Q：
|
Is contract gratuities assessable under salaries tax?
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A：
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Yes, contract gratuities are taxable, regardless of whether you receive those during the course of employment or upon or after cessation of employment.
|
Q：
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Do I need to report the whole payment as assessable income upon receipt of contract gratuities?
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A：
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You can report the whole amount in the year of assessment such lump sum payment was received, but you can also apply to have it related back to the service period for which they are made.
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Q：
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How long can be the payment related back?
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A：
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If the gratuity paid for the period of service exceeds 3 years, the amount will be related back at a constant rate over 36 months ending on the date of entitlement to the payment or the last date of employment, whichever is the earlier.
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Q：
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Under what condition will the Inland Revenue Department (“IRD”) approve such application?
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A：
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IRD will only relate back the lump sum payments if it will reduce taxpayer’s overall tax liability.
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Q：
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I completed a 30-month contract of employment from 1 April 2019 to 30 September 2021 and received a lump sum contract gratuity of HK$300,000. Do I have to report the entire sum as assessable income for the year of assessment 2021/22?
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A：
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You may report the whole sum as assessable income for the year of assessment 2021/22 or apply to have the lump sum related back to the period in respect of which the payment was made if there is any overall tax liability can be reduced for such action.
The apportionment of the gratuity to the years would be as follows:
|
Year
of Assessment
|
HK$
|
|
|
2019/20
(1 April 2019 to 31 March 2020)
|
120,000
|
(12
of 30 months)
|
|
2020/21
(1 April 2020 to 31 March 2021)
|
120,000
|
(12
of 30 months)
|
|
2021/22
(1 April 2021 to 30 September 2021)
|
60,000
|
(6
of 30 months)
|
|
TOTAL
|
300,000
|
|
|
FAQ
