In this blog we will explore that what methods are adopted and what time limits are given to the taxpayers experiencing different circumstances for the tax recovery. We will discuss the various ways that are adopted by CIR to recover these taxes. We will further explore the tax recovery from the debtor, persons living in Hong Kong, impounding ship or aircraft and as civil debt through district court.
The ways given below may be used by the CIR to recover the tax:
Recovery of Tax through District Court as Civil Debt under Section 75
In District Court proceedings for the tax recovery in default as per Section 75 (3), the CIR signed certificate containing name, defaulter latest postal address, and tax particulars will be enough evidence for the due amount and sufficient authority of a District Court to give decision for the said amount.
In these types of proceedings, any request such that tax is subject to excessive under appeal or objection, incorrect should not be entertained by the court. The reference for this statement is taken from Section 75 (4) of Hong Kong tax law.
No power is given under tax recovery action to the taxpayer either having company setup in Hong Kong or other business for assessment dispute. The certificate of CIR under Section 75 of Hong Kong tax law is necessary evidence of the amount of due tax. Following cannot be argued by the taxpayer doing business in Hong Kong:
In the case of the Ng Chun Kwan it was pointed out by Justice Briggs that, it was not stated by law that, on action for the recovery of tax there can be no defense brought by the CIR. Consider an example here, in the case of D 25/90, there was a question as to identity the taxpayer having Hong Kong incorporation under partnership in which it was observed that, an assessment raised on the partnership was discharged by board of review on the basis that there was no proofs for the existence of partnership.
Section 75 of Hong Kong tax law violate the Hong Kong Bill of Rights Ordinance. As to the claims of CIR for payments of tax certain articles related of the Hong Kong Bill of Rights Ordinance have been used by some taxpayers having company setup in Hong Kong:
It was held by Judge Kwan in the case of Eekon Enterprise Ltd. that:
In a case of Chapman Development Ltd. it was held by the judge HC Wong that, the Article 10 of Hong Kong Bill of Rights Ordinance is consistent with the Section 75 of the Inland Revenue ordinance. The taxpayer (T) having Hong Kong incorporation will not be disadvantaged of an access to court or seeking judicial remedies although the CIR has optioned to wind up T in the execution of judgement if T fails to pay up the assessed tax. The various options and possibilities are open to T, and one of this option is to ask the CIR for holding-over the payment until after the appeal to board of review. If somehow it gets fail in the appeal to board of review, then T has option to apply for a judicial review to the board of review. The winding up of T may or may not decide by the CIR. T has option to pursue the issue in a different court even if it does take place at a date in future.
It was held by Deputy district court judge J Ko in case of Carpe Diem Publications Ltd. that:
Recovery of Tax from a Debtor under Section 76
A debtor under the of Section 76 of Hong Kong tax law means a person who hold the money to the taxpayer or holds on the behalf of taxpayer.
In a case of Shanghai and Hong Kong Banking Service it was held that notice in which it was required by bank to pay money to CIR from a joint account was asked by it to be served to satisfy the tax liability of one of the account holders.
A notice in writing may be given by CIR to debtor, and a copy of which should be send to the taxpayer in which it may be required by the debtor to pay the amount of outstanding tax from:
If the debtor fails to observe the response on request of CIR without reasonable excuse and not able to obey the request of CIR within 14 days from the termination of above 30-day period, an offence is committed by him. This would be discussed in more details in the subsequent articles.
If the debtor is not able to obey the request of CIR, he shall give notice in writing to the CIR within 14 days from the end of the above period of 30 days in which the facts should be explained. The reference for this statement is taken from Section 76 (3) of Hong Kong tax law.
If Employment Ordinance covered an employee, then while deducting the wages i.e. all the deductions, including other deducted item(s) made in period of 1 wage shall not increase 1 half of the wages that are payable in that amount of time except under some specified conditions and circumstances employer of that employee must follow the Section 32 (3) of Hong Kong tax law. So, if:
In response to the Section 76 (1) of Hong Kong tax law, his employer should:
The debtor who obeys the request of CIR shall be reimbursed in the respect of payment that was made to Inland Revenue department against all the proceedings that are either criminal or civil and notwithstanding the allowances of any contract or written law. The reference for this statement was taken from Section 76 (2) of Hong Kong tax law.
Recovery of Tax from Person Leaving Hong Kong
A district judge may issue the departure prevention direction, if he is not dissatisfied by an oath statement by chief assessor or CIR or above authorized by CIR that:
The departure prevention direction (DPD) shall be issued to:
Directing them for preventing the person from leaving the Hong Kong without delivering security or paying tax for the CIR’s satisfaction to payment of that tax. When it is known by taxpayer that, an offence is committed by him if he attempts to depart from Hong Kong without any legal authority, as an authorization by the CIR. The maximum penalty in the form of amount for such type of offence is $ 25,000.
An appeal may be done by a person to CFI to satisfy a departure prevention direction:
Impounding the Ship or Aircraft under Section 77A
For the taxpayers rendering services to Hong Kong incorporation services that are chargeable under Section 23B, 23C, 23D or 23E of Hong Kong tax law, if the taxes of them are in default. It may be issued by CIR with earlier approval of the Chief Secretary to:
A certificate of the addresses and names of the particulars and taxpayers of the taxes in default under Section 77A of Hong Kong tax law. Then any aircraft or ship that chartered by such taxpayers or is owned partially or wholly shall not be granted clearance at all to leave the Hong Kong until the payment is done for tax or provision of adequate security is given. The reference for this statement is taken from the Section 77A (2) of Hong Kong tax law.