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Hong Kong Company Formation: Allowances

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Allowances

If a taxpayer is assessed to Salaries Tax or has elected Personal Assessment, he/she, in addition to or as an alternative to a Basic Allowance, may claim the following allowances if appropriate:

Married Person’s Allowance

A taxpayer is entitled to Married Person’s Allowance if he/she was, at any time during the year :

1. married and not living apart from his/her spouse ; or
2. living apart from his/her spouse but was maintaining or supporting him/her.

and, in the situation where the taxpayer is assessed to Salaries Tax, his/her spouse did not derive any income chargeable to Salaries Tax or the couple has elected for Joint Assessment.

Child Allowance

Child Allowances are granted to taxpayers in respect of their unmarried child(ren) maintained by them. The child must be under the age of 18 during the year of assessment or if 18 and over but under 25 during the year of assessment and receiving full-time education at a university, college, school or other similar educational establishment. In addition, Child Allowance is granted for a child of or over the age of 18 who is incapacitated for work by reason of physical or mental disability. Under separate taxation, all Child Allowances must be claimed by either the husband or the wife.

– For each child, child allowance is increased from $40,000 to $50,000 for the year of assessment 2007/08, and to $60,000 with effect from the year of assessment 2011/12. With effect from the year of assessment 2007/08, an additional one-off Child Allowance of $50,000 will be granted in the year the child was born. The amount is increased to $60,000 from the year of assessment 2011/12 onwards. In other words, the total child allowance for a newborn child, in the year of born, will be $100,000 for the years of assessment 2007/08 to 2010/11, which is increased to $120,000 from the year of assessment 2011/12 onwards.

Dependent Brother or Dependent Sister Allowance

A Dependent Brother or Dependent Sister Allowance is granted if an individual or his/her spouse maintains an unmarried brother/sister of his/her own or of his/her spouse and the person so maintained at any time in the year of assessment was:

1. under the age of 18 years;
2. of or over the age of 18 years but under the age of 25 years and was receiving full time education at a university, college, school or other similar educational establishment; or 17
3. of or over the age of 18 years and was, by reason of physical or mental disability, incapacitated for work.

A Dependent Brother/Sister Allowance may be granted for each brother/sister maintained. A brother/sister is only treated as maintained by the person or by the spouse of the person if, at any time during the year, the person or the spouse had sole or predominant care of the brother/sister. A Dependent Brother or Dependent Sister Allowance and a Child Allowance shall not both be given in any year of assessment in respect of the same dependent person.

Dependent Parent or Dependent Grandparent Allowance

1. To be eligible for claiming the basic Dependent Parent/Dependent Grandparent Allowance, the taxpayer must have maintained at any time during the year a parent/grandparent who:
   1. is ordinarily resident in Hong Kong (i.e. the dependent parent/grandparent must be habitually and normally resident in Hong Kong);
   2. is aged 55 years or more or eligible to claim an allowance under the Government’s Disability Allowance Scheme; and
   3. has either resided with the taxpayer, otherwise than for full valuable consideration, for a continuous period of 6 months or has received from him/her or his/her spouse not less than $12,000 in money towards his/her maintenance.
2. An Additional Dependent Parent/Dependent Grandparent Allowance will be granted in respect of each dependent parent/grandparent actually living with the taxpayer otherwise than for full consideration continuously throughout the year.
3. Only one individual can be granted the allowance in respect of any one parent/grandparent (the dependant). In the event that more than one taxpayer wish to claim the allowance in respect of the same dependant for the same year of assessment, only one allowance will be given in respect of that dependant. The Inland Revenue Department will request the claimants to reach an agreement among themselves so as to decide which one of them is to have the allowance for that year.
4. For the purpose of Dependent Parent Allowance, the word “parent” means:
   1. a parent of whose marriage the person or his/her spouse is a child;
   2. a parent by whom the person or his/her spouse was legally adopted;
   3. a step-parent; (iv) the person’s or his/her spouse’s natural parent; or (v) a parent of the person’s deceased spouse. 18
5. For the purpose of Dependent Grandparent Allowance, the word “grandparent” means:
   1. a natural grandfather or grandmother of the person or his/her spouse;
   2. an adoptive grandparent of the person or his/her spouse;
   3. a step grandparent of the person or his/her spouse; or (iv) a grandparent of the person’s deceased spouse.

Single Parent Allowance

A Single Parent Allowance is granted if an individual had at any time during the year of assessment the sole or predominant care of a child in respect of whom the individual was entitled during the year of assessment to claim a Child Allowance. The allowance is not due if the individual was married and not living apart from his/her spouse at any time during the year or by reason only that he/she made contributions to the maintenance or education of the child during the year. No Single Parent Allowance is allowable in respect of any second or subsequent child.

Disabled Dependant Allowance

A Disabled Dependant Allowance is granted if an individual is maintaining a dependant who is eligible to claim an allowance under the Government’s Disability Allowance Scheme. This allowance is granted in addition to the other allowances.