The Hong Kong Inland Revenue Department updated its practice notes in February 2020 to reflect the remedial interpretation of a marriage as delivered to include same-sex marriage as a consequence of the Leung Chun Kwong v Secretary for the Civil Service (2019) 22 HKCRAF 127 (“the Leung Case”). Let’s explore the case and the same-sex marriage tax implications of this landmark ruling in Hong Kong.

Previous Hong Kong Inland Revenue Department Ordinance

Under the Hong Kong Inland Revenue Ordinance (“IRO”), married persons are entitled to elect for joint assessment and personal assessment jointly with their spouse; and claim or nominate their spouse to claim certain allowances and deductions. In section 2(1) of the IRO, “marriage” is defined to mean:

1. any marriage recognised by the law of Hong Kong; or
2. any marriage, whether or not so recognised, entered into outside Hong Kong according to the law of the place where it was entered into and between persons having the capacity to do so.

In the same section of the IRO, “spouse” means a husband or wife whereas “husband” and “wife” refer to a married man and married woman respectively. In order words, a same-sex marriage was not recognised previously for the purposes of the IRO.

Judgement of Court of Final Appeal (“CFA”)

In Leung Chun Kwong v Secretary for the Civil Service (2019) 22 HKCRAF 127 (“the Leung Case”), the Appellant had entered in 2014 into a same-sex marriage outside of Hong Kong. After the Appellant and his spouse moved to Hong Kong, he started to work for the Hong Kong Civil Service Department.

During the course of the Appellant’s employment, his spouse was denied access to the spousal medical and dental benefits under the Civil Service Regulations and the Appellant was neither able to elect for joint assessment of salaries tax under the IRO.

Consequently, the Appellant applied for a judicial review claiming that he had been unlawfully discriminated against on the basis of his sexual orientation. The CFA allowed the Appellant’s appeal in its ruling on 6 June 2019 and recognised that the protection of the institution of marriage in Hong Kong, being heterosexual and monogamous, was a legitimate aim.

Same-Sex Marriage Tax Implications

The CFA considered that the differential treatment under the IRO between a person in a heterosexual marriage and a person in a same-sex marriage entered into outside Hong Kong was not rationally connected to the legitimate aim and was not justified and thus a remedial interpretation of the IRO was appropriate. The CFA ordered the following declaration:

1. The existing limb (b) of the term “marriage” in section 2 of the Ordinance shall be read as “any marriage, whether or not so recognised, entered into outside Hong Kong according to the law of the place where it was entered into and between persons having the capacity to do so, provided where the persons are of the same sex and such a marriage between them would have been a marriage under this Ordinance but for the fact only that they are persons of the same sex, they shall be deemed for the purposes of such a marriage to have the capacity to do so”; and

2. For the purposes of the Ordinance, references to:

• “Husband and wife” shall be read as “a married person and his or her spouse”;
• “Not being a wife living apart from her husband” shall be read as “not being a spouse living apart from the married person”; and
• “Either the husband or wife” shall be read as “either the married person or his or her spouse”.

Accordingly, a same-sex marriage has now been recognised for the purposes of the IRO which creates same-sex married tax implications. A married person, whether in a heterosexual marriage or same-sex marriage, is entitled to elect for joint assessment or personal assessment jointly with the person’s spouse; and is entitled to claim tax allowances or deductions under the IRO in respect of the person’s spouse.