New law gives Hongkongers tax break of US$7,650 in a bid to boost their inadequate pension
Hong Kong’s lawmakers have unanimously passed an amended law that allows up to HK$60,000 (US$7,650) in tax deductions in a bid to encourage more voluntary retirement savings in pension schemes and address the shortfall. The change comes into effect on April 1 and taxpayers will be able to claim the deduction on their tax returns in the new financial year.
“The tax law change is aimed at encouraging more people to better prepare for their retirement,” said Wong Ting-kwong, a lawmaker from the Democratic Alliance for the Betterment and Progress of Hong Kong. “We support the law change, but we would also like to see the government review the scheme in the future and increase the tax incentive cap to HK$100,000.”
James Lau, the Secretary for Financial Services and the Treasury, said the government plans to review the tax incentive cap and will also look into the possibility of expanding the scheme to cover more pension products after looking at the initial response.
The scheme will allow employees to move their additional contributions in deferred annuity products from insurance companies or to the voluntary Mandatory Provident Fund so that they can claim tax deductions of up to HK$60,000 a year on their income. This could increase to HK$120,000 if they buy pension products that cover their spouses who do not pay tax. This is on top of the HK$18,000 tax break a year for mandatory MPF contributions.