Deduction for Contributions to Mandatory Provident Fund Schemes and Recognised Occupational Retirement Schemes
Some of the contributions that you make to a mandatory provident fund (MPF) scheme or a recognised occupational retirement (ROR) scheme can be deducted from your assessable income. Here you learn about deductible amounts under both types of schemes, and how different types of employees and self-employed people can claim deductions in different situations.
Mandatory Provident Fund Schemes
Under the provisions of the Inland Revenue Ordinance (IRO), mandatory contributions to MPF schemes are deductible in computing your assessable income as an employee or assessable profits as a self-employed person's own contribution. The maximum deduction for each year of assessment is :
| Year of assessment | Maximum deduction ($) |
| 2017/18 onwards | 18,000 |
Employees
The following examples explain the tax treatment for employees in various situations.
Example 1: Single income source – tax treatment in general
The table below gives common scenarios for employees with a single source of income for the year of assessment 2022/23.
|
Monthly Income |
Mandatory Contributions (per year) |
Voluntary Contributions (per year) |
Allowable Deductions |
|---|---|---|---|
|
$10,000 |
$6,000 |
- |
$6,000 |
|
$10,000 |
$6,000 |
$3,000 |
$6,000 |
|
$20,000 |
$12,000 |
- |
$12,000 |
|
$30,000 |
$18,000 |
- |
$18,000 |
Example 2: Fluctuating income
An employee received a total income of $500,000 during year of assessment 2022/23. His income fluctuated over the year and he was exempt from the MPF scheme for April to June 2022 when his earnings fell below $5,000. For the remaining 9 months he made mandatory contributions of $1,500 per month. A deduction of $13,500 will be allowed in computing his assessable income for the year.
Example 3: Two employments and two MPF schemes
An employee worked for Company A and Company B and received monthly salaries of $30,000 and $20,000 respectively. During the year of assessment 2022/23, he made mandatory contributions to each of his employers’ MPF schemes. Although the total mandatory contributions during the year were $30,000, the maximum amount deductible under salaries tax is $18,000 only.
Example 4: Two employments and one MPF scheme
An employee received annual salaries of $180,000 from his principal employment. During the year of assessment 2022/23, he made mandatory contributions of $9,000 and voluntary contributions of $6,000 to a MPF scheme during the year. He also received $3,500 per month ($42,000 for the year) from a part-time employment and was exempt from participating in the MPF scheme of his part-time employer. His net assessable income will be $222,000 (income from the two employments) less the mandatory contributions of $9,000.
Example 5: Director’s remuneration
An executive director receiving a salary under a contract of employment is required to join a MPF scheme and is entitled to claim tax deduction for his mandatory contributions. The deduction shall not exceed the maximum deductible amount for the relevant year. A director who receives director’s fees as an office holder is not an employee and is not required to participate in MPF scheme.
Self-Employed Persons
The following examples explain the tax treatment for various types of self-employed persons.
Example 6: Single business owners
A sole proprietor of a business earned profits of $1,000,000 in a year of assessment. During the year of assessment 2022/23, he made mandatory contributions of $18,000 to a MPF scheme as a self-employed person. In computing the assessable profits of the business, a deduction of $18,000 will be allowed.
If you are a self-employed person you can make a declaration of income to the trustee of the MPF scheme to determine the amount of mandatory contributions without obtaining a tax assessment from the Inland Revenue Department.
Example 7: Owners of multiple businesses
A person operated 3 businesses as a sole proprietor and held interests in 3 partnerships. The aggregate income (including profits and losses) of all these businesses for the year of assessment 2022/23 was $300,000. Under the MPF Ordinance, his mandatory contribution to a MPF scheme should be $15,000 for year of assessment 2022/23. The allowable deduction under profits tax will be $15,000.
Example 8: Proprietor’s spouse as employee
A proprietor made mandatory contributions of $18,000 in the year of assessment 2022/23 as a self-employed person. His wife assisted him in running the business and joined the MPF scheme. Her contribution during the same year was $10,000. As the IRO does not permit the spouse of a proprietor to claim a deduction for MPF contributions, only the mandatory contributions of $18,000 made by the proprietor will be allowed as a deduction in calculating the assessable profits of the business.
Example 9: Both employed and self-employed
A person received salary income and operated a business at the same time. He made mandatory contributions of over $18,000 to a MPF scheme as an employee and a self-employed person in the year of assessment 2022/23. However, the aggregate deductions under the salaries tax and profits tax will be $18,000 only. The following table explains this situation:
|
Income |
Mandatory Contributions |
Allowable Deductions |
|
|---|---|---|---|
|
Salaries Profits (Proprietorship) |
$120,000 $100,000 |
$6,000 $5,000 |
$6,000 $5,000 |
|
Salaries Profits (Proprietorship) |
$500,000 $400,000 |
$18,000 $18,000 |
$18,000 Nil |
|
Salaries Profits (Proprietorship) |
$120,000 $500,000 |
$6,000 $18,000 |
$6,000 $12,000 |
Recognised Occupational Retirement Schemes
If you opt to participate in a MPF-exempted ROR scheme, contributions you make to that scheme are also deductible, subject to the following restrictions:
- the amount deductible is the lesser of two amounts, that is, the amount you actually contributed to the ROR scheme or the amount of mandatory contribution that you would have been required to pay had that scheme been an MPF scheme; and
- the maximum deduction for each year of assessment is :
| Year of assessment | Maximum deduction ($) |
| 2017/18 onwards | 18,000 |
Example 10: Single income source
An employee received annual remuneration of $180,000 during the year of assessment 2022/23. He opted to participate in the MPF-exempted ROR scheme offered by his employer. The contributions deductible under salaries tax in two scenarios are as follows.
|
Contributions to ROR Scheme |
Mandatory Contributions to MPF Scheme |
Allowable Deductions |
|---|---|---|
|
$18,000 |
$9,000 |
$9,000 |
|
$5,400 |
$9,000 |
$5,400 |
Example 11: MPF and ROR schemes contributions
How to Lodge a Claim
You should claim your deductions in Part 4.3 of the Tax Return – Individuals (BIR60) for the relevant year of assessment. You can lodge a claim on the form IR831 if you have not claimed the deduction in your tax return.
Supporting Documents
You need not submit documents together with your tax return to support your claim. However, you should keep proper records, including computations of accrued benefits in the schemes, annual benefit statements and, where a transfer to another MPF scheme has taken place, the relevant transfer statements. These should be sent to the Inland Revenue Department for inspection when required.
Further Information
Information about the frequently asked questions is available through the following link.
Frequently asked questions about deductions for contributions to MPF and ROR schemes