VHIS Tax Deduction Guide
According to the Health Bureau, the premiums paid for a VHIS policy can be used as a “deductible expense” for salary tax. It grants individuals a way to reduce taxable income and hence, achieved what we so call, “tax deduction”.
Wish to pay lesse tax, and save even more money at the same time? Before filing your taxes, take a look at the following key points!
Key Point 1: VHIS Tax Deduction Limit
For each taxable year, each individual that purchases VHIS policy for themselves (meaning they are also the Insured Person) can apply for a tax deduction.
The maximum qualifying premiums for tax deduction is HK$8,000, so even if the total premiums paid for the year exceed this amount, only HK$8,000 could be filed in the tax return.
Key Point 2: VHIS Deduction Amount Calculation
Key Point 3: Buying an expensive plan always saves you more? Not necessarily!
Based on the above calculation, buying a more expensive VHIS will result in a higher tax deduction. Indeed, the more expensive the VHIS policy is, the higher the tax deduction you can earn.
However, the most cost-effective way is actually to purchase a cheaper plan that provides a similar level of coverage.
To demonstrate a better picture for the VHIS tax deduction, let’s take a look at the following two scenarios:
- Mr. Chan🧔🏽: Bought an expensive VHIS, resulting in a higher tax deduction!
- Mr. Wong👨🏼🦲: Bought a cheaper VHIS that provides sufficient coverage, and then applies for a tax deduction!
| Mr Chan🧔🏽 | Mr Wong👨🏼🦲 | |
| Actual annual premiums paid | HK$8,000 | HK$3,000^ |
| Premiums eligible for tax deduction | HK$8,000 | $3,000^ |
| Tax deduction amount (Assume tax rate as 17%) | HK$8000 x 17%* = HK$1,360 | $3,000 x 17%* = $510 |
| Total annual expenditure (actual premium paid – tax deduction amount) | HK$8,000 – HK$1,360 = HK$6,640 | $3,000 – $510 =$2,483 |
From the row of “Total Annual Expenditure”, we can see that the approach Mr. Wong👨🏼🦲is taking is the “most cost-effective option“.
By applying tax deductions for a cheaper VHIS plan with sufficient protection, he successfully saved more than 3.5 times as much as Mr. Chan🧔🏽!
- *Please note that the tax rate varies depending on personal income.
- Note: The "Actual annual premiums paid" mentioned in Mr. Chan's example above is a hypothetical number, but an actual premium paid in real life cases.
- ^The standard premiums is calculated based on a 40-year-old male buyingBowtie Pink VHIS (Ward) - HK$80k deductibles.
Key Point 4: Save even more by having the highest income earner in the family to purchase VHIS!
Want to save more money like Mr. Wong👨🏼🦲?
Under the scheme, a policyholder can purchase VHIS for other eligible dependents. As long as all policies are consolidated under the highest income earner’s tax return, more tax can be saved when tax deductions are applied.
As the highest income earner enjoys a higher tax rate, when they are applying for the VHIS tax deductions of the dependents, under the VHIS tax deduction calculation, they will naturally gain a higher tax deduction amount.
Eligible dependents include:
- Spouse1
- Children2
- Under 18 years old
- 18-25 years old and receiving full-time education
- 18 years old or above, but unable to work due to physical or mental problems
- Siblings2
- Under 18 years old
- 18-25 years old and receiving full-time education
- 18 years old or above, but unable to work due to physical or mental problems
- Parents / grandparents / great-grandparents2
- Under 55 years old, but eligible for government disability allowance
- 55 years old or above
- 1Limited to individual income tax payers
- 2Applicable to adoption and fostering relationships. For details, please refer to the Inland Revenue Ordinance (Chapter 112).
- Note: To apply for tax deductions, the insured person must be a Hong Kong resident, including Hong Kong identity card holders, non-Hong Kong identity card holders, and those under 11 years old who were born or adopted by Hong Kong identity card holders. For details, please refer to the Inland Revenue Ordinance (Chapter 112).
Please note that only the policyholder is eligible to apply for VHIS tax deductions. But here is no limit to the number of policies that can be applied for tax deductions under the tax return of this person.
As mentioned earlier, “buying a cheaper VHIS plan with adequate coverage is the most cost-effective way”.
Assuming that Mr. Wong👨🏼🦲 uses the “most cost-effective” way to purchase VHIS for his 40 years old wife👩🏽 and 2 children aged 20, the total premiums paid would be:
| The “most cost efficient” way | Mr Wong👨🏼🦲 | Mrs Wong👩🏽 | Son👦🏽 | Daughter👧🏽 |
| Actual annual premiums paid | $3,000^ | $3,000^ | $1,824# | $1,824# |
| Premiums eligible for tax deduction | $3,000^ | $3,000^ | $1,824# | $1,824# |
| Tax deduction amount (Assume tax rate = 17%) | $3,000 x 17% = $510 | $3,000 x 17% = $510 | $1,824 x 17% = $310 | $1,824 x 17% = $310 |
| Total annual expenditure (actual premium paid – tax deduction amount) | $3,000 – $510 = $2,490 | $3,000 – $510 = $2,490 | $1,824 – $310 = $1,514 | $1,824 – $310 = $1,514 |
Mr. Wong👨🏼🦲 purchases VHIS for all his family members, end up saving an additional tax of $1,640 per year.
Though the total annual expenditure is higher than before, it also offsets potential future medical expenses.
- ^The standard premiums is calculated based on a 40-year-old male/ female buying Bowtie Pink VHIS (Ward) - HK$80k deductibles.
- #The standard premiums is calculated based on a 20-year-old male/ female buying Bowtie Pink VHIS (Ward) - HK$80k deductibles.
Key Point 5: Only VHIS is tax deductible among various medical insurances
There are many medical insurance products in the Hong Kong insurance market, so pay attention to the following before making any purchase:
- Only VHIS is tax deductible
Among various medical insurance products, only Voluntary Health Insurance Scheme (VHIS) can enjoy tax deduction. Under the supervision of the Health Bureau, insurance companies are responsible for identifying the VHIS products for their customers.
- Additional coverage under the “Flexi Plan” is not tax deductible
VHIS-approved products can be divided into:
- Basic “Standard Plan“
- Insurance companies’ self-designed “Flexi Plan“, Flexi Plan also includes high-end medical insurance that provides more comprehensive and higher coverage.
Some insurance companies may also package the “Flexi Plan” with other insurance products for sale. However, please note that only the premiums for the “VHIS Flexi Plan” is tax deductible.
Example:
| Insurance Products | Annual Premiums | Is Premiums “Deductible”? |
| “Standard Plan” | HK$3,000 | ✔️ |
| “Flexi Plan” | HK$8,000 | ✔️ |
| “Flexi Plan” + Home Insurance | “Flexi Plan”: HK$7,000 Home Insurance: HK$1,000 | ✔️ “Flexi Plan” premiums ❌ Home Insurance premiums |
Plan 3 includes VHIS and home insurance. However, since home insurance is not a product recognized by the Health Bureau, the related premium expenses are not tax deductible.
- Note: The above content is for reference only. For any tax advice, please consult your tax advisor. You can also visit the website of the Health Bureau for more details on tax deduction. Subject to the relevant conditions.
FAQ for VHIS tax deduction
Assuming Mr. Chan purchased 3 VHIS policies for his mother, he can apply for tax deduction for all eligible premium payments, but the premium ceiling is HK$8,000.
This means that if the total annual premium for the 3 policies is HK$12,000, Mr. Chan can only apply for tax deduction for HK$8,000.
Yes, both brothers can enjoy the tax deduction benefits.
Assuming Mr. Chan and his brother each purchased a VHIS for their mother with an annual premium of HK$10,000 and HK$2,000 respectively.
Mr. Chan can apply for tax deduction for HK$8,000 for his mother, while his brother can apply for tax deduction for HK$2,000.
