MPF tax tips: deduction caps on taxable income

MPF contributions are tax-deductible — but with caps. Employees, the self-employed and employers each face different rules, and mandatory versus voluntary contributions are treated differently.

What’s the cap for employees?

$12,000 a year, mandatory contributions only. Under the Inland Revenue Ordinance, salaried employees and self-employed persons can deduct MPF mandatory contributions when computing assessable income or profits, capped at $12,000 a year. Example: earning $30,000 a month means $1,000 monthly mandatory contributions — $12,000 deductible for the year. Declare the year’s mandatory contributions under the deductions section of the tax return. Voluntary contributions get no tax break.

What about employers?

Both mandatory and voluntary contributions are deductible, capped at 15% of the employee’s total annual pay. Employers computing profits-tax assessable profits get relief on MPF contributions — and unlike employees, their voluntary contributions are also exempt.

For MPF tax arrangements, visit the MPF education centre, or compare schemes at MPF fund comparison.