3. How is Salaries Tax computed?
 
Suppose you earned a salary of $20,000 and contributed $1,000 to a Mandatory Provident Fund (MPF) Scheme each month from 1 October 2006. The calculation is as follows:
Year of Assessment 2006/07 (i.e. 1/4/2006 – 31/3/2007) |
$ |
Income ($20,000 x 6) |
120,000 |
Less: MPF contributions ($1,000 x 6) |
(6,000) |
Net Total Income: |
114,000 |
Less: Basic allowance |
(100,000) |
Net Chargeable Income: |
14,000 |
Salaries Tax at progressive rate @2% on Net Chargeable Income |
$280 |
Salaries Tax at standard rate @16% on Net Total Income |
$18,240 |
Salaries Tax payable (*the smaller amount) |
$280 |
*As mentioned before, Salaries Tax is charged on your net chargeable income at progressive rate, or is charged on your net total income at standard rate, whichever is the lesser.
|