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Comparison of IIT between Hong Kong, China and Taiwan for 2022/2023 (2)

Part One：Comparison of IIT between Hong Kong, China and Taiwan for 2022/2023 (1)

Section II Case Analysis

This section takes the form of an example for taxpayer who employed in China, Hong Kong and Taiwan, and receive same amount of salaries and wages, to calculate and compare the income tax payable for these three places. A comparative analysis of taxpayers?tax burdens.

Unless otherwise stated, the examples in this section are based on the following conditions:

The taxpayer only obtains employment income / salaries income and does not have any other taxable income that needs to be declared.
Whether the parents are supported is only based on the local legal age standard, and other factors are not considered for the time being.
Except for relatives such as spouses, parents, and children supported by taxpayers, other tax allowances, deductions, and expenses are not considered.
Based on the currency exchange, the monetary value of the salary income obtained by taxpayers in the three places is substantially equal. The exchange rate is: [Exchange rate between HKD and NTD: 1:4] [Exchange rate between HKD and RMB: 1:0.9]
The taxpayers?MPF contributions in Hong Kong, labour and health insurance costs withheld in Taiwan, and basic social insurance premiums and housing provident funds withheld in Shanghai are based on the taxpayer’s salary in 2022. The housing provident fund contribution rate in Shanghai is 7%.

The seven cases listed in this section for the data for the employment income/salary income and taxable income data for China, Hong Kong and Taiwan’s are summarized as follows:

Case			Employment /Salaries Income			Tax Payable
Case			Hong Kong (HK$)	Taiwan (NT$)	Shanghai (RMB)	Hong Kong (HK$)	Taiwan (NT$)	Shanghai (RMB)
Single	1	No dependant relatives	195,000	780,000	175,500	0	17,850	5,250
Single	2	Have dependant relatives	195,000	780,000	175,500	0	0	2,850
Married (Single party earning)	3	Parents aged below 60 One child	520,000	2,080,000	468,000	0	67,960	37,001
	4	Dependant parents Two children				0	15,250	34,601
	5	Dependant parents No dependant spouse’s parents Two children				0	44,440	34,601
Married (Both parties earning)	6	Parents aged below 60 One child				9,650	143,440	38,201
Married (Both parties earning)	7	Dependant parents Two children				0	110,225	37,001

Based on the aforementioned exchange rate between HKD, RMB and NTD, after converting the employment income /salaries income and tax payable denominated in RMB and NTD into HKD, the tax payable of Mainland China, Hong Kong and Taiwan are as follows. (Maximum tax payable and tax bearing rate is marked with red):

Cases			Employment /Salaries Income (HK$)	Tax Payable (HK$)			Tax Bearing Rate
Cases			Employment /Salaries Income (HK$)	Hong Kong	Taiwan	Shanghai	Hong Kong	Taiwan	Shanghai
Single	1	No dependant relatives	195,000	0	4,463	5,833	0	2.29%	2.99%
Single	2	Have dependant relatives	195,000	0	0	3,167	0	0%	1.62%
Married (Single party earning)	3	Parents aged below 60 One child	520,000	0	16,990	41,112	0	3.27%	7.91%
	4	Dependant parents Two children		0	3,813	38,446	0	0.73%	7.39%
	5	Dependant parents No dependant spouse’s parents Two children		0	11,110	38,446	0	2.14%	7.39%
Married (Both parties earning)	6	Parents aged below 60 One child		9,650	35,860	42,445	1.86%	6.90%	8.17%
Married (Both parties earning)	7	Dependant parents Two children		0	27,556	41,112	0	5.30%	7.91%

According to Hong Kong’s tax relief measures, when the tax payable is less than HK$6,000, Hong Kong residents do not need to pay taxes. Learned from the above calculation results, Hong Kong residents have the lowest income tax for the same amount of employment income than the residents in Mainland China and Taiwan. The main reason is that Hong Kong ’s personal income tax (individual income tax) can obtain higher tax allowances and more tax exemptions and deductions. In addition, the Hong Kong Inland Revenue Department has not set excessively high and complicated tax exemption conditions, so that Hong Kong residents are more likely to meet the requirements of tax exemption or deduction and enjoy various tax preferential policies more generally and easily.

Compared with Taiwan and Shanghai, the tax burden of Shanghai residents is higher because although the taxpayers in mainland China have already calculated the annual consolidated tax and enjoyed special additional deductions, but in fact they cannot declare the family as the unit, and there are many restrictions on tax exemptions and deductions. For example, husband and wife cannot file a joint declaration, and when the husband or wife has no income, the taxpayer cannot obtain any allowance. For any supporting parents, the number of supporting parents is not taken into account for the special additional deduction regardless of how many dependants the taxpayers should support, the total deduction shall not exceed RMB 24,000 per person per year for all taxpayers who are the single child, the maximum deduction shall not exceed RMB 12,000 per person per year for taxpayers who are non-single child.

The Taiwan tax law allows taxpayers to declare and pay individual income tax on a family basis. This method has obvious advantages when the family income is low, the parents and several children need to be supported. However, compared with Hong Kong, Taiwan ’s income tax law also has more restrictions on tax exemptions and deductions and more complex requirements, such as wealth restrictions clauses. In addition, according to the calculation results of Examples 6 and 7, in the case where the family income is high and the husband and wife have salary income, the amount of tax levied on the salary income of a taxpayer or his/her spouse computed separately and then declared and paid on a consolidated basis by the taxpayers is lower than the consolidated declaration, the tax method of computed separately is more advantageous. This is because the higher the net consolidated income obtained during the consolidated calculation, the higher the corresponding progressive tax rate and the higher the tax payable.

Case One: Single Employees

Income Items	Hong Kong Mr. A (HK$)	Taiwan Mr. B（NT$）	Shanghai Mr. C（RMB）
Monthly Salary	15,000	60,000	13,500
Annual One-off Bonus	15.000	60,000	13,500

Annual Salary	195,000	780,000	175,500
Expense Items	MPF 9,000	Labor Insurance 12,096	Social Insurance 17,010
Expense Items	MPF 9,000	Health Insurance 11,280	HPF 11,340

No Dependant

[Example 1] The taxpayer is single without siblings, his father is 54 years old and his mother is 53 years old.

(1)

Hong Kong Residents

Items		Amount（HK$）
Salaries		195,000
Exemptions and Deductions	Exemptions for Single	132,000
	MPF	9,000
	Total Exemptions and Deductions	141,000
Chargeable Income		54,000
On the first 50,000tax rate is 2%tax payable		1,000
Remainder 4,000tax rate is 6%tax payable		240
Total Tax Payable		1,240
Less100% of tax reliefUpper limit 6,000		1,240
Net Tax Payable		0

(2)

Taiwan Residents

Taiwan resident taxpayer?parents are under the age of 60, they cannot declare as dependant and need to declare the individual income tax separately. Itemized deductions of labour insurance and health insurance premiums are lower than the standard deductions, so choosing standard deductions is more beneficial to the taxpayer.

Items		Amount（NT$）
Gross Consolidated Income		780,000
Exemptions and Deductions	General ExemptionsTaxpayer	92,000
	General DeductionsSingle	124,000
	Special Deductions for Wages	207,000
	Total Exemptions and Deductions	408,000
Net Consolidated Income		357,000
Tax Rate		5%
Tax Payable		17,850

(3)

Shanghai Residents

The taxpayer is single child and the parents do not reach 60 years old, so they cannot apply for special additional deduction for the elderly care.

（a）Individual Income Tax for Salaries and Wages

Items		Amount（RMB）
Annual Salaries and Wages		162,000
Deductions	Basic Exemption	60,000
	Special DeductionsSocial Insurance (Individual Part)	17,010
	Special DeductionsHPF (Individual Part)	11,340
	Special Additional DeductionsElderly Care (for Single Child
	Total Deductions	88,350
Taxable Income		73,650
Tax Rate		10%
Quick Deductions		2,520
Tax Payable for Salaries and Wages		4,845

(b) Individual Income Tax for Annual One-off Bonus

Items	Amount（RMB）
Total Annual One-off bonus	13,500
Taxable Income	13,500
Tax Rate	3%
Quick Deductions	0
Tax Payable for Annual One-off Bonus	405

Items	Amount（RMB）
Tax Payable for Annual Salaries and Wages	4,845
Tax Payable for Annual One-off Bonus	405
Total Annual Tax Payable	5,250

With Dependants

[Example 2] The taxpayer is single without siblings and lives with parents. His father is 60 years old and his mother is 58 years old.

(1)

Hong Kong Residents

The taxpayer’s parents have all met the age standard of the tax allowance and live together with the taxpayer. In addition to the tax allowance of dependant parents, an additional tax allowance can also be applied. The total amount of tax exemptions and deductions exceeds the annual income, and taxpayers are not required to pay taxes.

Items		Amount（HK$）
Salaries		195,000
Allowances and Deductions	Basic Allowances	132,000
	Allowance for dependant mother aged over 55 but below 60	25,000
	Allowance for dependant father aged 60	50,000
	Allowance for living with mother aged over 55	25,000
	Allowance for living with father aged over 60	50,000
	MPF	9,000
	Total Exemptions and Deductions	291,000
Chargeable Income		0

(2)

Taiwan Residents

The taxpayer ’s father is over 60 years old and his mother is under 60 years old with no ability to support herself. Therefore, they can declare as dependants and file a tax return with the taxpayer. Both parents are under the age of 70 and all 3 people are subject to the general tax allowance of NT$ 92,000 per person.

The basic living expense difference of NT $ 188,000 can be deducted from the income:

Total basic living expenses-(Exemption + Standard /Itemized deduction + pre-school children deduction + Physically or mentally challenged deduction+ Savings and investment deduction + Educational tuition deduction)
=196,000X3-（276,000+124,000）=188,000

Items		Amount（NT$）
Gross Consolidated Income		780,000
Exemptions and Deductions	General Exemptions92,000 * 3 Persons	276,000
	Standard DeductionSingle	124,000
	Special Deduction for Employment Income	207,000
	Basic Living Expense Difference	188,000
	Total Exemptions and Deductions	795,000
Net Consolidated Income		0
Tax Payable		0

(3)

Shanghai Residents

The taxpayer is a single child, and one of the parents has reached the age of 60 and can apply for a special additional deduction for elderly care for RMB 24,000 per year.

(a) Individual Income Tax for Salaries and Wages

Items		Amount（RMB）
Annual Salaries and Wages		162,000
Deductions	Basic Exemption	60,000
	Special Deductions: Social Insurance (Individual Part)	17,010
	Special Deductions: HPF (Individual Part)	11,340
	Special Additional Deduction Elderly Carefor Single Child	24,000
	Total Deductions	112,350
Taxable Income		49,650
Tax Rate		10%
Quick Deductions		2,520
Tax Payable for Salaries and Wages		2,445

(b) Individual Income Tax for Annual One-off Bonus

Items	Amount（RMB）
Annual One-off Bonus	13,500
Taxable Income	13,500
Tax Rate	3%
Quick Deductions	0
Tax Payable for Annual One-off bonus	405

Items	Amount（RMB）
Tax Payable for Annual Salaries and Wages	2,445
Tax Payable for Annual One-off Bonus	405
Total Annual Tax Payable	2,850

Case Two: Married (Single Party Earning)

Income Items	Hong Kong Mr. A (HK$)	Taiwan Mr. B（NT$）	Shanghai Mr. C（RMB）
Monthly Salary	40,000	160,000	36,000
Annual One-off Bonus	40,000	160,000	36,000
Annual Salary	520,000	2,080,000	468,000
Expense Items	MPF 18,000	Labor Insurance 12,096	Social Insurance 43,077
Expense Items	MPF 18,000	Health Insurance 29,652	HPF 28,718

Parents Under 60 Years Old and Have Ability to Support Themselves

[Example 3] The taxpayer is married, and the spouse has no income. The taxpayer and the spouse are single children. The taxpayer has a child over 3 years old and lives with his parents. Father is 62 years old and mother is 58 years old. The spouse’s father is 60 years old and the mother is 55 years old.

(1)

Hong Kong Residents

(a) The taxpayer’s spouse has no work and no income. So, the married person’s allowance is applied.

(b) The age of the taxpayer’s parents and spouse’s parents meets the tax exemption conditions. The taxpayer lives with parents, he can get an additional tax allowance for dependant parents.

(c) The total amount of tax exemptions and deductions exceeds the annual salaries income, and the taxpayer is not required to pay taxes.

Items		Amount（HK$）
Salaries		520,000
Allowances and Deductions	Married person’s allowance	264,000
	Allowance for living with father aged over 60	100,000
	Allowance for living with mother aged over 55	50,000
	Allowance for dependant spouse’s father aged over 60	50,000
	Allowance for dependant spouse’s mother aged over 55	25,000
	Children allowance for one child	120,000
	MPF	18,000
	Total Exemptions and Allowances	627,000
Chargeable Income		0
Tax Payable		0

(2)

Taiwan Residents

(a) The taxpayer’s and spouse’s mothers are under the age of 60, they cannot declare as dependant, and the taxpayer, spouse and their parents should declare individual income tax separately.

(b) The taxpayer, his spouse, their child and their fathers, can apply for the general tax allowance which is NTD 92,000 per person.

(c) The itemized deductions of labor insurance premiums and health insurance premiums are lower than the standard deductions, so choosing the standard deductions is beneficial to taxpayers.

(d) The taxpayer can apply pre-school deduction of NTD 120,000 while one of the taxpayers?children under 5 years old. However, the tax rate applicable to the taxpayer after applying the pre-school allowance is 20%, so the pre-school deduction cannot be used, and the net taxable income should be returned and adjusted.

(e) The basic living expense difference of NT $ 152,000 can be deducted from the income:

Total basic living expenses-(Exemption amount + Standard /Itemized deduction + pre-school children deduction + Physically or mentally challenged person deduction+ Savings and investment deduction + Education and tuition deduction)
= 196,000 * 5- (460,000 + 248,000 + 120,000) = 152,000

Items		Amount（NT$）
Gross Consolidated Income		2,080,000
Exemptions and Deductions	General Exemptions92,000*5 Persons	460,000
	Standard DeductionMarried	248,000
	Special Deduction for Employment Income	207,000
	Pre-School Children Deduction	120,000
	Basic Living Expense Difference	152,000
	Total Exemptions and Deductions	1,187,000
Net Consolidated Income		893,000
Tax Rate		12%
Progressive Difference		-39,200
Tax Payable		67,960

(3)

Shanghai Residents

The taxpayer is the single child, one of his parents is over 60 years old. Although the spouse’s father is also over 60 years old, the number of elderly dependants is not affecting the special additional deduction. Single child can apply for a deduction of RMB 24,000 per year.

The taxpayer’s child has reached the age of 3, so that the taxpayer can meet the special additional deduction standard for children’s education and can apply for a deduction of RMB 12,000 per child per year.

(a) Individual Income Tax for Salaries and Wages

Items		Amount（RMB）
Annual Salaries and Wages		432,000
Deductions	Basic Exemption	60,000
	Special Deduction Social Insurance (Individual Part)	43,077
	Special DeductionHPF (Individual Part)	28,718
	Special Additional Deduction Elderly Carefor Single Child	24,000
	Special Additional Deduction: Children’s EducationOne Child	12,000
	Total Deductions	167,795
Taxable Income		264,205
Tax Rate		20%
Quick Deduction		16,920
Tax Payable for Annual Salaries and Wages		35,921

(b) Individual Income Tax for Annual One-off Bonus

Items	Amount（RMB）
Annual One-off Bonus	36,000
Taxable Income	36,000
Tax Rate	3%
Quick Deduction	0
Tax Payable for Annual One-off Bonus	1,080

Items	Amount（RMB）
Tax Payable for Annual Salaries and Wages	35,921
Tax Payable for Annual One-off Bonus	1,080
Total Annual Tax Payable	37,001

Dependant Parents and Dependant Spouse’s Parents

[Example 4] The taxpayer is married, and the spouse has no income. They all are the single child and have two children which are age 9 and age 4. The taxpayer lives with his parents, his father is 70 years old and his mother is 65 years old. The spouse’s parents are over 70 years old.

(1)

Hong Kong Residents

Items		Amount（HK$）
Salaries		520,000
Allowance and Deductions	Married person’s allowance	264,000
	Allowance for dependant parents aged over 60	100,000
	Allowance for living with parents aged over 60	100,000
	Allowance for dependant spouse’s parents aged over 60	100,000
	Children allowancetwo children	240,000
	MPF	18,000
	Total Allowance and Deductions	822,000
Chargeable Income		0

(2)

Taiwan Residents

(a) The taxpayer, his spouse, 2 children and 4 retired parents, altogether 8 persons. Five of them can apply the general exemption of NT$ 92,000 per person, and three of them are over 70 years old and can apply for the general exemption of NT$ 138,000 per person.

(b) One of the children is under 5 years old and can use the pre-school children deduction of NT$ 120,000.

(c) The basic living expense difference of NT $ 326,000 can be deducted from the income:

Total basic living expenses-(Exemption amount + Standard /Itemized deduction amount + pre-school children deduction + Physically or mentally challenged person deduction+ Savings and investment deduction + Education and tuition deduction)
= 196,000 * 8 - (874,000 + 248,000 + 120,000) = 326,000

Items		Amount（NT$）
Gross Consolidated Income		2,080,000
Exemptions and Deductions	General Exemptions92,0005 +138,0003	874,000
	Standard DeductionMarried	248,000
	Special Deduction for Employment Income	207,000
	Pre-School Children Deduction	120,000
	Basic Living Expense Difference	326,000
	Total Exemptions and Deductions	1,775,000
Net Consolidated Income		305,000
Tax Rate		5%
Tax Payable		15,250

(3)

Shanghai Residents

(a) Individual Income Tax for Salaries and Wages

Items		Amount（RMB）
Annual Salaries and Wages		432,000
Deductions	Basic Exemption	60,000
	Special DeductionSocial Insurance (Individual Part)	43,077
	Special DeductionHPF (Individual Part)	28,718
	Special Additional Deduction Elderly CareFor Single Child	24,000
	Special Additional Deduction: Children’s EducationTwo Children	24,000
	Total Deductions	179,795
Taxable Income		252,205
Tax Rate		20%
Quick Deductions		16,920
Tax Payable for Salaries and Wages		33,521

(b) Individual Income Tax for Annual One-off Bonus

Items	Amount（RMB）
Annual One-off Bonus	36,000
Taxable Income	36,000
Tax Rate	3%
Quick Deduction	0
Tax Payable for Annual One-off Bonus	1,080

Items	Amount（RMB）
Tax Payable for Annual Salaries and Wages	33,521
Tax Payable for Annual One-off Bonus	1,080
Total Annual Tax Payable	34,601

Supported Parents (Unsupported Spouse’s Parents)

[Example 5] The taxpayer is married without siblings, and his spouse has no income. They have two children which age are 15 and 10 years old. The taxpayer does not live with his parents, his father is over 70 years old, and his mother is over 65 years old.

(1)

Hong Kong Residents

Items		Amount（HK$）
Salaries		520,000
Allowances and Deductions	Married person’s allowance	264,000
	Allowance for supporting parents aged over 60	100,000
	Children allowance (two children	240,000
	MPF	18,000
	Total Allowances and Deductions	622,000
Chargeable Income		0

(2)

Taiwan Residents

(a) The taxpayer, his spouse, two children and two retired parents, six persons in total, in which, five can apply the general exemption of NT$ 92,000 per person, and one is over 70 years old and can apply for the general exemption of NT$ 138,000.

(b) The basic living expense difference of NT $330,000 can be deducted from the income:

Total basic living expenses-(Exemption + Standard /Itemized deduction + pre-school children deduction + Physically or mentally challenged person deduction+ Savings and investment deduction + Educational tuition deduction)
=196,000X6-（598,000+248,000）=330,000

Items		Amount（NT$）
Gross Consolidated Income		2,080,000
Exemptions and Deductions	General Exemptions92,000 *5 +138,000	598,000
	Standard DeductionMarried	248,000
	Special Deduction for Employment Income	207,000
	Basic Living Expense Difference	330,000
	Total Exemptions and Deductions	1,383,000
Net Consolidated Income		697,000
Tax Rate		12%
Progressive Difference		-39,200
Tax Payable		44,440

(3)

Shanghai Residents

The calculation for this example is the same as [Example 4]. Please refer to [Example 4] for the tax payable.

Case Three：Married (Both Parties Earning)

Income Items	Hong Kong Mr. A (HK$)	Taiwan Mr. B（NT$）	Shanghai Mr. C（RMB）
Monthly Salary	40,000	160,000	36,000
Annual One-off Bonus	40,000	160,000	36,000
Annual Salary	520,000	2,080,000	468,000
Expense Items	MPF 18,000	Labor Insurance 12,096	Social Insurance 43,077
Expense Items	MPF 18,000	Health Insurance 29,652	HPF 28,718

Parents Under 60 Years Old and Have Ability to Support Themselves

[Example 6] The taxpayer is married with one child at 3 years old, and they have the same salary. The taxpayer lives with his parents. His father is 62 years old and his mother is 58 years old. The spouse’s father is 60 years old and the mother is 55 years old.

(1)

Hong Kong Residents

The taxpayer and the spouse can choose to file separate assessment or joint assessment. The Hong Kong IRD will automatically calculate the taxpayer’s tax, compare the results of the two methods and choose whichever is lower.

(a) If the couple files a joint assessment, details of the salaries tax payable are as below:

Items		Amount（HD$）
Total Salaries on Joint Assessment		1,040,000
Allowances and Deductions	Married person’s allowance	264,000
	Allowance for living with dependant parents aged over 60	100,000
	Allowance for living with dependant parents aged over 55	50,000
	Allowance for dependant parents aged over 60	50,000
	Allowance for dependant parents aged over 55	25,000
	Children allowance (one child)	120,000
	MPF	36,000
	Total Allowances and Deductions	645,000
Chargeable Income		395,000
First 200,000tax payable		16,000
Remainder 195,000tax Rate 17%tax payable		33,150
Total Tax Payable		49,150
Less100% of tax reliefUpper limit 6,000		6,000
Net Tax Payable		43,150

(b) If the couple files separate assessment, the details of salaries tax payable by the husband are as below:

Items		Amount（HK$）
Husband’s Salaries		520,000
Allowances and Deductions	Married person’s allowancedeclare separately	132,000
	Allowance for living with dependant father aged over 60	100,000
	Allowance for living with dependant mother aged over 55	50,000
	Allowance for dependant spouse’s mother aged over 55	25,000
	MPF	18,000
	Total Allowances and Deductions	325,000
Chargeable Income		195,000
First 150,000tax payable		9,000
Remainder 45,000tax rate 14%tax payable		6,300
Total Tax Payable		15,300
Less100% of tax reliefUpper limit 6,000		6,000
Net tax Payable		9,300

Items		Amount（HK$）
Wife’s Salaries		520,000
Allowances and Deductions	Married person’s allowancedeclare separately	132,000
	Allowance for dependant spouse’s father aged over 60	50,000
	Children allowance (one child)	120,000
	MPF	18,000
	Total Allowances and Deductions	320,000
Chargeable Income		200,000
Tax Payable		16,000
Less100% of tax reliefUpper limit 6,000		6,000
Net Tax Payable		10,000

Under the above situation, no matter whether the couple chooses to file separate assessment or joint assessment, they are required to pay salaries tax. But the tax payable of HK$19,300 for separate assessment (9,300 + 10,000) is lower than the tax payable of HK$43,150 for joint assessment, the tax payable should be the lower one. The average tax payable for husband and wife is HK$9,650.

(2)

Taiwan Residents

The taxpayer and his spouse can choose to calculate the tax separately and then make a consolidated declaration, or they can choose to jointly calculate the tax and make a consolidated declaration.
.
The taxpayer’s and his spouse’s mothers are under the age of 60, so they cannot declare as dependants.

The taxpayer, his spouse, their child and their fathers, five persons in total, the general tax allowance of NT $ 92,000 per person will be applied.

The tax rate applicable to the taxpayer after applying the pre-school allowance for pre-school children is 30%, so the pre-school children deduction cannot be applied, and the net consolidated income should be adjusted.

The basic living expense difference formula calculates the difference of NT $ 72,000 and can be deducted from the income:

Total basic living expenses - (Exemptions + Standard / Itemized deductions + Pre-school children deduction + Physical or mentally challenged person deduction+ Savings and investment deduction + Educational tuition deduction)
=196,000X5-（460,000+248,000）=272,000

(a) Joint Declaration

Items		Amount（NT$）
Gross Consolidated Income		4,160,000
Exemptions and Deductions	General Exemptions92,000 * 5	460,000
	Standard DeductionMarried	248,000
	Special Deduction for Employment Income	414,000
	Pre-School Children Deduction	120,000
	Basic Living Expense Difference	272,000
	Total Exemptions and Deductions	1,514,000
Net Consolidated Income		2,646,000
If applicable tax rate is 20% or higherpre-school children deduction cannot be applied		120,000
Final Net Consolidated Income		2,766,000
Tax Rate		30%
Progressive Difference		-392,000
Tax Payable		437,800

(b) If the couple files separate assessment, the details of salaries tax payable by the husband are as below:

Items		Amount（NT$）
Husband’s Gross Consolidated Income		2,080,000
Exemptions and Deductions	General Exemption (92,000*4)	368,000
	Standard DeductionMarried	248,000
	Special Deduction for Employment Income	207,000
	Pre-School Children Deduction	120,000
	Basic Living Expense Difference	48,000
	Total Exemptions and Deductions	991,000
Net Consolidated Income		1,089,000
Tax Rate		12%
Progressive Difference		-39,200
Tax Payable		91,480

Items		Amount（NT$）
Wife’s Gross Consolidated Income		2,080,000
Exemptions and Deductions	General Exemption (92,000*1)	92,000
	Standard DeductionMarried	0
	Special Deduction for Employment Income	207,000
	Pre-School Children Deduction	0
	Basic Living Expense Difference	104,000
	Total Exemptions and Deductions	403,000
Net Consolidated Income		1,677,000
Tax Rate		20%
Progressive Difference		-140,000
Tax Payable		195,400

(d) If the couple files separate assessment, the total tax payable is NT $ 91,480+195,400=286,880.

Comparing the tax calculation, the tax payable for separate assessment is NT$286,880 which is lower than the tax payable for joint assessment amount NT$578,600. The final tax payable is NT$ 437,800. The average tax payable for husband and wife is NT$143,440.

(3)

Shanghai Residents

The calculation of China’s individual income tax does not take the family as the unit, and the taxpayers who obtain individual income shall declare the individual income tax. Both the husband and wife are single child, and all their fathers are over 60 years old, so both can apply for a special additional deduction for supporting the elderly as single child.

Taxpayers can apply for a special additional deduction for children’s education of RMB 12,000 for children over the age of three. 50% will be deducted for both or 100% in full for one of them can be applied. In this example, the taxpayers deduct 50%, which is RMB 6,000.

(a) Individual Income Tax for Salaries and Wages of the Husband

Items		Amount（RMB）
Husband’s Annual Salaries and Wages		432,000
Deductions	Basic Exemption	60,000
	Special Deduction: Social Insurance (Individual Part)	43,077
	Special Deduction: HPF (Individual Part)	28,718
	Special Additional Deduction: Elderly Care (for Single Child)	24,000
	Special Additional Deduction: Children Education (One Child)	6,000
	Total Deductions	161,795
Taxable Income		270,205
Tax Rate		20%
Quick Deductions		16,920
Tax Payable for Salaries and Wages		37,121

(b) Individual Income Tax for Annual One-off Bonus of the Husband

Items	Amount（RMB）
Annual One-off Bonus	36,000
Taxable Income	36,000
Tax Rate	3%
Quick Deduction	0
Tax Payable for Annual One-off Bonus	1,080

(c) The tax computation process and tax payable of the wife for her salaries and wages and annual one-off bonus are the same as that of the husband’s.

(d) Annual Individual Income Tax Payable Borne by the Husband and Wife separately:

Items	Amount（RMB）
Tax Payable for Annual Salaries and Wages	37,121
Tax Payable for Annual One-off Bonus	1,080
Total Annual tax Payable	38,201

Dependant Parents

[Example 7] The taxpayer is married, the husband and wife have the same salary, and they are single child. They have two children who are 4 and 9 years old. The taxpayer lives with his parents, his father is 70 years old and his mother is 65 years old. Spouse’s parents are over 70 years old.

(1)

Hong Kong Residents

(a) If the couple files a joint assessment, details of the salaries tax payable are as below:

Items		Amount（HK$）
Total Salaries on Joint Assessment		1,040,000
Allowances and Deductions	Married person’s allowance	264,000
	Allowance for living with dependant parents aged over 60	100,000
	Additional allowance for living with dependant parents aged over 60	100,000
	Allowance for dependant parents aged over 60	100,000
	Children allowance (two children)	240,000
	MPF	36,000
	Total Allowances and Deductions	840,000
Chargeable Income		200,000
Tax Payable		16,000
Less: 100% of tax relief (Upper limit 6,000		6,000
Net Tax Payable		10,000

(b) If the couple files separate assessment, the details of salaries tax payable by the husband are as below:

Items		Amount（HK$）
Husband’s Salaries		520,000
Allowances and Deductions	Married person’s allowance	132,000
	Allowance for dependant father aged over 60	50,000
	Children allowance (two children)	240,000
	MPF	18,000
	Total Allowances and Deductions	440,000
Chargeable Income		80,000
Tax Payable		2,800
Less: 100% of tax relief (Upper limit 6,000)		2,800
Net Tax Payable		0

Items		Amount（HK$）
Wife’s Salaries		520,000
Allowances and Deductions	Married person’s allowance	132,000
	Allowance for dependant mother aged over 60	50,000
	Allowance for living with dependant parents aged over 60	200,000
	MPF	18,000
	Total Allowances and Deductions	400,000
Chargeable Income		120,000
First 100,000tax payable		4,000
Remaining 20,000tax rate 10%tax payable		2,000
Total Tax Payable		6,000
Less: 100% of tax relief (Upper limit 6,000)		6,000
Tax Payable		0

Under the above situation, if the couple chooses to file separate assessment, they are not required to pay salaries tax. Comparing the tax payable between separate assessment and joint assessment, the tax payable of HK$0 for separate assessment is lower than the tax payable of HK$10,000 for joint assessment, the tax payable should be the lower one.

(2)

Taiwan Residents

The taxpayer and his spouse can choose to calculate the tax separately and then make a consolidated declaration, or they can choose to jointly calculate the tax and make a consolidated declaration.

(a) Joint Declaration

The taxpayer, his spouse, two children, and four parents, eight persons in total, five of which are applicable to the general exemptions of NT $ 92,000 per person, and the other 3 persons which are aged 70 or above are applicable to NT $ 138,000 per person.

The tax rate applicable to the taxpayer after applying the pre-school allowance for pre-school children is 20%, so the pre-school children deduction cannot be applied, and the net consolidated income should be adjusted.

The basic living expense difference formula calculates the difference of NT $ 446,000 and can be deducted from the income:

Total basic living expenses - (Exemptions + Standard / Itemized deductions + Pre-school children deduction + Physical or mentally challenged person deduction+ Savings and investment deduction + Educational tuition deduction)
=196,000X8-（874,000+248,000）=446,000

Items		Amount（NT$）
Gross Consolidated Income		4,160,000
Exemptions and Deductions	General Exemptions92,0005+138,0003	874,000
	Standard DeductionMarried	248,000
	Special Deduction for Employment Income	414,000
	Pre-School Children Deduction	120,000
	Basic Living Expense Difference	446,000
	Total Exemptions and Deductions	2,102,000
Net Consolidated Income		2,058,000
The applicable tax rate is 20%pre-school children deduction cannot be applied		120,000
Final Net Consolidated Income		2,178,000
Tax Rate		20%
Progressive Difference		-140,000
Tax Payable		295,600

(b) If the couple files separate assessment, the details of salaries tax payable by husband are as below:

Items		Amount（NT$）
Husband’s Gross Consolidated Income		2,080,000
Exemptions and Deductions	General Exemption (92,0004 + 138,0003)	782,000
	Standard DeductionMarried	248,000
	Special Deduction for Employment Income	207,000
	Pre-School Children Deduction	120,000
	Basic Living Expense Difference	222,000
	Total Exemptions and Deductions	1,579,000
Net Consolidated Income		501,000
Tax Rate		5%
Progressive Difference		0
Tax Payable		25,050

Items		Amount（NT$）
Wife’s Gross Consolidated Income		2,080,000
Exemptions and Deductions	General Exemption (92,000*1)	92,000
	Standard DeductionMarried	0
	Special Deduction for Employment Income	207,000
	Pre-School Children Deduction	0
	Basic Living Expense Difference	104,000
	Total Exemptions and Deductions	403,000
Net Consolidated Income		1,677,000
Tax Rate		20%
Progressive Difference		-140,000
Tax Payable		195,400

(d) If the couple files separate assessment, the total tax payable is NT $ 25,050+195,400=220,450.

Comparing the tax calculation, the tax payable for separate assessment is NT$220,450 which is lower than the tax payable for joint assessment amount NT$295,600. The final tax payable is NT$220,450 . The average tax payable for husband and wife is NT$110,225.

(3)

Shanghai Residents

The calculation of China’s individual income tax does not take the family as the unit, and the taxpayers who obtain individual income shall declare the individual income tax separately. Both the husband and wife are single child, and all their fathers are aged over 60, so both can apply for a special additional deduction for supporting the elderly as single child.

Two children of the taxpayer are over 3 years old to meet the special additional deduction standard for children ’s education, and the taxpayer and his wife can apply for a deduction of RMB 12,000 per child for the whole year. It can be deducted in full by one or 50% respectively. In this example, the taxpayers deduct 50% or RMB 12,000.

The calculation for the husband and wife to declare separately is the same as [Example 3], and the results are as follows:

Items	Amount（RMB）
Tax Payable for Annual Salaries and Wages	35,921
Tax Payable for Annual One-off Bonus	1,080
Total Annual Tax Payable	37,001

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