This is a tool that calculates the Hong Kong (HK) income tax and net income for the earned income, for a single person or married couple, over a specified tax year, and displays the results in a table. Optionally, it is possible to include mandatory pension contributions in the analysis. In which case, the results table also displays the calculated mandatory pension contributions, with the net income reflecting this extra deduction. In the case of a married couple, the displayed results show the total gross income, income tax and net income, though the tax may be calculated via separate or joint assessment. Since the resulting assessment may differ from the inputted preference, e.g. separate assessment may result in a lower tax bill than joint assessment, this is also shown.
Additionally, if required, the tool displays more detailed results from the tax calculation:
- The income tax is calculated using both progressive tax rates and the standard flat tax rate, with the minimum tax being selected.
- Therefore, a results table is shown for the annual progressive tax rate calculation, with a row for each relevant income: your own, your spouse's (if married) and your joint income (if married and joint assessment has been elected for). Each row shows the gross income, the tax allowance used, the mandatory pension contributions (if applicable), the taxable income, the calculated tax before any reduction has been replied, the tax reduction if relevant, and finally the calculated tax after any reduction.
- A results table is also shown for the annual standard tax rate calculation, with a row for each relevant income: your own, your spouse's (if married) and your joint income (if married and joint assessment has been elected for). Each row shows the gross income, the mandatory pension contributions (if applicable), the taxable income (noting that this calculation has no tax allowances), the tax percentage rate, the calculated tax before any reduction has been replied, the tax reduction if relevant, and finally the calculated tax after any reduction.
- To show how the actual tax is determined from these calculations, an extra table is displayed to indicate which of the progressive or standard tax calculations results in less tax and is thus chosen, and also, if joint assessment has been elected for, whether separate or joint assessment works out better.
- If mandatory pension contributions should be included in the comparison, a further results table is shown, displaying the pension contributions for each relevant income: your own, your spouse's (if married) and the total (if married).
- Finally, a results table is given for each progressive tax rate calculation, showing the tax band details (the range, taxable income, tax percentage rate and calculated tax for each band).
For the income tax calculations, it is necessary to supply the following compulsory information:
- Your gross earned income in monthly, weekly or annual terms.
- The tax year, noting that this runs from 1 April in the first year to 31 March in the next.
- Your date of birth, in the default format (DD/MM/YYYY), unless you change the format in the menu. To reduce the time needed for data entry, a default date of birth is provided. Only if you are 18 or under, or 65 or over, during the tax year is it essential to provide an accurate birth date, since this has an effect on the calculation of mandatory pension contributions.
- Your personal status, i.e. whether you are single or married.
- The number of dependent children. If this is greater than 0 and your personal status is single, the tool assumes that you are a single parent who provides sufficient support to the children to qualify for single parent allowances etc.
- Whether mandatory pension contributions should be included in the comparison or not. Since mandatory pension contributions are deductible from gross income when calculating tax, including these contributions automatically results in a decrease in taxable income.
If you are married, it is necessary to supply the following additional information:
- The gross earned income of your spouse in monthly, weekly or annual terms. If this field is left blank, the tool assumes that your spouse has no income.
- The date of birth of your spouse, in the default format (DD/MM/YYYY), unless you change the format in the menu. To reduce the time needed for data entry, a default date of birth is provided that can be used by most tax payers for calculating tax. Only if your spouse is 18 or under, or 65 or over, during the tax year is it essential to provide an accurate birth date, since this has an effect on the calculation of mandatory pension contributions.
- Whether you should be assessed separately or jointly. However, if you elect for joint assessment but the tool finds during calculation that the tax bill is lower if you are assessed separately, assessment is reverted to separate.
Note: In Hong Kong, this is also known as salaries tax.
Note: The tool automatically includes certain tax deductions when determining the taxable income and thus calculating the income tax: the standard tax allowances which depend on your personal status (e.g. a married couple's allowance) and the number of children you have, as well as the deduction for any mandatory pension contributions. Currently, it is not possible to specify any extra income tax deductions that should be taken into account.
Note: The tax reduction on the calculated tax, mentioned above, is currently only relevant to the tax years 2009-10 and 2010-11, and involves a reduction of 75% up to a maximum of 6000HK$. In the 2011-12 tax year calculations, no such reduction is applied.
Note: It is not possible to specify any dependent relative allowances.
The data used by this tool was obtained mainly from the following sources:
The data used by this tool for the HK mandatory pension contributions calculation was obtained primarily from the following sources:
Associated tool link: http://www.coggit.com/tools/hk_income_tax_earned.html