Filing Deadlines for Taxpayers in Hong Kong Approaching

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HONG KONG, Mar. 26 – The 2009/10 assessment year for will end on March 31, 2010 and the tax filing season will commence again on April 1, 2010 with the bulk issue of profits tax returns and employer’s returns of remuneration and pensions. This will be followed on May 3, 2010 by a bulk issue of individual tax returns.

Tax returns normally have to be submitted within one month from the date of issue. However, in recognition of the fact that such filing requirements can place an enormous burden upon taxpayers, the commissioner is continuing the practice of granting extensions of filing dates for certain categories of taxpayers.

The Commissioner of Inland Revenue, who has the power to impose significant penalties for late filing of tax returns, will continue to use this power under Section 82A of the Inland Revenue Ordinance to enforce timely filing of tax returns.

Generally, companies are tracked by the tax authorities and should issue their tax returns for the first anticipated “year of assessment.” Even if no tax returns have been issued, the company has an obligation to notify the tax authorities if assessable profits have arisen.

The commissioner can impose penalties or issue an estimated assessment if there is a delay in filing the 2009/10 return. The commissioner can also impose penalties of up to 300 percent of the tax undercharged under Section 82A of the IRO. In practice, penalties under this section are normally imposed in the range of 10 percent to 50 percent of the tax undercharged. Taxpayers should therefore take all possible steps to meet the filing deadlines, particularly if they have been late in previous years.

For corporations, a valid profits tax return must be accompanied by signed audited accounts for the relevant accounting period (except for “small companies” as defined by the Inland Revenue Department who are not required to submit the audited accounts until requested by the department). Companies should liaise with their relevant accounting and auditing contacts to ensure that their accounting records are prepared on a timely basis and the audit completed. Companies should also allow ample time for the profits tax return to be finalized and submitted to the IRD prior to the relevant filing date.

For information or advice on tax compliance in Hong Kong, please contact Dezan Shira & Associates at hongkong@dezshira.com.