[Tax-Saving Duo] A complete guide to tax deductions with Voluntary Health Insurance Scheme (VHIS) and Qualifying Deferred Annuity Policy (QDAP) – helping you save smart!
Finance2025-03-11
5 Mins Read
When that green envelope arrives each year, it’s a clear sign that tax season is here again. While we all understand that paying taxes is a civic duty, it’s hard not to feel a little heart-wrenching when you see your bank balance take a hit. You’ve probably heard of Voluntary Health Insurance Scheme (VHIS) and Qualifying Deferred Annuity Policy (QDAP). This ‘Tax-Saving Duo’ not only helps safeguard your health and future retirement life but also serves as an effective tool for tax deductions. But how can you truly save smart with them?
The answer lies in mastering a few simple financial planning tips. By doing so, you can not only reduce your tax bill but also lay a solid foundation for your health and retirement. Let’s explore how you can make the most of these advantages to take control of the present and plan wisely for the future.
Tax Savings & Protection go hand-in-hand
Grab the last opportunity! Apply for a designated tax-deductible plan by 31st March 2025, so you can apply for tax deductions for the 2024/25 taxable year1. You may enjoy individual tax savings of up to HKD 11,5601,3,4,7!
Understanding the ‘Tax-Saving Duo’: What is a QDAP? What is VHIS?
A QDAP is an insurance product designed to help individuals plan for their future retirement. Purchasers can pay premium regularly during the premium payment term. After reaching a specified age, they will begin receiving a fixed annuity income during the designated annuity period, ensuring the purchaser’s continuous financial support throughout retirement.
On the other hand, the VHIS is a government initiative launched in Hong Kong in 2019. It aims to improve the level of protection for hospital insurance products, offering an alternative for those who prefer private healthcare services, such as hospitalisation, surgeries, and other high-cost medical expenses. In the long term, it also helps to alleviate pressure on the public healthcare system by encouraging the use of private medical services through hospital insurance coverage.
How to use them to address current needs and plan for the future
With rising healthcare demands and increasing medical inflation, the VHIS plays a crucial role in safeguarding against unexpected health issues. It not only covers hospitalisation and surgical expenses but also provides pre/post-confinement outpatient protection. This helps reduce the potential burden of future medical costs. When paired with a QDAP, which ensures a steady income stream after retirement, individuals can face their retirement years with greater confidence.
In addition to meeting long-term needs, taking out both QDAP and VHIS also offers tax deductions1, providing immediate financial relief. This can effectively ease the current economic burden for both individuals and families.
Looking for protection while enjoying tax deductions?
Try our TaxBliss Calculator now and discover how 'AXA WiseGuard Pro Medical Insurance Plan' and 'IncomeBliss Deferred Annuity Plan' can provide you with both!
Why can QDAP and VHIS be tax-deductible? How much can you deduct each year?
To encourage citizens to make better financial plans for the future and enhance personal and family health protection, the Hong Kong government provides tax deductions for QDAP and VHIS. This ‘Tax-Saving Duo’ not only reduces the tax burden on citizens but also promotes retirement and health protection.
Tax deduction cap for VHIS
Under the tax deduction arrangements for VHIS, taxpayers can purchase qualified VHIS policies for themselves or designated relatives1,2, including their spouse and children, and the taxpayer's or his/her spouse's grandparents, parents and siblings. The premiums paid for these policies are eligible for tax deductions. The maximum eligible premium for tax deduction per insured person is HKD8,0001,3.
For example, if you purchase VHIS for yourself, your spouse, and children, paying premiums of HKD10,000, HKD6,000, and HKD2,000 respectively, you can apply for deductions as follows1:
- Your own premium: A maximum of HKD8,000 can be deducted (as the premium paid exceeds HKD8,000, only the HKD8,000 limit can be claimed for tax deduction);
- Your spouse's premium: Full amount of HKD6,000 is eligible for deduction;
- Your children's premiums: Full amount of HKD2,000 is eligible for deduction.
In this example, you can claim a total of HKD16,000 in eligible premiums for tax deduction on your tax return1. It is important to note that this does not mean each taxpayer can directly save tax payment of HKD8,000 for each tax year. The actual tax savings amount is calculated by multiplying the VHIS premium by the applicable tax rate, as shown in the formula below1:
‘VHIS premium x Tax rate = Tax savings amount’
The tax rate is based on the chargeable income, with a two-tier standard tax rate of 15% on the first HKD5,000,000 of the net income and 16% on the remainder, while the progressive marginal tax rates are 2%, 6%, 10%, 14%, and 17%, starting from the 2024/25 assessment year1.
Tax deduction cap for QDAP
Each taxpayer can apply for tax deductions on premiums paid for QDAP, whether for a single policy or multiple policies. The maximum deduction limit for each tax year is HKD60,0001,4. For example, if a taxpayer pays premiums of HKD40,000 and HKD30,000 for two separate QDAP policies, they can only apply for a tax deduction on the HKD60,000 premium, not the full HKD70,000. Similarly, the tax deduction amount does not represent the actual tax savings amount; the QDAP premiums must be multiplied by the applicable tax rate to determine the final tax savings amount1.
‘QDAP premium x Tax rate = Tax savings amount’
How different individuals can maximise their tax deduction strategies?
1. Individuals
- The maximum deductible amount for QDAP premiums is HKD60,0001,4. If you purchase a QDAP for yourself and pay HKD60,000 in premiums, you can fully utilise the deductible amount. Assuming the highest marginal tax rate of salaries tax of 17% applied, you could save up to HKD10,200 in tax1,4,5.
- The maximum deductible amount for VHIS premiums is HKD8,0001,3. If the premium you pay qualifies for the full deduction, you could save up to HKD1,360 in tax1,3,6, based on the highest marginal tax rate of salaries tax of 17% applied.
- An individual can save up to HKD11,560 in tax1,3,4,7 through ‘Tax-Saving Duo’.
2. Families
- The maximum deductible amount for QDAP premiums is HKD60,0001,4 per taxpayer. If both you and your spouse purchase QDAP, the total tax saving could be up to HKD20,4001,4,8, assuming the highest marginal tax rate of salaries tax of 17% applied.
- If you have a spouse and children, you can purchase VHIS policies based on their age and health conditions to maximise the tax deductions. The maximum deductible amount for VHIS premiums is HKD8,0001,3. Assuming the highest marginal tax rate of salaries tax of 17% applied, this equates to HKD1,3601,3,6 in tax savings per insured person. For a family of four (self, spouse, and two children) purchase a VHIS policies separately, where each insured person’s premiums qualify for the full HKD8,000 deduction1,3, the family could save up to HKD5,440 in tax1,3,9.
- A family can save over HKD25,000 in tax1,3,4,10 through ‘Tax-Saving Duo’.
- Pro tip: Since higher incomes are taxed at higher rates, the overall tax savings will be greater if the family member with the highest income purchases the VHIS and claims the tax deductions1.
Looking for protection while enjoying tax deductions?
Try our TaxBliss Calculator now and discover how 'AXA WiseGuard Pro Medical Insurance Plan' and 'IncomeBliss Deferred Annuity Plan' can provide you with both!
How to apply for tax deductions1?
- You can apply for tax deductions through the eTAX online tax filing platform or by completing a physical tax return form. In the section titled ‘Qualifying Premiums Paid under Voluntary Health Insurance Scheme Policy ’ or ‘Qualifying Annuity Premiums and Tax Deductible MPF Voluntary Contributions('TVC'),’ and simply enter the amount of ‘Qualifying Premiums.’
- While you do not need to submit supporting documents when applying for the deduction, taxpayers should keep premium receipts and annual premium statements for six years in case of future verification by the Inland Revenue Department.
AXA’s Tax-Saving Duo: Double protection for your health and retirement
AXA IncomeBliss Deferred Annuity Plan features
- Tax deduction: Enjoy up to HKD 60,000 in tax deductions1,4
- Self-funded pension: Start receiving monthly annuity payments as early as age 5011. Enjoy a stable monthly income for an annuity period of up to 20 years12
- Ensure the future well-being of your family: Provide life protection and dementia advance protection13
- Annual discount: Enjoy a 5% discount14 every year during the premium payment period, a total premium discount up to 50% of the first year’s annual premium15
- Enhance control with policy currency options: Choose between US dollar and Hong Kong dollar policy currencies
AXA WiseGuard Pro Medical Insurance Plan features
- Savings on tax: Enjoy a maximum annual tax deductible limit of HKD 8,000 per insured person1,3!
- Coverage for unknown pre-existing condition: We cover pre-existing conditions – those that you don’t know you have at the time of application!
- Guaranteed renewal up to age 10016: With VHIS, your renewal is guaranteed until you are 100 years old.
- Full cover17 for hospitalisation and surgical expenses: Most major items do not impose sub-limits17, and there is no lifetime benefit limit.
- No waiting period: Your coverage starts as soon as your policy becomes effective.
- Multiple coverage options: You will be given a choice of 3 ward classes (general ward, semi-private room and standard private room), 3 geographic regions and 3 levels of annual deductibles.
- Top medical service network18,19: Includes cashless arrangement, second medical opinions, and medical services network in mainland China.
Tax savings are undoubtedly an attractive feature of these plans. However, the most important aspect is that these products provide protection for our health and future, offering the support we need in critical moments. VHIS provides us with medical coverage, ensuring that we don’t face excessive financial strain when dealing with unexpected health issues; while QDAP allow us to maintain a stable standard of living after retirement, reducing anxiety caused by financial concerns.
Whether you are a young person just beginning to plan for the future or a middle-aged individual preparing for retirement, choosing the right VHIS and QDAP will help you face challenges with greater ease and peace of mind. After all, our health and a secure future are the most valuable investments we can make in life.
Subject to terms and conditions. Please refer to the product brochure and promotional materials in the website link for details.
1. For details on tax deductions, please refer to the relevant product brochure and visit the website of Inland Revenue Department (IRD) of HKSAR or contact IRD for tax related enquiries.
2. Specified relatives are defined under Inland Revenue Ordinance (Chapter 112).
3. HKD8,000 is the maximum tax deductions per taxpayer per year for VHIS policy premiums for each insured person.
4. HKD60,000 is the maximum tax deductions per taxpayer per year for qualifying annuity premiums and MPF tax deductible voluntary contributions.
5. Assuming the Hong Kong taxpayer has purchased a QDAP, and can claim the maximum tax deduction amount of 17%. It is also based on the information on allowance published by the Inland Revenue Department (“IRD”) as of the May 2024 and is subject to change from time to time. Only the QDAP premiums paid in relation to the QDAP payments can be tax deductible.
6. Assuming the Hong Kong taxpayer has purchased a VHIS certified plan, and can claim the maximum tax deduction amount of 17%. It is also based on the information on allowance published by the Inland Revenue Department (“IRD”) as of the May 2024 and is subject to change from time to time. Only the VHIS certified plan premiums paid in relation to the VHIS payments can be tax deductible.
7. Assuming the Hong Kong taxpayer has purchased a VHIS certified plan and a QDAP, and can claim the maximum tax deduction amount of 17%. It is also based on the information on allowance published by the Inland Revenue Department (“IRD”) as of the May 2024 and is subject to change from time to time. Only the QDAP premiums/VHIS premiums paid in relation to the QDAP/VHIS payments can be tax deductible.
8. Assuming two Hong Kong taxpayers have purchased a QDAP, and can claim the maximum tax deduction amount of 17%. It is also based on the information on allowance published by the Inland Revenue Department (“IRD”) as of the May 2024 and is subject to change from time to time. Only the QDAP premiums paid in relation to the QDAP payments can be tax deductible.
9. Assuming the taxpayers are a legally married couple and have successfully purchased four VHIS certified plans for eligible family members, and can claim the maximum tax deduction amount of 17%. It is also based on the information on allowance published by the Inland Revenue Department (“IRD”) as of the May 2024 and is subject to change from time to time. Only the VHIS certified plan premiums paid in relation to the VHIS payments can be tax deductible.
10. Assuming the taxpayers are a legally married couple and have successfully purchased a QDAP for themselves and four VHIS certified plans for eligible family members, and can claim the maximum tax deduction amount of 17%. It is also based on the information on allowance published by the Inland Revenue Department (“IRD”) as of the May 2024 and is subject to change from time to time. Only the QDAP premiums/VHIS premiums paid in relation to the QDAP/VHIS payments can be tax deductible.
11. Only applicable to policies with issue age of 18 - 40.
12. After the accumulation period, customer can receive monthly annuity payments for a duration of up to 20 years. Please refer to the relevant product brochure for details.
13. Eligibility for the dementia advance benefit is subject to certain criteria and exceptions. The benefit payable under this dementia advance benefit is equivalent to the amount of death benefit payable under IncomeBliss as if the annuitant died on the date of first diagnosis of Severe Dementias. Once this dementia advance benefit becomes payable, the policy will automatically terminate. Please refer to the policy contract for further details.
14. Only qualified annuity premiums paid under IncomeBliss Deferred Annuity Plan can be tax deductible. For the purpose of tax deduction, the premium discount offered by AXA will not be considered as qualified annuity premiums paid.
15. Applicable to policy with a premium payment term of 10 years and subject to terms and conditions. Please refer to product brochure and promotional leaflet for more details.
16. Subject to the terms and benefits of the policy contract, you have a guaranteed right to renew the policy by making payment of the prevailing premium on each policy anniversary.
17. Full cover shall mean no itemised benefit sub-limit and is only applicable to the reimbursement of the actual amount of eligible expenses and / or other expenses charged after deducting the remaining deductible (if any), and is subject to the annual benefit limit and other conditions as stated in the product brochure and the policy contract. Full cover applies to certain benefit items only. Further details of the terms, conditions, exclusions and limitations are provided in the policy contract.
18. The service providers which provide the Network Doctors, Network healthcare facilities, GBA healthcare facilities and Case Manager are independent third parties and are not agents of AXA. AXA shall not have any obligation or liability whatsoever in relation to the medical services and advices provided by the service providers and their Network Doctors, Network healthcare facilities, GBA healthcare facilities and Case Manager and shall not be responsible for any act or failure to act on the part of Network Doctors, Network healthcare facilities, GBA healthcare facilities and Case Manager or its personnel (including doctors, nurses, or other medical staff).
19. The list of Network Doctors, Network healthcare facilities, GBA healthcare facilities and Case Manager are subject to change from time to time at AXA’s sole discretion without prior notice. Hence, the Network Doctors’ and Case Managers’ number of years’ experience and post-fellow specialist training may vary.
Insurance plans vary in coverage and are subject to their respective terms and conditions. For detailed coverage of the plan, please refer to the relevant product brochure and policy contract.
No warranty or responsibility is assumed by AXA Hong Kong and our related or holding companies regarding non-infringement, security, accuracy, completeness, adequacy, reasonableness, fitness for a purpose or free from computer viruses in connection with the information and materials provided. AXA Hong Kong and our related companies and holding companies do not accept any liability for any loss, damage, cost or other expense, whether wholly or partially, directly or indirectly, arising from any error, inaccuracy or omission of the information and materials to the extent that such liability is not excluded by law.
AXA WiseGuard Pro Medical Insurance Plan and IncomeBliss Deferred Annuity Plan are underwritten by AXA China Region Insurance Company (Bermuda) Limited (Incorporated in Bermuda with limited liability)(“AXA”).
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