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MPF Mandatory Contribution Limit & Tax Matters
Understand the latest information and regulations on the upper limit of MPF contributions, as well as the relevant details and benefits of tax deductions on MPF contributions. Master the the practices to prepare and plan for your retirement life.
How to calculate the maximum contribution to the MPF for employers? Understand the latest maximum MPF contribution now
The maximum MPF contribution refers to the maximum amount that employers and employees can contribute within each contribution period in the MPF scheme. Under current regulations, both employers and employees are required to contribute 5% of their relevant income.However, these contribution amounts are subject to minimum and maximum relevant income levels.
Employees and Employers with monthly salary
Monthly relevant income
The maximum MPF contribution
Employers' Contribution
Employees' Contribution
Lower than $7,100
Relevant Income ×5%
No contributions required
$7,100 to $30,000
Relevant Income ×5%
Relevant Income ×5%
More than $30,000
$1,500
The maximum MPF contribution
$1,500
The maximum MPF contribution
Self-employed people with monthly/ annual contributions
Relevant income
Monthly
Annual
The maximum MPF contribution
Lower than $7,100
Lower than $85,200
No contributions required
$7,100 to $30,000
$85,200 to $360,000
Relevant Income ×5%
More than $30,000
More than $360,000
$1,500 per month or $18,000 per year
Relevant income refers to the amount that employers pay or are required to pay to employees in the form of money:
• Includes: any wages, salaries, holiday allowances, expenses, commissions, bonuses, gratuities, contractual remuneration, rewards, or allowances. • Excludes: severance payments or long-term service payments under the ''Employment Ordinance.''Monthly salaried employees:
Generally, the contribution date is the 10th day of each month. For example, the wages for the period of September should be paid to the trustee on or before October 10. For the first contribution of new employees, employers should make the contribution to the trustee on the next contribution date (10th of each month) after the employee's 60th day of employment. If the contribution date falls on a Saturday, public holiday, or during a strong wind/black rainstorm warning, the payment date will be postponed to the first non-Saturday, non-public holiday, or non-strong wind/black rainstorm warning day following the original date.Employer contribution period:
The contribution period generally refers to the wage period. Employers' contributions should be calculated from the first day of employment.Employee contribution period:
Employees enjoy an exemption period, which means they do not have to make contributions for the first 30 days of employment, nor: I. In the first incomplete wage period following the exemption period (such as one month or less); or II. In the month of the 30th day of employment (if the employee's wage period is more than one month).Example:
Miss D's first day of employment is June 5. Since she enjoys an exemption period for the first 30 days of employment, the employer should not deduct MPF contributions from the income earned during that 30-day period (from June 5 to July 4).
When should employers submit payment statements?
Employers should submit a payment statement to the trustee each time they make contributions.Submission methods:
Written: The trustee provides pre-printed payment statements, eliminating the need for employers to prepare documents every month. Digital: The trustee provides software for easy preparation and submission of payment statements over the internet.Important notes:
Even if the trustee does not provide pre-printed payment statements or computer software, employers must fill out the statement themselves.Should payment statements be filled out even if an employee has no relevant income for a particular month?
Even if individual employees have no income for a certain month, the payment statement should still report ''$0'' or provide the necessary information based on the instructions of the individual trustee.Monthly contribution records:
After making contributions to the trustee each month, employers should provide each employee with a monthly contribution record within seven working days. The record should include the following information:• Relevant income of the employee
• Mandatory contribution amounts for the employer and the employee
• Voluntary contribution amounts for the employer and the employee (if applicable)
• Date of payment to the trustee
Annual Benefit Statement:
The MPF trustee must provide an annual benefit statement to employees within three months after the end of each fiscal year. The statement should include the total contributions made by the employer for the employee during that year, the MPF value at the beginning and end of the year, and account gains or losses.The above information reflects the current MPF contribution limits. Please note that these regulations may be subject to changes in laws and policies. To confirm the latest contribution limits, it is advisable to consult professional organizations or refer to announcements from the relevant government departments in Hong Kong.
MPFA plans to increase the contribution limit to HKD 2,750
According to media reports, it is anticipated that the MPF contribution limits for both employers and employees will be revised as part of the scheme's ''four-year review,'' which involves reviewing the contribution levels for minimum and maximum income levels. Based on recent income levels, changes in salaries, and the existing mechanisms in place, it is expected that the monthly MPF contribution limit for both employers and employees will increase from $1,500 to $2,750. Additionally, the minimum monthly salary threshold for MPF contributions will increase from $7,100 to $10,000. The MPF contribution limits have not been adjusted in the past 10 years. However, due to the ongoing economic recovery phase and to avoid increasing the burden on employees, the government has temporarily refrained from proposing any adjustments.MPF Contribution Tax Strategy: 4 Key Points to Note
1
Tax Deductions for MPF Contributions - Are mandatory contributions tax-deductible?
Under the current tax system, employees' mandatory contributions to the MPF are eligible for tax deductions. For the 2015-16 tax year and subsequent tax years, the maximum deduction limit for MPF contributions is $18,000. In other words, employees with a monthly salary of $30,000 or above can enjoy the full deduction amount, while employees with a monthly income below $7,100, who are not required to make mandatory contributions, are not eligible for this tax deduction. However, voluntary contributions made by employees are not tax-deductible. Only eligible voluntary contributions that are tax-deductible qualify for the deduction.
Employees who joined the MPF SchemesThe following examples explain the tax treatment for employees in different situations:
Example #1
For the 2022/23 tax year, assuming an employee has no other part-time jobs, the situation is as follows:Monthly income
Mandatory contributions (annual total)
Voluntary contributions (annual total)
Tax-deductible MPF contributions amount
$10,000
$6,000
-
$6,000
$10,000
$6,000
$3,000
$6,000
$20,000
$12,000
-
$12,000
$30,000
$18,000
-
$18,000
Employees who joined the recognized Occupational Retirement SchemesIf you choose not to participate in the MPF scheme and instead join a Recognized Occupational Retirement Scheme that has been exempted by the MPFA, your contributions can also be deducted. The deducted amount is subject to the following two limitations:
• The amount of contributions you made to the Recognized Occupational Retirement Scheme, but not exceeding the mandatory contribution amount calculated under the Mandatory Provident Fund Schemes Ordinance; and
• The maximum deduction limit for each tax year is:
Tax Year
Maximum Deductible Amount ($)
2017/18 and subsequent years
$18,000
2
MPF Contribution Tax - What are Tax-deductible Voluntary Contributions (TVC)?
TVC is an important concept in MPF contribution tax and refers to voluntary contributions that are eligible for tax benefits. Account holders can enjoy tax benefits when they pay salaries tax or personal income tax. For the 2019-20 tax year and each subsequent tax year, the tax deduction limit is $60,000 per year (the total limit for tax-deductible voluntary contributions and eligible deferred annuity premiums). If the contributor makes both tax-deductible voluntary contributions and purchases eligible deferred annuity within the same year, the deduction amount will be deducted from the tax-deductible voluntary contributions first, and the remaining balance will be used to reduce the deferred annuity premiums. Qualified deferred annuity products must comply with the guidelines issued by the Insurance Authority for the premiums paid to be eligible for tax deduction.
When filling out tax returns, it is important to pay attention to the relevant aspects of MPF contribution tax. The trustee provides a summary of tax-deductible voluntary contributions to plan members each year, showing the tax-deductible voluntary contributions paid in that tax year, making it easier for plan members to fill out their tax returns.
Tax-deductible voluntary contributions have the following advantages in MPF contribution tax:1. Convenience: Qualified individuals can choose an MPF scheme with tax-deductible voluntary contributions, open an account with the trustee, and make contributions directly.
2. Transparency: The MPF trustee provides a contribution summary each year, facilitating plan members in filling out their tax returns.
3. Flexibility: Contributions can be made irregularly and in varying amounts, and can be increased, decreased, stopped, or restarted as per individual circumstances.
4. Simplicity: Account holders can transfer the entire account balance to the tax-deductible voluntary contributions account of another MPF scheme at any time.
3
MPF Contribution Tax - Calculation method not limited to fixed monthly salary?
When calculating the amount of MPF contribution tax, we cannot only consider the fixed monthly salary but also include the contribution portion of additional income such as commissions, bonuses, and double pay. The MPF contribution tax amount is calculated based on the actual amount of mandatory contributions, not the total income for the entire year. Therefore, we must be mindful that in months when our income falls below the minimum income threshold of $7,100 for mandatory MPF contributions, if we receive commissions, double pay, or bonuses in that month, the additional income may bring our monthly income to or above $7,100. In such cases, we need to contribute 5% of the income as mandatory contributions, and this portion can be used for MPF contribution tax.
4
MPF Contribution Tax - Can multiple MPF contribution accounts enjoy multiple deductions?
In recent years, ''Slashies'' (people with multiple jobs) have become increasingly common in the workplace, and some employees may work multiple part-time jobs to increase their income. These individuals may have multiple MPF contribution accounts. However, the MPF contribution tax is calculated on an individual basis and has a limit. Therefore, when declaring personal income, the MPF contribution tax will remain at the limit of $18,000.
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