VHIS is more than tax deductions, be mindful of the calculation and get insured wisely
- Written by The Chronicle
However, many policyholders focus on saving the most tax, but neglecting the actual premium paid, and end up saving less money.
VHIS Tax Deduction Claimable Limit & Calculation
Each policyholder and taxpayer can claim up to HK$8,000 of VHIS premium for tax deduction. If the annual VHIS premium exceeds this amount, only HK$8,000 can be claimed.
The tax deduction amount is calculated as below -
| Formula | ||
| VHIS premium paid during the assessment year | X Tax Rate | = Actual Tax Deduction Amount |
| Example | ||
| HK$8,000 （Tax Deduction Claimable Limit ） | X 17% （Assuming the Tax Rate is 17%*） | = HK$1,360 |
Many may think choosing a VHIS with higher premium allows them to enjoy higher tax deduction, and save more money. However, it is not the case.
Instead of saving tax, you spend more for a more expensive VHIS plan with similar Protection
Formula shows policyholders could enjoy higher tax deduction with more expensive plans.
However, Bowtie's calculations show that the most cost-effective way is to purchase a Voluntary Health Insurance Scheme (VHIS) Policy with a lower premium but adequate protection.
| | Case 1: Purchase a more expensive VHIS plan^ | Case 2: Purchase a more affordable VHIS plan^ |
| Tax Deduction Claimable Limit | HK$8,000 | HK$3,372 |
| Tax Deduction Amount （Assuming the Tax Rate is 17%*） | HK$8,000 x 17% = HK$1,360 | HK$3,372 x 17% = HK$607 |
| Yearly Expenses （Actual Paid Premium - Tax Deduction Amount） | HK$8,000 – HK$1,360 = HK$6,640 | HK$3,372 – HK$607 =HK$2,765 |
^ VHIS with similar protection
From the yearly expenses, we could see case 2 saved two times more money than case 1.
Most money is saved when the family member with the highest income applies for the tax deduction as the Policyholder
Higher the income, higher the tax rate. If the family member with the highest income purchases VHIS for the whole family, and applies for tax deduction, most money will be saved.
Bowtie will demonstrate the internal calculations with an example from Case 2.
| | Case 2 | Case 2 - Family Member a | Case 2 - Family Member b | Case 2 - Family Member c |
| Tax Deduction Claimable Limit | HK$3,372 | HK$4,476 | HK$1,920 | HK$2,196 |
| Tax Deduction Amount （Assuming the Tax Rate is 17%*） | HK$3,372 x 17% = HK$607 | HK$4,476 x 17% = HK$761 | HK$1,920 x 17% = HK$326 | HK$2,196 x 17% = HK$373 |
| Yearly Expenses （Actual Paid Premium - Tax Deduction Amount） | HK$3,372 - HK$607 = HK$2,765 | HK$4,476 - HK$761 = HK$3,715 | HK$1,920 - HK$326 = HK$1,594 | HK$2,196 - HK$373 = HK$1,823 |
From the above demonstration, we could see that if one member of the family purchased VHIS for the other three members, they could save HK$1,460 more tax than before (versus saving only HK$607 for one member).
Last Tip - The most "money-saving" way is to...
The family member with the highest salary should purchase VHIS for the entire family and claim for tax deduction. Then, when choosing a plan, choose a plan with similar protection but a lower premium.
Hashtag: #Bowtie #vhis #insurance
The issuer is solely responsible for the content of this announcement.
About Bowtie
The Bowtie Life Insurance Company Limited is an authorised life insurance company and Hong Kong's very first virtual insurer approved under the Fast Track pilot scheme. Through the use of modern technology and medical expertise, Bowtie offers a commission-free convenient online platform for customers to quote, apply and claim for health insurance plans certified by the Health Bureau under the Voluntary Health Insurance Scheme (VHIS).
In addition, Bowtie has also gone into everyday life by creating the One-stop Primary Care Centre Bowtie & JP Health and the Asian Health Hub Gobowtie. Bowtie is backed by Sun Life Financial, Mitsui & Co., Ltd and supported by leading international reinsurers.
Stay up to date at www.bowtie.com.hk.