Suppose you earned a salary of $20,000 and contributed $1,000 to a Mandatory Provident Fund (MPF) Scheme each month from 1 October 2006. The calculation is as follows:

Year of Assessment 2006/07 (i.e. 1/4/2006 ¡V 31/3/2007) : HK$

Income ($20,000 x 6) : 120,000

Less: MPF contributions ($1,000 x 6) : (6,000)

Net Total Income: 114,000

Less: Basic allowance : (100,000)

Net Chargeable Income: 14,000

Salaries Tax at progressive rate @2% on Net Chargeable Income : $280

Salaries Tax at standard rate @16% on Net Total Income : $18,240

Salaries Tax payable (*the smaller amount) : $280

* As mentioned before, Salaries Tax is charged on your net chargeable income at progressive rate, or is charged on your net total income at standard rate, whichever is the lesser.