

The "Three Tax-Deductible Treasures" in Hong Kong: Introduction, Application Strategies and Policy Overview
The "Three Tax-Deductible Treasures" refer to three tax incentive tools launched by the Hong Kong government, aiming to encourage citizens to enhance their retirement protection and medical coverage through financial planning. These three tools are the Qualified Deferred Annuity Plan (QDAP), Tax-Deductible Voluntary Contributions (TVC) to Mandatory Provident Fund (MPF), and Voluntary Health Insurance Scheme (VHIS), collectively known as the "Three Tax-Deductible Treasures". Implemented since April 2019, they share a maximum annual tax deduction limit. Below is a detailed introduction and practical application strategies:
I. Qualified Deferred Annuity Plan (QDAP): Long-Term Savings to Mitigate Longevity Risk
Core Features
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Product Nature: A long-term insurance product with a minimum contribution period of 5 years and a minimum annuity payment period of 10 years. It must be certified by the Insurance Authority (IA) of Hong Kong.
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Tax Incentives: A maximum annual tax deduction of HK$60,000 (shared with TVC). For couples filing joint tax returns, the upper limit can be increased to HK$120,000.
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Withdrawal Restrictions: Annuity recipients must be aged 50 or above to start receiving annuity payments, ensuring funds are used for retirement purposes.
Practical Cases
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Retirement Planning for Singles: A 40-year-old white-collar worker invests HK$50,000 annually in QDAP for 5 consecutive years. Assuming an annualized return rate of 3.5%, he/she can receive approximately HK$2,800 per month starting from the age of 55 until death. If his/her marginal tax rate is 17%, the annual tax savings would be HK$8,500 (HK$50,000 × 17%), totaling HK$42,500 over 5 years—effectively reducing the tax burden of long-term savings.
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Advantages of Joint Tax Filing for Couples: A couple purchases QDAP separately, contributing HK$30,000 each annually, totaling HK$60,000. Since joint tax filing allows sharing of the HK$120,000 deduction limit, they only use half of the limit, and the remaining amount can be reserved for other investments or increasing contributions in the future.
Eligibility Criteria
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The annuity recipient must be a Hong Kong Identity Card holder and either the policyholder him/herself or the policyholder’s spouse.
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The plan must be purchased through an authorized insurance company, and proof of premium payment must be retained.
II. Tax-Deductible Voluntary Contributions (TVC) to MPF: Flexible Investment to Enhance Retirement Savings
Core Features
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Product Nature: A voluntary contribution under the MPF Scheme. It allows selection of different investment funds, with flexible contribution amounts and frequencies.
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Tax Incentives: A maximum annual tax deduction of HK$60,000 (shared with QDAP). The contribution amount is directly deducted from the taxable income.
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Withdrawal Restrictions: Funds can only be withdrawn at the age of 65 or under specific conditions (e.g., permanent departure from Hong Kong, total incapacity).
Practical Cases
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Tax-Saving Strategy for High-Income Earners: A manager with a monthly income of HK$80,000 makes an additional annual contribution of HK$60,000 to TVC. If his/her marginal tax rate is 17%, the annual tax savings would be HK$10,200. Assuming an annualized investment return rate of 5%, after 25 years, the accumulated amount can reach approximately HK$3.2 million (including a principal of HK$1.5 million), significantly increasing the source of income after retirement.
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Combined Use with QDAP: A 50-year-old investor contributes HK$40,000 annually to TVC and uses the remaining HK$20,000 to purchase QDAP. Since TVC takes priority in the deduction order, the full HK$60,000 limit can be utilized, while diversifying investment risks (TVC can choose equity funds, and QDAP provides stable annuities).
Eligibility Criteria
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The applicant must be a member of an MPF Scheme, open a TVC account through a trustee, and independently decide the investment strategy.
III. Voluntary Health Insurance Scheme (VHIS): Dual Benefits of Medical Protection and Tax Incentives
Core Features
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Product Nature: A government-certified medical insurance that covers inpatient care, surgical procedures, and outpatient services. Its coverage scope is broader than that of traditional medical insurance.
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Tax Incentives: A maximum annual tax deduction of HK$8,000 per insured person, with no upper limit on the number of insured persons (applicable to spouses, children, and parents).
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Flexibility in Coverage: Different plan tiers (Standard Plan or Flexible Plan) can be selected, and lifetime guaranteed renewal is provided.
Practical Cases
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Family Medical Protection Planning: A couple purchases VHIS for their two children and four parents, with a total annual premium of HK$32,000. Since each insured person is eligible for an independent tax deduction, they can apply for a deduction of HK$8,000 × 6 people = HK$48,000 (subject to actual expenditure, as it exceeds the actual premium). If their marginal tax rate is 15%, the annual tax savings would be HK$4,800, while ensuring the entire family enjoys comprehensive medical protection.
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Optimization of Medical Expenses for High-Income Earners: An entrepreneur has an annual medical expenditure of approximately HK$100,000, of which HK$50,000 is used for VHIS premiums and the rest for out-of-pocket medical expenses. Through a tax deduction of HK$8,000, the actual medical cost is reduced to HK$92,000, while obtaining higher medical coverage.
Eligibility Criteria
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The insured person must be a Hong Kong resident, and the policy must be issued by an authorized insurance company.
IV. Combined Strategy of the "Three Treasures": Maximizing Tax Savings and Protection Benefits
1. Dual Enhancement of Retirement and Medical Protection
Case: A 45-year-old professional with an annual salary of HK$1.2 million and a marginal tax rate of 17% adopts the following combined strategy:
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QDAP: Annual contribution of HK$40,000 (tax deduction of HK$40,000)
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TVC: Annual contribution of HK$20,000 (tax deduction of HK$20,000)
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VHIS: Purchase for him/herself and spouse, with an annual premium of HK$16,000 (tax deduction of HK$16,000)
Tax Savings: Total tax deduction of HK$76,000, resulting in tax savings of HK$12,920 (HK$76,000 × 17%). Long-Term Benefits: After retirement, he/she can receive approximately HK$3,000 per month from QDAP annuity, accumulate about HK$1.5 million in TVC assets (after 25 years), and at the same time, the whole family enjoys medical protection.
2. Additional Advantages of Joint Tax Filing for Couples
Case: A couple with a combined annual salary of HK$1.8 million and a marginal tax rate of 20% adopts the following strategy:
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QDAP: Joint purchase with an annual contribution of HK$120,000 (tax deduction of HK$120,000)
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VHIS: Purchase for two children, with an annual premium of HK$16,000 (tax deduction of HK$16,000)
Tax Savings: Total tax deduction of HK$136,000, resulting in tax savings of HK$27,200 (HK$136,000 × 20%). Additional Benefits: By utilizing the HK$120,000 QDAP deduction limit for joint tax filing, they gain an extra HK$60,000 tax deduction space compared to separate tax filing.
V. Application Notes and Risk Warnings
Management of Deduction Limits
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QDAP and TVC share a HK$60,000 limit, which needs to be allocated according to personal needs. For example, if prioritizing the enhancement of retirement savings, most of the limit can be allocated to TVC; if stable annuity income is desired, increase QDAP contributions.
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The VHIS tax deduction limit is independent, but it is necessary to ensure that the relationship between the insured person and the policyholder complies with regulations (e.g., spouse, children, parents).
Product Selection and Risks
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For QDAP, attention should be paid to the annuity interest rate and guarantee period. Some products may include non-guaranteed bonuses, so the financial stability of the insurance company must be evaluated.
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The investment return of TVC depends on market performance. Funds should be selected based on risk tolerance, and over-concentration of investments should be avoided.
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For VHIS, compare the coverage scope and claim services of different insurance companies to ensure it meets personal medical needs.
Application Process and Documentation
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QDAP and VHIS must be purchased through authorized insurance companies, and policies and premium receipts must be retained.
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For TVC, an account must be opened with an MPF trustee, and the contribution amount must be declared in the tax return.
VI. Policy Updates and Future Trends
2024/25 Financial Year Relief Measures
The government provides a one-off 100% salaries tax reduction for the 2024/25 financial year, with a cap of HK$1,500. This can be combined with the tax savings from the "Three Tax-Deductible Treasures".
Long-Term Policy Direction
The government continues to encourage citizens to enhance their retirement and medical protection through financial tools. In the future, it may further relax the deduction limits or add new product types. It is recommended to regularly pay attention to announcements from the Inland Revenue Department (IRD) and the Insurance Authority (IA) of Hong Kong.
Summary
The "Three Tax-Deductible Treasures" are important financial tools promoted by the Hong Kong government. They encourage citizens to plan for retirement and medical protection in advance through tax incentives. Individuals can flexibly combine and use these three tools according to their income level, risk preference, and family situation to legally save taxes while strengthening their financial safety net. It is recommended to consult a professional financial advisor before application to ensure the strategy aligns with personal long-term goals.