Tax Assessment on Deceased Persons, Joint and Co-owners of Immovable Properties and Corporation rendering Hong Kong Company Incorporation Services


In the following blog we will be seeing the different types of person that are responsible for compliance under different Sections of Hong Kong tax law. These persons include non-resident, expired persons, incapacitated persons, partnership holders, co-owners and joint owners of immovable properties, corporation and body of persons and court free company amalgamation.

Non-Resident

It is responsibility of an agent of non-resident to perform all acts that are compulsory by or under the Inland Revenue ordinance to be done by a non-resident under Section 53 of Hong Kong tax law for starting a company in Hong Kong.

Deceased Person

A person who execute a deceased person is:

  • Responsible to do all things, acts and matters, which the person that has passed would be liable to do if they were not dead. The reference for this statement is taken from Section 54 of Hong Kong tax law.
  • Allowable to pay tax before the date of death for all periods.

Under Section 2 (1) of Hong Kong tax law, the meaning of an executor is:

  • Administrator;
  • A person who is taking care of estate of a dead person, that can be a trustee acting under a trust that was created under last will of the expired; and
  • An executer

There should be no prosecution taken against the executor if tax evasion has been committed by the expired person. Though, for such avoidance the executor may be assessed to additional tax under Section 82 A of Hong Kong tax law. The reference for this statement is taken from Section 54 proviso (a) of Hong Kong tax law.

Partnership

It is the duty of all partners having Hong Kong incorporation establish under partnership act, to be answerable for doing all matters, acts or things required by partnership under Inland Revenue ordinances of Section (s 56(1) of Hong Kong tax law.

A partner of precedent person is defined by Section 2 (1) of Hong Kong tax law to mean a partner who is:

  • Named first in a statutory statement of partner’s name;
  • Living in Hong Kong;
  • Named first in name of partnership;
  • Named first in agreement of partnership.

Co-Owners and Joint Owners of Immoveable Properties

It is the responsibility of any of co-owners or joint owners of any land and / or buildings to be answerable for doing all matters, acts and things that would be required to be completed by a sole owner under the Inland Revenue ordinance. The reference for this statement is taken from Section 56 (1) of Hong Kong tax law.

If in a case share of tax on property has paid by a co-owner or joint owner to other co-owner or joint owner, then this amount can be recovered by him from other co-owner or joint owner under Section 56A (3) of Hong Kong tax law. 

Body of Persons and Corporation

Under Section 57 (1) of Hong Kong tax law, the manager, secretary, any liquidator or director of a corporation and the principal officer of a body of persons who are rendering Hong Kong company incorporation services should answer for performing all such matters, acts or things that are required to be done by such body of persons or corporation under the standards of Inland Revenue ordinance. The reference for this statement is taken from Section 57 (1) of Hong Kong tax law.

 

In a case of The Commissioner of income tax, it was demanded by tax authority of Jamaica that, the previous managing director of a company should pay tax on behalf of the company that relying on, among other things, under Section 52 (2) of Hong Kong tax law and income tax act. According to this income tax act, ‘any other principal officer of any body of persons or the manager shall be accountable for doing all such matters things and acts as shall be required to be done by the morality of this act for the assessment of such payment of tax and body.’ It was considered by Privy Council that:

  • The simple aim is that the principal officer of a body of persons or company or the manager is responsible to take the all ministerial or administrative action which is required by the act to be taken to assess the body and tax payment to which it is allowable. It is the body that is made liable and responsible to pay tax.
  • The words ‘the payment of tax’ are to be associated, not with words ‘answerable for’ but with words ‘doing all such matters things and acts as shall be required to be done by the morality of this act……’.

If:

  • No principal officer of a body of persons
  • No receiver of a corporation, director, secretary manager

Is resident in Hong Kong ordinary, then as the case may be, the body of persons or corporation has to inform CIR to keep on informing him at all times about the name and address of an ordinarily individual resident in Hong Kong for starting a company in Hong Kong or doing any other business. That resident shall be answerable for performing all such matters, acts or things that are required to be done by such body of persons or corporation under the standard of Inland Revenue ordinance. The reference for this statement is taken from Section 57 (2) of Hong Kong tax law.

Court-Free Company Union

In a case it was announced by the Inland Revenue department its practice of making assessment on profit tax for cases that involved a court-free union under the Companies Ordinance known as CAP 622 delaying the decision to alter the Inland Revenue ordinance.

In order to fill the returns for profit tax, the united company or the amalgamated company (ADC) should:

  • Submit the return on profit tax for each uniting company for the assessment year in which the date of united company is considered as having expired its business fall.
  • Inform the CIR in writing about union within 1 month from the date of union.

Considering obligations and rights, the amalgamated company:

  • Shall presume all the tax responsibilities of the amalgamated company, unquestionable and fortuitous, in case of:
  • all previous assessment years
  • the assessment year in which amalgamated company is considered as having expired its business
  • Should accept all obligations forced on amalgamated company, in particular:
  • allowance of required information
  • Requirement for record keeping
  • return filing requirement

Summary of Persons Liable for Compliance

Taxpayer

Responsible persons

Inland revenue ordinance provisions

Persons that are unfit

Trustee

Under Section 53 of Hong Kong tax law.

Non-resident

Agent

Under Section 53 of Hong Kong tax law.

Expired persons

Executor

Under Section 54 of Hong Kong tax law.

Partnership

Model partner

Under Section 56 of Hong Kong tax law.

Corporation

Director, manager, liquidator or secretary

Under Section 57 (1) of Hong Kong tax law.

Body of persons

Principal officer

Under Section 57 (1) of Hong Kong tax law.

Co-owners and joint owners

Any of co-owners and joint owners

Under Section 56 A of Hong Kong tax law.

 

 

 

 

 

 

 

 

 

 

 

 

 

Assessments

Normal Cases

Under Section 59 (1) of Hong Kong tax law, a person may be assessed by an assessor whom he considers to be allowable to tax under Inland Revenue ordinance instantly after the departure of time limit for submitting a return.

Urgent Cases

However, a person may be assessed by an assessor at any time if he is of the opinion that person is about to depart from Hong Kong or that for any other reason it is desirable to do so under Section 59 (1) proviso of Hong Kong tax law.

Now we will discuss an example, an individual tax return was sent to Mr. Ho by an assessor on 4 May 2016. According to that tax return it was required by him to complete and submit the return within 1 month. It was learned by assessor that Mr. HO was about to depart from Hong Kong, on 11 May 2016. Mr. Ho could have assessed by assessor instantly without waiting for expiry of the limit for submission of return on 2 June 2016.

Assessment per Return

If tax return is accepted by an assessor that is submitted by a person then he may assess per return under Section (s 59 (2) (a)) of Hong Kong tax law.

Estimated Assessment where Returns are not Accepted under Section 59 (2) (b)

If a return is submitted by a person and assessor does not accept the return, then he is empowered to increase an estimated assessment (EA). A key thing to note here is that a return must be submitted before the invocation of this sub-Section.

In order to raise an estimated assessment (EA), it was needed by the assessor to not inform the taxpayer (having company setup in Hong Kong ) the reason for rejecting the return or assessment’s basis. As long as assessor is not acting arbitrarily or carelessly, the estimated assessment cannot be interrupted unless it can be proved by taxpayer that the assessment is immoderate or wrong. It is not mandatory that the assessor should be put to stern proof of his statement. In plead, the burden rests on the taxpayer for proving the assessment incorrect. There must be reasonable grounds by assessor for estimate.

Assessment Estimated in the Non-Presence of Return

If returns have not submitted by a person within the advised time limit and it is considered by assessor that person is allowable to tax, then estimated assessment may be issued on person by assessor under Section 59 (3) of Hong Kong tax law. If no returns have been submitted then only Section 59 (3) can be invoked. A person is not discharged from the responsibility to submit a return even though an estimated assessment is raised on a person. In accordance with the request of Inland Revenue ordinance, he may still be responsible to a sanction for failure to submit a return.

Assessment on the Basis of Usual Rate on Net Profit on Yield under Section 59 (4)

The assessor is authorized to assess under Section 59 (4) of Hong Kong tax law on the base of usual rate of net profit on the yield of business or trade if account of a business is not kept adequately. The amounts of such usual rates of profit in specific classes of business or trade may be prescribed by the board of Inland Revenue.

Additional Assessments under Section 60

As long as it appears to an assessor that in any assessment year:

  • The taxpayer either having company setup in Hong Kong or doing some other business is under assessed; or
  • On any person allowable to tax no assessment is raised on him / her

He is given power under Section 60 (1) of Hong Kong tax law, to issue an additional assessment or assessment to his judgement.

The limit on time to raise such an assessment is 6 years after the expiry of concerned assessment year. Let’s discuss an example to understand such scenario. On / before 31 March 2016 an additional assessment for 2009 to 10 must be raised. The limit on time can be extended from 6 years to 10 years. Where under assessment or non-assessment is due to reason of willful default or fraud under Section 60 (1) proviso (b) of Hong Kong tax law.

It was governed that Section 60 of Hong Kong tax law is a separate Section. This Section may be applied without any need to raise the assessment under Section 59 of Hong Kong tax law. This statement was observed in the case (Mok Tsze, Court of final appeal 29 of 2015).

In a case of Lam Soon Ltd. it was governed by court that Section 60 of Hong Kong tax law before the raising of an additional assessment, does not require the submission of a return.

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