Salaries Tax - Basis period
Salaries Tax is
charged on the assessable income earned by an employee or an office holder
in a year of assessment that runs from 1 April to 31 March.
assessment will not normally be made before the end of the year of assessment
(save the taxpayer is about to leave Hong Kong).
provisional assessment is made on the basis of
the last final assessment. The tax demanded by the
provisional assessment is to be paid by two installments: 75% in January
to March within the year of assessment and 25% in the coming April to June.
In other words, tax is payable on the earned “provisional income”.
If the actual income is 90%
of the provisional income or less, the taxpayer can ask for a revised
assessment of provisional income. The time limit for such application is
28 days before the pay day of the provisional tax.
When the final
assessment is raised, the provisional tax charged will be deducted from
the tax payable for that year.
Normally, in the year of assessment with a commencement of
employment, the first tax payable will be a final assessment without
a deduction for provisional tax plus a provisional tax for the following
year of assessment.
For illustration showing how to compute salaries tax,
taxpayer may receive a lump sum payment
on termination of employment. Besides, he may receive a lump sum payment
which is a deferred pay or arrear of pay. In these two cases, he can apply
for relating back the lump sum payment over the period to which the
payment relates. The maximum period of relating back is 3 years. The
purpose of relating back is to spread the lump sum over 2 to 4 years of
assessments so as to avoid the sudden increase of marginal tax rate in the
year of the lump sum payment.
Any salaries payments after cessation of employment shall
be deemed to be accrued to the employee the last day of employment.
Press here fore more.