Tax Deductions for Qualifying Annuity Premiums and Tax Deductible MPF Voluntary Contributions

The Inland Revenue and MPF Schemes Legislation (Tax Deductions for Annuity Premiums and MPF Voluntary Contributions) (Amendment) Ordinance 2019 was enacted on 29 March 2019. The amendment ordinance provides tax deductions for qualifying annuity premiums and tax deductible MPF voluntary contributions (TVC) under salaries tax and personal assessment. The deductions are applicable to a year of assessment commencing on or after 1 April 2019 (i.e. year of assessment 2019/20 onwards).

(A) Qualifying Annuity Premiums

What is a Qualifying Deferred Annuity Policy (“QDAP”)

An insurance policy

(a) under which a regular payment is receivable by an annuitant during an annuity period and

(b) that is certified by the Insurance Authority to be in compliance with the specified criteria published by the Insurance Authority.

You may go to the Insurance Authority’s website for List of QDAP eligible for tax deduction

What is "Qualifying Annuity Premiums"

"Qualifying annuity premiums" means the net sum of moneys that is payable under a QDAP  to the insurer for writing or renewing the policy in so far as it relates to the provision of annuity payments.

Eligibility for Deduction

From the year of assessment 2019/20 onwards, you may claim a deduction for qualifying annuity premiums paid by you or your spouse (not living apart) as a policy holder of a QDAP policy for an annuity payment receivable by an annuitant. 

To be deductible, the policy holder must be:

  • yourself;
  • your spouse; or
  • yourself and your spouse

The qualifying annuity premiums must be paid by:

  • yourself;
  • your spouse (not living apart); or
  • yourself and your spouse (not living apart)

The annuitant must be:

  • yourself; or
  • your spouse (being your spouse at any time during the year of assessment); or
  • yourself and your spouse (being your spouse at any time during the year of assessment)

The annuitant must also be a HKID card holder during the relevant year of assessment.

Claim for Deduction by Married Persons

Married taxpayer may claim deduction for qualifying annuity premiums paid by him/her or spouse (not living apart), but premiums already claimed by spouse should be excluded. They must agree on how to divide the amount of deduction. If no agreement is reached, the claim would not be entertained. If deduction has already been allowed, additional assessment will be raised to withdraw the deduction allowed in consequence of such an agreement reached by the married person and the person’s spouse within a reasonable time; or their failure to reach such an agreement within a reasonable time.

 

(B) Tax Deductible MPF Voluntary Contributions (“TVC”)

To be deductible, the MPF voluntary contributions must be paid into a TVC account defined under the Mandatory Provident Fund Schemes Ordinance. Taxpayer must be the TVC account holder. You can only claim deduction for contributions made into a TVC account of which you are the account holder.

You may go to the MPF Schemes Authority’s website for List of MPF schemes which provide TVC

 

(C) Amount of Aggregate Allowable Deduction

The deduction allowable to each taxpayer should not exceed the aggregate of qualifying annuity premiums and tax deductible MPF voluntary contributions paid during the year of assessment or the specified maximum deduction, whichever is lower. The specified maximum deduction (the aggregate limits for both items) for the year of assessment 2019/20 onwards is $60,000.

Taxpayer may claim deduction for qualifying annuity premiums paid under one or more than one policy. There is no limit for the number of QDAP.

The deductible amount is net of the refunded premiums. If refund is made after taxpayer has been allowed for deduction in respect of the qualifying annuity premiums, taxpayer must notify the Commissioner in writing within 3 months after the date of refund and despite any time limit for making an additional assessment, an assessor may make an additional assessment on the taxpayer under section 60 of the Inland Revenue Ordinance.

Penalties may be incurred if a taxpayer fails to notify the Commissioner in writing of the refund within the specified period without reasonable excuses. Fine or additional tax may be imposed in respect of the undercharged amount.

 

(D) Deduction Order

If you claim deductions in respect of both qualifying annuity premiums and TVC in a year of assessment, the deduction order is as follows:

  • TVC are to be firstly allowed; and
  • qualifying annuity premiums are to be secondly allowed.

(E) How to Lodge a Claim

You may claim the deduction for qualifying annuity premiums and TVC paid in your Tax Return – Individuals (BIR60) from the year of assessment 2019/20 onwards. If you wish to claim for the deduction after submitting the tax return, you may complete form IR831 and return it to the Department. The claim should be lodged not later than 6 years after the end of the year of assessment in which the claim relates.

Download form IR831 (pdf file)

2019/20 Provisional Salaries Tax

If you have paid/likely to pay qualifying annuity premiums and tax deductible MPF voluntary contributions in the year of assessment 2019/20 and wish to holdover the relevant provisional tax, you may lodge a holdover claim in writing or complete Form IR1121 upon receipt of the notice of assessment.

More information on Holdover of Provisional Tax

(F) Supporting Documents

When you file your tax return, you need not attach documents to support your claim. However, you should retain documentary evidence for verification when required.

  • Annual summary or premium payment record of QDAP issued by the insurance company
  • TVC contribution summary issued by the MPF trustee

Documents should be retained for 6 years after the expiration of the relevant year of assessment.

(G) Further Information

More information on the deduction for qualifying annuity premiums and tax deductible MPF voluntary contributions is available through the following links.

Last revision date: May 2019
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