Dependent brother / sister allowance (for whom no child allowance claimed)	30,000	30,000
Single parent allowance	108,000	108,000
Disabled dependant allowance (in addition to any allowances already granted for the disabled person)	60,000	60,000

Deductions Allowed

Item	2001/2002HK$	2000/2001HK$
Training expenses	40,000	30,000
Home mortgage interest	100,000	100,000
Elderly residential care expenses	60,000	60,000

Tax Thresholds (assuming no deduction)

Item	Income Level
	2001/2002(HK$)	2000/2001(HK$)
No tax payable
Single person / no children	up to 108,000	up to 108,000
Married person / no children	216,000	216,000
Married person / two children	276,000	276,000
Married person / two children and two dependents	336,000	336,000
Tax at standard rate
Single person / no children	over 1,443,000	over 1,443,000
Married person / no children	2,361,000	2,361,000
Married person / two children	2,871,000	2,871,000
Married person / two children and two dependents	3,381,000	3,381,000

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