The Federal Tax Credits Blog

Archive for March, 2009

Hong Kong is a central hub for business in Asia. It is extremely popular for a variety of reasons, including political stability, economic freedom and tax benefits. Hong Kong has one of the lowest tax rates in the world for a developed country, and has an intricate and effective tax system that allows companies to conduct business without being overpowered by their tax liabilities. Indeed, Hong Kong is rated as the world’s 3rd friendliest tax system by Forbes (Tax Misery & Reform Index 2009).

Corporate Tax in Hong Kong

Given the large number of companies that operate in Hong Kong or have an offshore business in Hong Kong, an understanding of Hong Kong tax implications begins with corporate tax.

In Hong Kong, any company conducting business on or offshore can be liable to corporate tax. Profits sourced in Hong Kong are taxed at a low rate of 16.5%, and unincorporated businesses are taxed at 15%. Profits that are sourced overseas, also known as ‘offshore profits’, benefit from a zero tax rate, even when remitted back to Hong Kong. Profits derived from operating ships in Hong Kong are treated as ‘offshore profits’ and are not liable to tax, but profits derived by professional reinsurers for reinsuring offshore risks will be taxed at 8.25% -i.e. half the corporate tax rate.

To note: offshore payments for intellectual property usage are liable to tax at 4.95%, goods sold by Hong Kong consignment agents on behalf of non-residents are also liable to tax on 0.5% of gross proceeds. On the other hand, bank deposit interest, interest on Tax Reserve Certificates, interest income on long-term debt instruments, dividends and capital gains are free from tax.

With the low tax rates there are also other regulations that protect business from unjustified taxes. Hong Kong is fully committed to its double tax agreement with thirty three nations, including PRC, Thailand and Belgium, to relieve companies from having to pay two taxes on one set of profits, as a result of multinational enterprise and multiple jurisdictions. For full details on Hong Kong’s double tax agreements, see the website for the Inland Revenue Department of Hong Kong (IRD).

Companies that conduct business through a branch in Hong Kong or are incorporated in Hong Kong cannot offset losses against the profits of other members in a group of companies –through consolidated accounting systems, however the Hong Kong jurisdiction allows losses to be carried forward indefinitely. Assets are depreciated at authorized prescribed rates of depreciation, for example, computer equipment can be depreciated at 100% in the first year.

The general procedure for corporate taxation after incorporation in Hong Kong is straightforward. Typically a Hong Kong incorporated company will be tracked by the Hong Kong authority and sent a tax return at year end. Even when no tax return is issued to a company, they are responsible for notifying the government of any profits liable to tax. In standard practice, estimated tax assessments will be issued provisionally during the tax year based on historic profit information. A final assessment will then be released after filing of the tax return.

It should be noted that the Hong Kong tax year begins on April 1st. Also, companies liable to tax in Hong Kong are required to fulfill accounting and auditing standards i.e. be audited by a firm of Hong Kong accountants.

Other Taxes
In Hong Kong, people also benefit from zero sales tax, zero value added tax and zero annual net worth taxes.

Melissa Glotzer is a Marketing Assistant at Healy Consultants. She is a graduate of the University of Manchester Business School with a BSc (Honours) in Management with Accounting and Finance.

Top stories of 2009

In 2009, we watched struggles over state budgets, fights by companies to keep their doors open and keep up their payrolls, votes to bring casinos to Ohio, and high-profile convictions and acquittals in courtrooms. Read the astonishing year in review in Ohio and Kentucky news, sports and business.

Handyman Matters in CBC story about Canadian the 2009 tax rebate

There are many qualifiers when we talk about valuable tax breaks. These qualifications will include freelance writers, photographers, artists, and other self-employed individuals and small business entrepreneurs all over the world that are connected with different kinds of insurances, in which medical health insurance coverage’s are not of exemption. These responsible qualifiers and businessmen should need to be aware of the increasing cost of medical health insurance coverage’s Another factor that these responsible self-employed professionals need to be aware of is the increasing warfare of increased premiums annually because charges are not so covered with all of the health and medical insurances that these businessmen avails and pays.

The Internal Revenue Services or the IRS help explains health insurances and medical health insurance coverage’s. As what we all know, when you categorized your expenses through a Schedule of A of Form 1040 of the IRS, the only expenditures deemed allowable are just those that exceeds 7.5% of Adjusted Gross Income or AGI. However, self-employed entrepreneurs and small businesses entrepreneurs have at least a privilege to deduct 100% for certain low cost health premium coverage’s. This would include the benefactors of the self-employed entrepreneur or small business entrepreneur which is the spouse and other legal dependents of the same without the regards of the 7.5% allowable threshold that the IRS give. A website named www.writefromhome.com provides two useful information on the qualifiers of IRS Form 1040.

1. Self-employed individuals and other small business entrepreneurs that operate businesses and other sole proprietorships, partnerships, and or limited liability companies are qualified to take the deductions annually.

2. S corporations shareholders owning more than 2% of the stocks are eligible for these deductions. S corporations are mostly institutions that are taxed the same way as to those of partnerships that pass profits through their shareholders respectively.

The deductions that are allowed for self-employed individuals and small business proprietors that are not subjected for the 7.5% threshold is fixed and that will also exempt other thresholds that all other medical expenditures have. In so doing, the deductions avoid Schedule A of the Form 1040 which is only designated for self-employed individuals and small business entrepreneurs that have medical insurance coverage’s. There rest will follow the standards of the IRS.

The amount that you want to deduct for your insurance coverage do not reduce self-employment income. When you fill up with the Schedule SE or the Self-Employment Tax of Form 1040 of the IRS, you are served with adequate information on why this is done. Your SE Tax of Form 1040 is responsible for the computation of your net earnings minus the health insurance coverage deductibles from self-employment. The computation on this particular schedule is also place with another secure schedule which is the Schedule C of the same Self-Employment Tax of Form 1040, by which, reports of self-employment receipts and expenses are placed with the net profits respectively. This is one great example of how the federal laws of a state or nation evolved throughout the years. Only a few years ago the self-employed and the small business proprietor were absorbing the total annual cost for medical insurance premium coverage, whereas today they are able to deduct the cost.

Federal energy efficiency tax credits expiring soon

Everything from biomass stoves to energy-saving windows and doors are eligible for the up to $1,500 credit, but projects must be finished by Dec. 31.

Recent statistics showed that foreclosure filings reached one million in May with indications that the number could swell to 2.4 million by the end of 2009. Unfortunately, much like filing bankruptcy, the ramifications of a foreclosure filing will follow these families around for a long time. The first issue following a foreclosure, however, is an immediate one; finding a new place to live. Many families, in the battle to remain in their home, will use up most or all of their funds prior to foreclosure. That leaves them empty handed once the foreclosure is done. Combined with a credit score that reflects the foreclosure, the lack of funds can make a prospective landlord queasy about approving an applicant in this situation. Solutions include:

* Writing a letter of explanation to accompany the lease application. Putting a story behind the current situation, along with a detailed solution can go a long way.

* Offering a larger deposit than required. It may have to be borrowed or saved during the last stages of the foreclosure but the offer of a larger deposit will serve to lessen the risk perceived by the landlord.

* If there is a solid income history, leasing a property at a small fraction of the total income will ease the concerns of a landlord.

The second issue is the inevitable hit on the homeowner’s credit score. Credit scoring is now integrated so that a foreclosure will not be an isolated event. Once a foreclosure hits a report, credit card interest rates will skyrocket and credit limits will be slashed. Carrying a high balance on credit cards can be prohibitively expensive at interest rates above 27%. It will also be difficult and expensive to get approved for any other type of loans. Solutions include:

* Debt settlement – Defaulting on consumer debt and then doing nothing doesn’t make it go away. Additionally, staying current on your cards with rates at 30% is going to take precious money away from lease deposits, etc. If your credit score is going to take a pounding anyway, entering a debt settlement will cut your payments in half and pay the debt off within 48 months.

* Be proactive regarding your credit score. Be sure to note your scores when balances are paid off. Your credit score can be re-built over time as you get out of debt.

Like bankruptcies, prospective employers are now focusing more attention on foreclosure filings in terms of judging the character and financial responsibility of the applicant. Credit checks are now a regular part of the screening process, especially when there are a number of applicants. A foreclosure can tip the scales if everything else is equal between two applicants. A possible solution is to have a letter of explanation detailing the events that led to the foreclosure. Total honesty is going to be the best approach here and, who knows, if the person hiring you is going through his own set of financial challenges you may just find some common ground which to you getting a break.

The IRS considers the amount of money owed on the mortgage that is not recovered from the sale of the property as income for the homeowner. In any case where debt is forgiven, the amount not paid back will be taxed as income. Solutions here include a congressional pass that exempts the owners of foreclosed property from a tax hit if it was their primary residence and the property wasn’t refinanced with a cash out loan. The tax bill can also be avoided by proving insolvency. If your debts are greater than your assets you’ll be allowed a pass on money owed for forgiven debt.

In the end, the mental toll of being forced from your home and community could be the greatest cost. The best solution is to focus on learning from mistakes, putting the past in the past, and moving forward. Lastly, like filing bankruptcy, the stigma of filing foreclosure doesn’t carry the baggage that it once did. As widespread as foreclosures are and with delinquencies occurring in 12% of homes across the country, they are quickly becoming seen as another part of life, not some sort of massive failure.

If unemployed, refinancing probably not an option

Q: I am a 59-year-old single woman who was recently laid off.

Government Majority for NDP the people party

Question: A few questions regarding Residential Energy Credit. (Form-5695 Part 2 of 2)?

In Year 2007, I spent $3,000 to replace the windows and $3,500 to replace the central A/C. They had been replaced in order to improve the energy efficiency. And, now I have a few following questions about how to claim these expenditures on my tax return form (5695)

(3) Can I claim this credit without having the manufacturer’s certifications? I replaced these without thinking about claiming the credit. The instruction on Form 5695 indicates that manufacturer’s certification is required to claim the credit. Can I still claim the credit or should I request such certification from the manufacturer?

Your genereous input is always greatly appreciated.!

Answer: A Manufacturer’s Certification is a signed statement from the manufacturer certifying that the product or component qualifies for the tax credit. The IRS encourages manufacturers to provide these Certifications on their website to facilitate identification of qualified products. Taxpayers must keep a copy of the certification statement for their records, but do not have to submit a copy with their tax return.

No need to itemize to take advantage of this tax break

In this column, Claude Renshaw and Ken Milani answer a question from a retired police officer about whether his health care premium is deductible under tax laws. The two also talk about tax credits for making your home more energy efficient.

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Question: What is the difference in costs savings between a 95% efficiency gas furnace?

And does the cost difference make the energy efficiency tax credit worth the extra expense?

Answer: The savings would depend on the efficiency of what you had. so if you had an 80% furnace the annual savings would be 15% of your total heating expense.
There would be some additional savings on the electric side due to the new furnace fan motor being an ECM type motor.
It will take a few years for the payback to be realized. The real question will be what the repair cost can be once the warranty is up on the new furnace.
The parts are a lot more expensive over the parts on a ,say 92% single speed type model.
The tax credit and the gas company rebates offer some relief tho.

The trend

Just in time for your brain pan to shift focus from post-holiday to organization: Russell + Hazel’s Memo line of storage items and desk accessories sold through Office Depot . The line — file, storage and magazine boxes, a spiral collator, zippered pouches, clipboard, desktop file and clock — is Minneapolis-based R + H’s first full line for a mass audience.

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Tax Credits Available for Replacement Windows