[Must-read for employees] Dual tax deductions, tax filing made easy

Employees are often most wary of receiving a “green tax bill”, and many look for ways to save on tax. Among them, the “tax-saving duo” — the “Qualifying Deferred Annuity Policy” (QDAP, commonly known as a “tax-deductible annuity”) and the “Voluntary Health Insurance Scheme” (VHIS) — is popular with many middle- to high-income earners.

Through the “tax-saving duo”, employees can obtain annual tax deductions of HKD 68,000 or more. Sun Life also offers a “tax-saving duo” package: 豐碩延期年金計劃 and 永明港卓越醫療保, which can help employees achieve three goals at once: tax savings, 5-star protection, and retirement planning.

One of the key members of the “tax deduction duo” is a tax-deductible annuity. Taking the 豐碩延期年金計劃, which received a 10Life 5-Star Tax-Deductible Annuity Award, as an example, it has already been certified by the Insurance Authority as a qualifying deferred annuity policy. In addition to tax deductions, the main purpose of a tax-deductible annuity is to pave the way for retirement, and the 豐碩延期年金計劃 can help policyholders create their own retirement income stream. The plan offers a range of options, with a premium payment term of 5 or 10 years¹. As long as premiums have been paid for an accumulated period of 10 to 50 years, policyholders may choose to start receiving monthly annuity payments from age 50 to 80. The annuity payment period is 10, 15 or 20 years², or until age 100.

If an employee takes out this policy, the maximum annual tax deduction is HK$60,000³. Based on the highest salaries tax rate of 17%, this could save up to HK$10,200 in tax.  

The plan provides guaranteed monthly annuity payments, delivering a stable monthly annuity income throughout the annuity period, while the non-guaranteed monthly annuity payments⁴ derived from accumulated reversionary bonuses offer growth potential. Based on the above table, using a 45-year-old non-smoking male as an example, and depending on the premium payment term and annuity period, the plan’s annualised internal rate of return ranges from 2.56% to 4.07%. Policyholders may choose different plans according to their individual financial needs.

Life is long, and unexpected events can arise at any time. In the event of the policyholder’s unfortunate death, the beneficiary will be entitled to death benefits. 豐碩延期年金計劃 offers two payment options for death benefits: a lump sum or instalments, providing financial support for the beneficiary.

Another important member of the “tax-deductible duo” is the Voluntary Health Insurance Scheme. Under government regulations, each taxpayer may purchase a certified plan under the Voluntary Health Insurance Scheme for themselves or designated relatives and claim a tax deduction⁵. The maximum deductible premium amount claimed for each insured person in each assessment year is HKD 8,000. If you insure specified relatives, the policy owner may claim tax deductions for the Voluntary Health Insurance Scheme premiums paid for each insured person, and there is no limit on the number of policies eligible for tax deduction! Assuming Mr Chan takes out cover for himself, his wife and his son, and calculating at the highest Salaries Tax rate (17%), Mr Chan could save up to HKD 4,080 in tax.

In addition to saving tax, policyholders purchasing Voluntary Health Insurance naturally hope for comprehensive protection. Sun Life Rainbow Medical Insurance has received a 5-star rating from 10Life, and its medical protection score has reached a perfect 10. The plan not only enables taxpayers to enjoy tax concessions, but also provides 5-star product protection for themselves or designated relatives, achieving two benefits in one.

If the insured unfortunately falls ill, being able to recuperate in a place with ample privacy and a comfortable environment is believed to be very helpful to recovery. Sun Life Rainbow Medical Insurance takes a mid-to-high-end positioning, allowing patients to rest quietly in a semi-private room in a private hospital. In addition, the policy offers an annual benefit limit of up to HK$10 million and a lifetime limit of HK$40 million, giving customers sufficient coverage to cope with the rising cost of private healthcare.

Many employees may already have group medical insurance provided by their employer, but the coverage may not be enough to cover substantial medical expenses, or they may need to purchase medical insurance independently. Sun Life Rainbow Medical Insurance can provide more comprehensive protection in addition to employer group medical insurance, filling the gaps in group coverage. Sun Life Rainbow Medical Insurance offers four deductible options⁶: HK$0, HK$20,000, HK$50,000 and HK$80,000, catering to employees’ need for flexible budgeting.

As the links between Mainland China and Hong Kong become increasingly close, there is greater interaction between residents of the two places. To meet the rising cross-border healthcare needs, Sun Life has expanded the list of designated hospitals in Mainland China and extended its Mainland China discharge cashless service⁷, which applies to the above-mentioned medical insurance products such as 永明港卓越醫療保.

The plan includes: 

• The list of designated hospitals in Mainland China has been expanded to more than 4,200 hospitals across the Mainland, including all Class 3 hospitals in China (Special Grade, Grade A, Grade B and Grade C). With the integration of the Greater Bay Area, the designated hospital list also covers all Class 2A hospitals in 21 Mainland cities, including 9 Greater Bay Area Mainland cities, as well as designated private hospitals. The list can be viewed via Designated Hospitals in Mainland China.
• To allow patients to focus on recovery without having to worry about additional medical expenses, Sun Life has enhanced its Mainland China discharge cashless service, extending it to all Class 3A public hospitals and all Class 2A public hospitals in the Greater Bay Area, bringing the total number of hospitals to nearly 2,000. Eligible customers only need to obtain pre-approval for cashless arrangement in advance, and Sun Life will pay all eligible medical expenses incurred during hospitalisation on their behalf. The list can be viewed via the list of network hospitals under the cashless arrangement for inpatient care.

The plan is subject to the terms and conditions. This article contains general information only and does not constitute any recommendation to purchase any policy. For details of the product features, including the risks and exclusions, please refer to the relevant sales brochure and sample policy document. If there is any inconsistency between this article and the policy document, the policy document shall prevail. Please refer to the sample policy document for definitions and full terms and conditions. Sun Life will provide the relevant documents upon request.

Notes:  
1.    This plan does not provide a prepayment premium service.
2.    You may choose to start receiving monthly annuity payments at age 50, 55, 60, 65, 70, 75 or 80.  Once the policy takes effect, the annuity commencement age and annuity period cannot be changed.
3.    The maximum tax deduction per taxpayer in each assessment year is HK$60,000, being the aggregate cap for qualifying deferred annuity premiums and tax-deductible MPF voluntary contributions. Whether the premiums paid under this plan are eligible for tax deduction under Salaries Tax and Personal Assessment is subject to the prevailing tax laws in Hong Kong and your individual circumstances. Please refer to the “Tax implications of a Qualifying Deferred Annuity Policy” section for the key risk factors. Sun Life Hong Kong Limited (“Sun Life Hong Kong”) does not provide tax advice. You should seek advice from an independent tax adviser.
4.    The non-guaranteed monthly annuity payments are determined and paid based on accumulated reversionary bonuses. The non-guaranteed monthly annuity payments and reversionary bonuses are not guaranteed and are determined at the sole discretion of Sun Life Hong Kong and announced from time to time. Both may vary according to the performance of several experience factors, of which investment return is generally regarded as the main determinant. Other factors include, but are not limited to, claims experience, policy expenses, taxation and policyowner surrender experience. Any change in reversionary bonuses and non-guaranteed monthly annuity payments will also affect the total internal rate of return. Under this plan, any withdrawal of the cash value of accumulated reversionary bonuses can only be made after the premium payment period. Such withdrawal after the premium payment period will reduce the face value and cash value of accumulated reversionary bonuses and future non-guaranteed monthly annuity payments.
5.    Whether the qualifying premiums paid are eligible for tax deduction is subject to the prevailing tax laws in Hong Kong, the individual circumstances of the policyholder (as taxpayer) and the insured person. For details, please refer to the Inland Revenue Department website and the Inland Revenue Ordinance (Cap. 112). Sun Life Hong Kong does not provide tax advice. You should seek advice from an independent tax adviser.
6.    The co-payment amount may be adjusted upon each policy renewal and upon fulfilment of specified requirements.
7.    The discharge without payment service is provided by a designated third-party service provider and is not guaranteed. The third-party service provider will use its best endeavours to handle any request from the insured person to rearrange or cancel value-added services arranged through the assistance service, provided that the insured person gives advance notice via the relevant hotline. Any rearrangement or cancellation of value-added services is subject to the terms and conditions set by the service provider for the relevant services. The service provider may charge fees for booked value-added services and may impose charges for rearrangement or cancellation of value-added services. All incidental related costs, including but not limited to changes to or cancellation of appointments, shall be borne by the insured person. Sun Life Hong Kong shall not be responsible for any acts, omissions or negligence of the designated third-party service provider. Sun Life Hong Kong shall also not be liable for any loss or damage, costs or other expenses arising from, resulting from or in connection with the services.
 

This English version of this article has been generated by machine translation powered by AI. It is provided solely for reference purposes. In the event of any discrepancy or inconsistency between this translation and the original Chinese version, the Chinese version shall prevail.