Payment to an employee from an approved retirement scheme (not
a MPF scheme):
The portion attributable to
employee's contribution is not taxable.
attributable to the employer's contribution is not taxable if it
is paid upon death, incapacity or retirement.
attributable to the employer's contribution (the accrued benefit) is not taxable if it
is paid on termination of employment
with services for more than 120 months. For termination of employment with
service less than 120 months, the exemption limit for the accrued
benefit is called "proportionate benefit" which is defined as: the accrued benefit
* no. of completed month
of service / 120. Any excess over the limit is taxable.
If an employee withdraws a sum
representing the employer's contribution not because of termination of
employment, retirement, death or
incapacity, the sum will be wholly assessable. This happens where an employee
withdraws all money upon change of retirement scheme while his employment is
still going on with his employer.
If part of the retirement
benefit is used to set off the Long Service Payment or Severance Payment under
the Employment Ordinance, the amount of set-off is deductible from the taxable
assessing practices are for general guidance. Special rules apply to civil
servants, teachers of subsidized schools and certain employees of charitable
An employee can claim
deduction for his mandatory contribution to a recognized retirement scheme.
The maximum deduction is $14,500
Payments from a MPF
Retirement is defined in Section 8(3) of IRO as
the service of the employer at a specified age that is not less than 45
a period of service with the employer of not less than 10 years; or
attainment of a
specified age of retirement or the age 60 years, whichever is the later.