In this blog we will explore, what are the powers given by Hong Kong government to the Inland Revenue department to collect information / document from the taxpayer, third party or officers that are employed by the public body or government of Hong Kong.
These powers include call a person for examination, to obtain information about the particular property and land transactions and to obtain information relating to foreign tax etc. E-filers should be granted with automatic extension from Inland Revenue department in order to encourage them for online filing of tax returns using e-Tax.
Tax Return Corporations
Annual tax returns are issued by Inland Revenue department for corporations on first working day of April each year in bulk. The normal due date for submission of that tax return is within one month. There is a block extension scheme for represented test cases and under that scheme extension of time for filing of tax returns for the assessment year 2015 to 16 was generally granted to the taxpayers who make up their annual accounts after 30th November 2015 and was to start up business Hong Kong, so to help them run their corporation easily by extending the tax filing date. The given below is Accounting Date Code ‘N’:
Extended due date
Further extended due date
(for electronic filing)
‘N’ Code –
1 April to 30 November 2015
4 May 2016
(no extension unless for electronic filing)
Further 2 weeks
‘D’ Code –
1 to 31 December 2015
12 August 2016
Further 2 weeks
‘M’ Code –
1 January to 31 March 2016
15 November 2016
Further 2 weeks
‘M’ Code –
(current year loss cases)
1 February 2017
1 February 2017
(same as per returns)
If any corporation is in state of liquidation, then BES would not be applicable on that corporation. If the extension in filing the tax return is not justified properly then no extension in time will be provided to the taxpayer. If somehow an extension of time has been given to corporation for filing the tax return under BES that extension will be taken back automatically upon the beginning of liquidation. In that incident, the tax return must be filed within 1 month from the date of notification of withdrawal of the previously granted extension.
In case there are some exceptional circumstances then only Inland Revenue department can grant further extension of time. If a corporation or individual taxpayer required, the extension beyond the extended due dates then request should be made by it or him respectively in writing at least 14 days before the relevant expiration date of the block extension. In addition to the application there must be explanation of why lodgment cannot be made in time and the evidences to support the application.
For the businesses that are registered newly, some 18 months after the date of incorporation or date of beginning of new business the Inland Revenue department usually issues the first tax return in profits. However, where conditions permit, a provisional profits tax return may be issued by the Inland Revenue department for completion at an earlier date.
Powers of Inland Revenue Department to Collect the Information
Further Returns under Section 51 (3)
According to Section 51 (3) of Hong Kong tax law, a written notice can be issued by the assessor to a taxpayer requiring him to supply a fuller or further return to support his return. This power can only be exercised by the assessor after taxpayer has submitted the return.
Power to collect document / information form third party or taxpayer under Section 51 (4) (a)
In order to obtain the information in consideration to any matter that may affect any responsibility, obligation or liability of any person under the Inland Revenue ordinance, a notice may be given by an inspector or assessor in writing to:
Whom that person considers may be in control or possession of documents or information in consideration to any such matter as mentioned previously, required by him within such logical time as stated in the notice to provide the documents or information. The reference for this statement is taken from Section 51 (4) (a) of Hong Kong tax law.
Documents that may be required by the taxpayer rendering Hong Kong incorporation services in support of his tax return includes any plans, books, deeds, instruments, stock lists, trade lists, bank statements, vouchers or other documents that may considered by the inspector or assessor or may be related for such purposes. These document can also include the proof for his services that he provides offshore for offshore company incorporation.
A lawyer or barrister can deny to comply with a notice under Section 51 (3) of Hong Kong tax law in consideration of any privileged communication or information that is made or given to him in that capacity other than the request for information that is related to transaction for property and land under Section 51 (4A) of Hong Kong tax law.
Power to call a person for examination under Section 51 (4) (b)
An assistant commissioner has authority to call any person to attend and be analyzed in consideration to any matter which may affect his tax obligation/responsibility or tax obligation/responsibility of another person.
Power to Obtain Information Related to Particular Land and Property Transactions
In relation to the particular property and land transaction the following persons may be required by an assistant commissioner under Section 51 (4) (b) or inspector / assessor under Section 51 (4) (a) to attend an interview or supply documents / information.
Under Section 51 (4A), professional legal advantage is not available to a solicitor or lawyer in respect of a request for information.
Power to Obtain Information Relating to Foreign Tax
Section 51 (4AA) extends the power of Section 51 (4)) of Hong Kong tax law to obtain the information in consideration to any matter (‘the concerned matter’) that may affect the responsibility, liability or obligation of any person (‘the concerned person’) under the laws of states that are outside the Hong Kong regarding any tax of that state if:
And for the causes of application of Section 51 (4) and Section 51 (4AA), pointing to matter such as aforementioned and similar matter to be established as reference to the concerned matter, and references to ‘such person’ in Section 51 (4) (a) and 51 (4) (b) of Hong Kong tax law can be used to point for the concerned person.
Under Section 49 of Hong Kong tax law, it may be declared by order by Chief Executive in Council that:
Statements of Liabilities and Assets and Search Warrants
In a suspected tax avoidance case, powers are given to CIR to obtain:
Power to Acquire Information from Officers that Employed by the Government of a Public Body under Section 52 (1)
CIR has authority to give notice in written form to an officer in the employment of:
And required by him to enhance any details for the purpose of Inland Revenue ordinances that may be in the possession of officer.
Under Section 52 (1) of Hong Kong tax law, the officer in the employment is not responsible to disclose any details in which he is under a show statutory duties, as to the observe confidentially.
Obligations of Taxpayer
Chargeability to Tax’s Notification under Section 51 (2)
Under the Section 51 (2) of Hong Kong tax law, each and every person having start up business Hong Kong or providing any services in Hong Kong is responsible to pay tax for any assessment year is required to inform the CIR in writing. He should not inform the CIR in writing later than 4 months after basis period for that assessment year is ended, that he is allowable to pay tax, unless he is already required to enhance a return under the Section 51 (1) of Hong Kong tax law.
Discussing an example, Mr. Chan joined an accountancy firm after he was graduated from the university. The date of his joining to the accountancy firm was a July 2015. He was given with a monthly salary of $ 15k. During that time he was single and also had no other dependent. He was not earning income from any other source. His total salary for the period from 1 July 2015 to 31 March 2016 i.e. for 9 months was (9 months * $ 15k) $ 135k. As his salary exceeded his personal allowance. Due to that reason he was responsible to pay salary tax for the assessment year 2015 to 16. It is required by him under the Section 51 (2) of Hong Kong tax law, to inform his chargeability to salaries tax to the CIR. He should inform this to CIR not later than 31 July 2016. This is also the last day of 4th month after assessment year 2015 to 16. Unless return for reporting his salaries income has already been sent by him under Section 51 (1).
Notification of Cessation
If the source of chargeable income / rental income / business of a person ceases, then it is required by him under the Section 51 (6) of Hong Kong tax law to inform the CIR in writing about this cessation. This cessation should be informed by that person to CIR within 1 month of cessation of source of chargeable income.
Now we discuss another example to further clarify such circumstance. Mr. Cheung was rendering Hong Kong incorporation services named as A Ltd. He ceased to work for that company as from 1 October 2015. After cessation he started to study full time in a state institution of Hong Kong. It was required by Mr. Cheung to inform CIR in writing that his source of salaries income had ceased by him not later than November. This informing the CIR about cessation is mandatory to avoid any future inconvenience.
Notification of Departure from Hong Kong under Section 51 (7)
Any person who is permissible to pay tax and about to leave Hong Kong for one month to provide services to offshore company incorporation situated outside Hong Kong is required to notify CIR through written notice of his date of departure that is expected under Section 51 (7). This notice should be given to CIR not later than 1 month before his expected date of departure. If his departure from Hong Kong is at frequent intervals to fulfil duties of his employment overseas, then such notification is not required by him to inform CIR, as taken from Section 51 (7) proviso (b) of Hong Kong tax law.