HONG KONG – The Mandatory Provident Fund (MPF) offsetting arrangement will cease from May 1, 2025, according to a notice the Hong Kong Special Administrative Region government gazetted on Friday.

The commencement notice will be tabled before the Legislative Council on Dec 4 for negative vetting.

Enacted by the Legislative Council in June 2022, the Employment and Retirement Schemes Legislation (Amendment) Ordinance 2022 comes into operation seeks to abolish the use of the accrued benefits derived from employers' mandatory contributions under the MPF system to offset severance payment and long service payment.

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Employers may continue to use the accrued benefits of their voluntary contributions and gratuities based on employees' length of service to offset severance payment (SP) and long service payment (LSP), the government said in a notification.

“The abolition of the offsetting arrangement has no retrospective effect,” reads the notification.

The abolition of the offsetting arrangement will also be applicable to occupational retirement schemes under the Occupational Retirement Schemes Ordinance, the two school provident funds under the Grant Schools Provident Fund Rules and Subsidized Schools Provident Fund Rules and overseas occupational retirement schemes joined by employees from outside Hong Kong which are exempted from the MPF system, said the government.

To tie in with the abolition of the offsetting arrangement, the HKSAR government will launch a 25-year subsidy scheme for the abolition of the MPF offsetting arrangement on May 1, 2025, to share out the SP/LSP expenses of employers after the abolition of the offsetting arrangement.

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"The government is implementing the preparatory work, and will continue to conduct extensive publicity to help employers and employees understand the abolition of the offsetting arrangement," said a government spokesman.

Assisted reproductive treatment tax relief

Also on Friday, the government gazetted the Inland Revenue (Amendment) (Tax Deductions for Assisted Reproductive Service Expenses) Bill 2024 which will stipulate provisions for a tax deduction for assisted reproductive service expenses under salaries tax and personal assessment starting from the year of assessment 2024/25.

The bill will be introduced into the LegCo for scrutiny on Dec 11.

Only taxpayers receiving assisted reproductive services for medical reasons may benefit from the tax deduction.

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To avoid incentivizing the delay of childbearing plans, expenses on gamete freezing services for other reasons will not be eligible for the tax deduction, said the government.

The tax deduction is one of the measures announced in the Chief Executive’s 2023 Policy Address to promote fertility by relieving the financial burden incurred by the expenditure on AR services to encourage couples facing difficulties in conceiving to seek medical assistance to tackle the current situation of low birth rate in the city.