1. What should be included under the section of Employee and/or Director's remuneration in the tax return ?
   
   
2. Is there any limit on deductions for MPF contributions made by employers for their employees ?
   
   
3. I made mandatory contributions of $12,000 in a year of assessment as a self-employed person. I also employed my wife in running the business and she joined the MPFS. My MPF contribution for her during the same year was $10,000. Can I claim further deduction for profit tax purposes from her part of contributions ?
   
   
4. After the commencement of the MPF scheme, are there any changes to the employer's responsibilities in filing the Employer's Return ?
   
   
5. An employer may occasionally receive a Recovery Notice issued under Section 76(1) of the Inland Revenue Ordinance requiring him/her to deduct the employee's salary for tax payments. Should the employer fulfill this obligation under the Recovery Notice before or after making the income deduction required under the Mandatory Provident Fund Schemes Ordinance ?

The "employee" referred to here includes all employees whose remuneration has been charged in the Profit and Loss accounts of the company, irrespective of whether the employees perform their duties in Hong Kong or elsewhere. Remuneration paid by you, as an employer, to overseas employees or staff working in the Mainland should also be included. "Employee" also includes a director of a corporation. However, "employee" does not include a proprietor or partners or their spouses of an unincorporated business.

It is the sum of all salaries, bonuses, wages, cash allowances etc. paid to employees and includes director's fees.

Fringe benefits such as reimbursement of rent for living quarters, reimbursement of travelling expenses, share options granted, passages, medical expenses etc. need not be added unless these have already been grouped under "employee remuneration" in the Profit and Loss account of the company.

Regular/monthly contributions (whether mandatory or voluntary) made to a MPF scheme by persons as employers for their employees are allowable for deduction. The deduction, however, is limited to 15% of the total remuneration of employees for the period to which the payments relate.

As the Inland Revenue Ordinance does not permit deduction for MPF contributions in respect of the spouse of a proprietor (or partner), only the mandatory contribution of $12,000 made by you as a self-employed person will be allowed as a deduction in calculating the assessable profits of your business.

Besides the reporting of employees' emoluments, the employer is also required to report the taxable portion of the accrued benefit that the employees received under the RORS or the MPF schemes. As to the circumstances in which the accrued benefits withdrawn by the employee are taxable under Salaries Tax, please refer to Appendix A and B of the "MPF Circular letter No. 1" issued by the Inland Revenue Department .

The Inland Revenue Department is prepared to accept, in the absence of legal precedent to the contrary, the priority of the income deduction for making mandatory contributions to a registered MPF scheme over the income deduction for paying default tax . Mandatory contributions refer to those contributions which an employer has a statutory responsibility to make under section 7A(1)(b) and section 7A(2)(b) of the Mandatory Provident Fund Schemes Ordinance (Cap.485 of the Laws of Hong Kong). They do not cover other contributions including the employee's voluntary contributions made through the employer under section 11 of that ordinance.

For enquiries about a recovery notice issued by the Inland Revenue Department, please call the telephone number printed on the recovery notice.