Tax payments are an inevitable part of our lives. However, there are various tax-deductible insurance or wealth management products in the market, including Voluntary Health Insurance Scheme (VHIS), Tax Deductible Voluntary Contributions (TVC) and Qualifying Deferred Annuity Policy (QDAP). These products not only help taxpayers better manage their personal or family finances, but also enable taxpayers to enjoy tax deductions annually. Choosing the right products will also help taxpayers get a variety of special offers and save on management fees. So which insurers offer all three Tax-Deductions Schemes?
Take the three Tax-Deductible products to plan for a better financial future
VHIS, TVC and QDAP are suitable for long-term financial planning. Taxpayers can choose to purchase all three products from one insurance provider, making it more convenient to manage your accounts and getting the chance to receive a variety of special offers.
Not every insurance company offers all three types of tax-deductible products and most do not offer TVC related products. When considering purchasing VHIS, you may also examine whether that particular insurer also offers TVC and QDAP products as well as any further special offers.
|Insurers that offer the three tax deductible products|
|Name of Insurer||VHIS||TVC||QDAP|
|Source：FHB, Insurance Authority, MPFA and Insurance companies
*Provided by Principal Trust Company (Asia) Limited
@Provided by BOCI-Prudential Asset Management Limited
#Provided by BCT Group and Principal Trust Company (Asia) Limited
As shown above, not all insurance providers directly offer all three types of tax-deductible products where it is even more rare of having an insurer providing both TVC and QDAP. AIA and Manulife are among the few insurance providers that offer both TVC and QDAP.
Furthermore, AIA and Manulife are also the major providers of wealth management products where you may purchase the three types of products and enjoy various special offers. Let us take a closer look at what kind of benefits Manulife and AIA offer!
VHIS: Maximum HK$8,000 of annual tax-deductible amounts for premiums paid per taxpayer
Comparison of VHIS’ premiums – standard plans by AIA and Manulife
|Name of Insurer and Plan||Price（HKD）|
|AIA Voluntary Health Insurance Standard Scheme||$1,990.4|
|Manulife Shelter VHIS Standard Plan||$1,832|
|*For a 30-year-old male policyowner|
VHIS facilitates taxpayers to minimize their tax-payable amount. One of the scheme’s biggest advantages is that taxpayers who purchase insurance policies for their family members^ can also have their taxes deducted according to their individual tax rate, where the higher the tax rate is, the higher the tax savings will be. At present, the maximum tax deduction for an individual who purchases VHIS is HK$8,000 where considering Hong Kong’s maximum tax rate for salaries tax is 17%, the maximum tax savings for each individual will be HK$1,360.
Major insurance companies do provide various special offers to attract new customers. For example, from now until March 31, 2021, policyholders will receive a 12% discount on premiums for the first two policy years when purchasing relevant medical insurance products from Manulife. Hence, if the policyholder also purchases insurance policies for their family members, they will receive premium discounts of up to 20%, depending on the number of insured persons.
AIA also offers a no-claims discount on premiums of up to 15%, subject to specified conditions, provided that no claims were made by the policyholder during the first policy year.
^specified relatives cover the taxpayer’s spouse and children, and the taxpayer’s or his/her spouse’s grandparents, parents and siblings
TVC: Maximum HK$60,000 of annual tax-deductible amounts per person
All employees must make monthly contributions to their MPF accounts but they can also opt for “TVC” (Tax Deductible MPF Voluntary Contributions), which operates under the same rules as the ordinary MPF contributions. In general, employees can only withdraw all contributions after they reach the age of 65.
The advantage of voluntary MPF contributions is that employees can convert contributions to tax deductions, with a maximum tax-deductible amount of HK$60,000 per year. In terms of a 2% tax rate, the maximum tax savings will be up to HK$1,200. On the other hand, if we are considering the maximum tax rate of 17%, the tax savings will be up to HK$10,200.
Look for TVC bonus offers
TVC products tend to be multifarious. A single insurance provider may offer more than 20 different types of MPF related products where each product has its own rate of return and characteristics. For example, AIA offers 25 MPF funds and Manulife offers 29 MPF funds. We advise that employees should pick their choices according to their personal requirements.
TVC products comparison by AIA and Manulife
|Name of Insurer||Bonus Rebate*|
|AIA||Special management fees (for five MPF funds) and
HK$250 to HK$1,500 extra bonus
for those joining before 31st Mar 2021
The first 2,000 members who successfully enrol
in the Programme on or before 31st Mar 2021,
set up direct debit instruction and settle annual contributions
of at least HK$12,000 or monthly contributions
of at least HK$1,000 for 12 consecutive months,
can enjoy 50% off management fees for the 1st year and HK$500 bonus
|Manulife||2% bonus rebates up to a maximum of HK$1,200
for opening an account
on or before 31st March 2021
and make new contributions and/or
transfer TVC accrued benefits from other MPF service providers
to the Manulife TVC Account on or before 31st March 2021
|*Subject to term, type of fund or client type restrictions
For more product offers and details, please visit the company’s official website
Similar to VHIS, TVC also involves different kinds of special offers. If a “bonus rebate” is on offer, it will be equivalent to adding value to your capital immediately. Take Manulife as an example, if a customer successfully sets up a Manulife TVC account on or before March 31st, 2021 and makes new contributions and/or transfer TVC accrued benefits from other MPF service providers to it on or before March 31st, 2021, the customer will be entitled to a special one-off bonus unit rebate of 2% (up to HK$1,200) of the total contributions made during the period of time.
As for AIA’s TVC products, special management fees and an annualised bonus are provided for TVC participants according to the amount of contributions made if they enrol in the programme on or before March 31st, 2021 which is similar to Manulife’s product offer. However, the bonus will be distributed in the first, third and fifth policy year. Also, if a member enjoys 50% off the 1st year’s management fees and HK$500 limited-time bonus (if applicable), he/she will not be eligible to the above-mentioned Double Offers (i.e. Rebate and Extra Bonus) in his/her 1st year of participation.
QDAP: Tax deductions can be shared with spouses
In order to have a thorough understanding of what QDAP is, let’s learn about what happens in the “accumulation period” and “income period”. Participants have to make continuous contributions during the accumulation period and receive returns during the income period. Therefore, the annuity is regarded as a long-term financial planning product which is beneficial to retirement planning. According to current government regulations, QDAP participants can only receive annuity payments after reaching the age of 50 and the contribution period should not be shorter than five years.
Just like purchasing any other wealth management products or general annuity, consumers should take note of the Guaranteed IRR when choosing QDAP products and don’t be simply attracted by the “Estimated Internal Rate of Return” on the promotional leaflets.
The maximum tax deductions for QDAP is also HK$60,000. However, a special feature of tax deductions for QDAP is that it allows a married couple to claim as a group, with a total tax-deductible amount of HK$120,000. For example, a husband can purchase QDAP and claim a HK$60,000 tax deduction, leaving the remaining HK$60,000 tax-deductible amount for his wife to claim.
Obtain more special offers by mixing and matching financial products
There are a few insurance companies that offer all three types of tax-deductible products as mentioned above. If policyholders or customers buy products from the same company, they may even receive “incremental” special offers.
Comparison of special offers when buying QDAP and VHIS together
|Name of Insurer and Plan||Offer|
AIA Deferred Annuity Plan
|From 1st Jan 2021 to 31st Mar 2021
7% rebate for the first year premium and
ManuLeisure Deferred Annuity
|From 11th Jan 2021 to 31st Mar 2021
Up to 20% premium discount for the first 2 years in total
For Manulife ManuLeisure Deferred Annuity, it offers 3%-16% Premium discount (% of basic plan’s premium) in the first policy year, depending on the amount of premium and premium payment period. Customers can also enjoy an extra premium discount of 2% to 4% in the second policy year of the eligible ManuLeisure policy if he/she can meet the eligibility criteria such as being a sole policyowner of any Eligible Medical, Critical Illness and/or Saving Plan(s) that has been inforce for at least 2 months and remains inforce by the end of the first policy year of the eligible ManuLeisure policy. Total discount can reach up to 20%. (The offers are subject to terms and conditions).
AIA also provides special offers for customers purchasing QDAP with annualised premium US$5,000 or above. It offers 7% premium refund. If the policyholder is laid off and become involuntarily unemployed, the grace period of late premium payment will be extended from 31 days to 365 days upon AIA’s approval. (special offers are subject to terms and conditions)
After carefully studying the special offer of major companies and understanding the details of the three tax-deductible products, customers can mix and match them to save more taxes and expenses, taking maximum advantage of the three tax-deductible products!
If all three products are very attractive to you, why not look for the companies mentioned above that can provide all three products? You can have a single professional insurance agent to help you if you choose a one stop insurance provider with all three products. The agent will then be able to make careful analysis and suggestions based on your personal needs as well as providing follow-up services and wealth management planning services for you in the future. On the contrary, if you buy them separately, you may need to deal with three different professional insurance agents, and the quality of service is difficult to guarantee.
Want to learn more about the government’s VHIS? Read our VHIS Guide!