As the Hong Kong tax filing season approaches, individual taxpayers may be exploring available deductions and allowances to reduce their tax liability. One commonly claimed allowance is the Dependent Parent and Grandparent Allowance, which applies to those who financially support an elderly parent or grandparent.

While the allowance offers meaningful tax relief, the eligibility criteria are specific, and incorrect claims may result in IRD queries, penalties, or amended assessments. This article outlines the official requirements and common mistakes to avoid.

Who Qualifies as a Dependant?

According to the Inland Revenue Department (IRD), a “parent” or “grandparent” includes the following individuals:

• Your natural, step, or legally adoptive father or mother
• The natural, step, or legally adoptive parent of your spouse
• The parent of a deceased spouse
• The same definitions apply to grandparents, including step and adoptive relationships

Eligibility Criteria for the Allowance

To qualify for the Dependent Parent or Grandparent Allowance, the individual must meet the following conditions during the year of assessment:

1. Be ordinarily resident in Hong Kong
   • The dependant must habitually and normally reside in Hong Kong.
     • The IRD may consider the following factors: Number of days spent in Hong Kong, frequency and duration of visits, whether the dependant maintains a permanent home in Hong Kong, whether they own property or reside abroad, whether they are employed or conduct business in Hong Kong, whether close family members are also based in Hong Kong.
2. Be aged 55 or above, or be eligible to receive Disability Allowance under the Government’s scheme
3. Receive support from you or your spouse, demonstrated by either:
   • Residing with you or your spouse (without paying the full cost) for a continuous period of not less than six months, or
   • Receiving at least HK$12,000 in financial support from you or your spouse during the year

Additional Allowance for Co-Residence

If the parent or grandparent resided with you continuously throughout the entire year without paying full cost, you may be entitled to an Additional Dependent Parent or Grandparent Allowance.

This additional amount recognises the higher level of care and support associated with long-term co-residence.

Important Considerations

1. Only One Claim Per Dependant

If more than one individual (e.g., siblings) is eligible to claim the same dependant, only one person may do so. The family must agree who will claim the allowance. Duplicate claims will be rejected.

2. Residential Care Expenses Deduction

If you have claimed a deduction for elderly residential care expenses for a parent or grandparent in a given year, you cannot also claim the dependent allowance for the same person in the same assessment year.

3. Documentation Matters

While supporting documents are not always required at the time of filing, the IRD may request evidence if your claim is selected for review. Common documentation includes:

• Proof of residence (e.g. joint address records)
• Financial support records (e.g. bank transfers, receipts)
• Relationship verification (e.g. marriage or birth certificates)
• Records to confirm “ordinary residence” status

Common Pitfalls and IRD Red Flags

The IRD routinely reviews allowance claims to ensure accuracy and compliance. Based on practical experience, here are some frequent issues:

• Claiming for parents who live overseas and do not meet the “ordinarily resident” test
• Claiming for parents living together continuously throughout the year/Failing to update the IRD when a parent no longer lives with the taxpayer or passes away (please see Note below)
• No evidence of financial support, especially in cases where the $12,000 minimum is cited
• Double claims by siblings or family members without coordination

Note: It is rather common for taxpayers and their (grand)parents to reside at separate premises. While taxpayers may occasionally visit, dine with, take care of their parents and household matters, such arrangements do not qualify for the Additional Dependent Parent or Grandparent Allowance, which mandates residing with the (grand)parents continuously throughout the tax year.

In recent cases, the Inland Revenue Department has issued enquiry letters to taxpayers, requesting detailed information and supporting documents to verify eligibility for this additional allowance.

Taxpayers are strongly advised to respond to such enquiries with care. The provision of incorrect or misleading information or documentation to the IRD may lead to penalties or prosecution under Hong Kong tax law.

Even unintentional errors can lead to re-assessments, disallowance of the claim, and in some cases, additional tax and surcharges.

HKWJ Tax Law Can Help

The Parent and Grandparent Allowance can offer meaningful tax relief for individuals who care for ageing family members. However, it is essential to ensure that all conditions are fully met and that the claim is properly documented.

At HKWJ Tax Law, we assist individuals, business owners, and cross-border professionals in reviewing their tax positions and preparing accurate returns. If you’re unsure about your eligibility for this or any other allowance, our team is ready to help.

In addition, if you receive the enquiry letters from the IRD and/or would like to rectify the errors previously made in the tax return filing, we can also assist.

Get in touch to schedule a confidential consultation.

Disclaimer: This article is for general reference only and does not constitute tax advice. Always consult a professional regarding your specific situation.