In This Article

5 Ways to Lower Your Salary Taxes in 2024

Byron Chan
November 10, 2023
6 min read

In This Article

key takeaways

Housing allowance policies can significantly lower salaries taxes and is a cost-effective method for employers to increase take home pay

Monthly rent paid to a landlord can be tax deductible

Common deductions forgotten include: domestic rent, MPF payments, mortgage interest

Provisional tax payments can be delayed with an application for holdover

 

Compared to other countries and cities in the world, Hong Kong has a straightforward and simple tax system, but there are still a few ways you can make sure you are not paying more salaries taxes than you have to.

 

Here are 5 ways you can lower your salary taxes

 

1. Ask your employer to setup a Housing Allowance policy

 

The most effective way to pay less taxes is if your employee sets up a Housing Allowance policy, and the best part? It costs the employer nothing.

 

How it works:

Housing allowances are taxed at 10% of net salary. To take advantage of this, your employer sets up your pay slips so that a portion of the salary is considered as housing rental reimbursement.

Meaning, if your salary is $50,000 a month, and your rent is $20,000 each month, setup the salary statements so that you receive $30,000 of salary and $20,000 in rental reimbursements. In this example, you end up saving almost $35,000 in taxes each year!

For more details of how this exactly works: How to Lower Your Staff’s Taxes Using Housing Allowance

 

2. Deducting your Monthly Rent on your tax returns

 

Starting in 2022, the Hong Kong IRD started implemented Tax Deductions for Domestic Rent.

How it works:

If you or your spouse pay rent for your flat, you can now deduct up to $100,000 of your rent from your taxable income.

For more details: Tax deductions for Rent Payments

 

 

3. See if you qualify as a contractor instead of an employee

 

Often, when your salary starts to increase, it may be beneficial for both you and your employer to explore the option of changing your status from an employee to an independent contractor. As an independent contractor, instead of paying salaries tax, you would be subject to profits tax, this means that expenses such as transportation, business related meals, expenses related to equipment, are all deductible expenses now. However, there are a few key factors the IRD looks at to determine whether you really qualify as an independent contractor.

Factors the IRD looks at to determine if you qualify as an independent contractor: Do I Qualify as an Independent Contractor?

 

4. Making sure you use every available allowance

 

To make sure you’re not paying more taxes than you need to, you should make sure to take advantage of every available deduction. Common deductions that people often over look include:

Allowances and Deductions 

HK$
Basic Allowance 132,000.00
Married Person’s Allowance 264,000.00
Child Allowance (For each of the 1st to 9th child) 120,000.00
For each child born during the year, the Child Allowance will be increased by 120,000.00
Dependent Brother or Sister Allowance (For each dependant) 37,500.00
Dependent Parent and Dependent Grandparent Allowance (For each dependant)
    Parent / grandparent aged 60 or above or is eligible to claim an allowance  50,000.00
    under the Government’s Disability Allowance Scheme
    Parent / grandparent aged 55 or above but below 60 25,000.00
Additional Dependent Parent and Dependent Grandparent Allowance
    Parent / grandparent aged 60 or above or is eligible to claim an allowance  50,000.00
    under the Government’s Disability Allowance Scheme
    Parent / grandparent aged 55 or above but below 60  5,000.00
Single Parent Allowance  132,000.00
Personal Disability Allowance 75,000.00
Disabled Dependant Allowance (For each dependant) 75,000.00
Expenses of Self-Education 100,000.00
Elderly Residential Care Expenses 100,000.00
Home Loan Interest 100,000.00
Mandatory Contributions to Recognized Retirement Schemes 8,000.00
Qualifying Premiums Paid under Voluntary Health Insurance Scheme (VHIS) 8,000.00
Qualifying Annuity Premiums and Tax Deductible MPF Voluntary Contributions 60,000.00
Domestic Rents Deduction 100,000.00
Approved Charitable Donations
    [(Income – Allowable Expenses – Depreciation Allowances) x Percentage ] 35%

 

5. Delay your tax payment with an application for Holdover or apply to pay in instalments

 

If for whatever reason, you may make less money than the year before, you can apply to either delay the provisional portion of your tax bill or you can apply to pay for it in instalments

Details on how to apply here: https://www.ird.gov.hk/eng/tax/measures.htm

 

Bonus:

 

The Hong Kong IRD has an extremely useful tool for people to estimate how much taxes they may owe:

Check and plan your tax liability with the IRD’s tax calculator

 

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