What are Tax Reserve Certificates?
Tax Reserve Certificates (TRCs) are a tool in a tax savings plan designed to help taxpayers pay their taxes with savings. This is a scheme offered by the Inland Revenue Department (IRD) to provide a wide range of services in electronic form, including the purchase of TRCs through various channels (e.g. monthly bank autopay, telephone, internet and bank ATMs) and the provision of “automatic tax payment” services.
Benefits of using Tax Reserve Certificates
Yes, you can get the “Automatic Tax Payment” service to ensure that the tax is paid on time. On the due date of an individual’s tax, the Inland Revenue Department (IRD) will automatically redeem the TRCs in your account to pay your tax and send you a statement of redemption of TRCs, together with the redeemed TRCs and the balance of your account.
About two weeks before the tax is due, the Inland Revenue Department (IRD) will issue a TRC redemption proposal setting out the TRCs to be redeemed and the balance of tax payable. If you do not create or redeem TRCs between the date of issue of the proposal and the due date of the tax, and the tax payable remains unchanged, the tax will be paid on or before the due date of the tax as shown on the proposal. If the amount of TRCs redeemed is insufficient to cover the full amount of tax, the remaining tax needs to be paid on or before the tax payment date. The unredeemed TRCs will remain in your account.
To purchase TRCs, you need to complete the Account Opening Form (IR1306) and submit it to the Tax Reserve Certificates Section of the Inland Revenue Department for processing. Upon successful account opening, you will receive your TRC account number. With this number, you can purchase and redeem your eTRCs. Each taxpayer can only open one TRC account, and the TRC account cannot be opened in joint names. Tax Reserve Certificates should be denominated at least $300 and increased in multiples of $50.
Interest on Tax Reserve Certificates
Tax Reserve Certificates can earn interest when they are redeemed for tax payment. There are certain regulations on how interest is calculated. The interest rate of TRCs is adjusted monthly with reference to the average interest rate of 12-month time deposits of the three note-issuing banks of $100,000 to less than $499,990. With effect from 5 December 2022, the interest rate on TRCs is 0.4% per annum and is applicable to general TRCs purchased on or after that date. For GTCs purchased before that date, interest will continue to accrue at the rate of interest on the date of purchase.
– TRCs can only earn interest when they are used to pay the holder’s own taxes.
– After purchase, the interest rate on the TRCs will remain unchanged and will be calculated based on the interest rate in effect on the date of purchase.
– Interest on TRCs is calculated at simple interest from the date of purchase to the date of redemption of TRCs.
– Tax Reserve Certificates have an interest bearing period of up to 36 months.
If the TRC is not used to pay the holder’s own tax, no interest will be earned. If you want to get back the principal amount in your TRC account, you need to complete the TRC Redemption Form. Between July and December, it normally takes nine working days for the IRD to process and refund cash for redemption of TRCs, while from January to June, the processing time is 12 working days.
Purchase a Tax Reserve Voucher Form https://www.gov.hk/tc/residents/taxes/etax/services/purchase_of_trc.htm
