Requirements for a Valid Appeal for Objection on Assessment by Taxpayer having Hong Kong Company Establishment to the Board of Review

In the following blog we will have thorough discussion on requirement of appeals that are done by taxpayer to board of review under objection on assessment. We will discuss some case studies to observe the authorities of board of review in catering these appeals. Then we will see some decisions of board of review in subject of these appeals and procedure of Section 61A of Hong Kong tax law. An individual or corporation starting or running Hong Kong company establishment should be aware of these procedures for any legal consequences in future.

Determination of Commissioner

The CIR is authorized by Section 64 (2) of Hong Kong tax law to:

  • Call any person who, is capable of giving proofs for the objection to attend before him, in the opinion of CIR and be examined on vow or otherwise.
  • Request books, in writing information or documents other than that from the person who for the purpose of determining the objection is giving objection.

It was observed in the proceeding of case of The Hong Kong Bottler Ltd. that, it is responsibility of CIR upon objection to review the complete assessment, not only the matter that is under objection. In accordance with Section 64 (2) of Hong Kong tax law, the CIR may increase, annual or reduce the assessment. It was held by board in case D 36/09 that, in his determination the CIR can increase an assessment.

Once all necessary information is obtained by CIR, it becomes their duty to make the determination within time. In the case of Yue Yuen Marketing Company Ltd., when taxpayer gave application for judicial review, it was considered by CFI that CIR is failed to determine the objections within reasonable amount of time hence it ordered the CIR to give the determination within a period of 6 months from the date of order.

In the case of Kong Tai Shoe Manufacturing Co Ltd., a taxpayer named as T was serving as company secretary Hong Kong issued some assessments on profit tax by CIR. T put objection on the assessment. It was refused by CIR unconditionally to hold-over the tax assessed and CIR also asked T to purchase the certificates on tax reserve as a substitute of paying the assessed tax. The application of T in which it asked to quash the relevant assessments was rejected by CIR and reason behind this was that assessments were not beyond the legal powers of CIR. As the decision was not unlawful so it was refused by CFI to quash the hold-over decision of CIR. And also it was considered by CFI that there was somehow an inordinate delay from the side of CIR for determination of objection of T hence it ordered the CIR to determine the relevant objections within certain period.

Appeals to the Board of Review

A taxpayer has legal rights to appeal to board of review if somehow he/she does not get agree with the determination of CIR. Board of review is an independent tribunal.

Which appeal is regarded as a valid one?

For an appeal to be valid it:

  • Must be written to the clerk of board of review within 1 month of determination of CIR, unless an extension is granted by board of review in case of absence of applicant from Hong Kong or his/her illness or other reasonable cause.
  • In accordance with Section 66 (1) of Hong Kong tax law, the appellant shall serve a copy of appeal’s notice to the CIR at the same time.
  • Must describe precisely the basis of appeal in addition with the copy of determination of CIR.

In a case D 4/99 it was observed that, against the determination of CIR, the board of review refused to grant an extension for lodging an appeal. This was due to the reason that a delay was caused by the carelessness of taxpayer. In the case D 32/99 a same ruling was made.

In a case D 146/01 board of review refused to grant a late appeal. In order to allow an appeal, it must be averted by taxpayer from not giving the notice of appeal within 1 month’s prescribed period. In a further case D 9/79 it was observed that, ignorance of rights of a person or of the steps to be taken is a ground upon which it may be granted an extension.

In the judgement of the case of Edward Chow Kwong-fai, it was observed that, a misunderstanding of taxpayer for the requirements of Section 66 (1A) was not considered a reasonable cause to allow a late appeal. The taxpayer who was forming a company in Hong Kong, was referred to both Chinese and English version of Section 66 by the Court of Appeal and it was ruled that the meaning of word ‘prevented’ in Section 66 (1A) is ‘unable to’. It was suggested by Lam Ying that; board of review is seeming to equate the word ‘prevented’ with ‘excused’. In response to this suggestion it was pointed out by the Court of Appeal that, the word ‘prevented’ was not as stringent as the word ‘prevent’ but that word imposes a very high threshold than ‘excused’.

In a case D 91/06 it was observed that, on 27 October 2006 the determination was issued by CIR on T. This determination was issued by registered post. The determination was collected by T on 31 October 2006 from the post office. T filled the notice of appeal on 28 November 2006 to board of review. It was held by board of review that, as the appeal was in time so ‘one-month’ time limit should be counted from the date when the transmission process was terminated after completion i.e. when determination was collected by T from the post office.

In a case D 5/10 it was observed that, the determination that was issued by CIR on the objection of T was served on the residential address of T. It was delivered through registered post and the receipt of delivery was also acknowledged by the husband of T. The appeal was made by T about 8 months out of time. The board of review refused to extend the time limit for appeal, as in its point of view the extension cannot be provided as the determination was served duly.

Responsibility of Proof

According to Section 68 (4) of Hong Kong tax law, the responsibility of proving that whether assessment is incorrect or excessive is on the appellant i.e. the taxpayer that can be working as a company secretary Hong Kong or elsewhere. In the cases where specific provisions in Inland Revenue Ordinance become operative only after the formation of opinion by an officer of Inland Revenue Ordinance, the burden of proof is still bore by taxpayer. For example, Section 61 A of Hong Kong tax law, in which an assessment is made by assistant commissioner in such a way as to counteract the benefits or Section 61 A of Hong Kong tax law, and in which the transaction is regarded as fictitious or artificial according to opinion of an assessor. In a case Cheung Wah keung it was observed the connection of taxpayer in the cases of Section 61 A of Hong Kong tax law that, as the responsibility of proofs remains with the Inland Revenue department hence it was rejected by the Court of first Instance. And it also remains the duty of taxpayer to prove that the disputed transaction is not for dominant or sole purpose of obtaining a tax benefit. In a case Ngai Lik Electronics Company Ltd. it was considered by Court of Final Appeal that, the exercise of power of CIR under Section 61 A (2) of Hong Kong tax law, by making random additional assessments has been miscarried seriously. And due to this reason the responsibility of proof of taxpayer that the assessments were incorrect or excessive was discharged.

In the cases in which evidences are not found by the board of review that supports the case of revenue (‘a scoreless draw’) or case of taxpayer having sole proprietorship HK, the appeal of taxpayer will not pass as the burden of proof and stays on the taxpayer. This case was of Real Estate Investments (N.T.) Ltd.


Decisions of Board of Review

The board of review after hearing the appeal:

  • With the opinion of board of review, may keep the case to CIR. The reference for this statement is taken from Section 68 (8) (a) of Hong Kong tax law.
  • Shall reduce, annual, confirm, increase the assessment appealed against.

As long as case is so remitted by the board of review, the CIR shall revise the assessment, as in requirement with the opinion of board of review, and in accordance with the such directions as board of review, at any time request to CIR, may give the concerning the required revision to give effect to this opinion. The reference for this statement is taken from Section 68 (8) (b) of Hong Kong tax law. According to Section 68 A of Hong Kong tax law, any clerical error, or mistake that raised from any accidental omission or slip in relation to a decision of board of review can be corrected by board of review.

In accordance with Section 68 (5) of Hong Kong tax law, all appeals are listened through camera, but any appeal after approval by secretary for justice may be reported in such publications in such a way that the identity of appellant is not disclosed.


According to Section 68 (9) of Hong Kong tax law, if the assessment is not annulled or reduced by the appellant then the cost that’s not increasing more than $ 25,000 before 1 April 2016 will be imposed on him/her. The secretary for treasury or financial services may amend the cost of case by order as time to time. The reference for this statement is taken from Section 68 (9A) of Hong Kong tax law.

Bankrupt Taxpayer

An undischarged bankrupt does not have right to appeal against the determination of CIR to board of review. It was considered by board of review in the case D 79/04 that, by the virtue of Bankruptcy Ordinance, the liabilities and assets of taxpayer are vested with Official Receiver upon bankruptcy. As the right to appeal upon bankruptcy, vested in Official Receiver so only receiver has right to appeal. However, against the penalty imposed under Section 82 A of Hong Kong tax law, a taxpayer may also have right to appeal.

Procedure of Section 61 A of Hong Kong Tax Law 

In a case of Ngai Lik Company Ltd. it was observed that, according to the consideration of Mr. Justice Ribeiro PJ to identify workable clarity at early stages, the case showed a clear need in proceeding of Section 61 A of Hong Kong tax law:

  • To cater the sound analysis of the concerned case.
  • The benefit on tax that it seeks to challenge.
  • The corporation or individual having sole proprietorship HK for the relevant dominant purpose.
  • The transaction had the effect of conferring the tax benefit on taxpayer as stated by it.
  • The provisions of such particulars, as a matter of fairness procedural.

The practice of board of review in case of Section 61 A, should be to issue the directions for such particulars supplied by Inland Revenue department particularly in support of alternate cases before the commencement of hearing. The purpose is not to say that particulars of Inland Revenue department cannot be changed. ‘The alteration should be allowed only if the existence of tax benefit or viable different or alternative tax scheme is supported by submissions or evidence as long as unfairness is caused by it which cannot be alleviated by measures of case management (such as the calling of new witness, adjournments, the recalling of witness, etc.). The basic aim should be that everyone knows how Section 61 A sought to be applied at each stage in the given case’.      

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