Tax season is indeed a headache. The economy has taken a turn for the worse and tax payment is inevitable. If you can’t pay your taxes on time, you may be subject to penalties from the IRS, adding insult to injury. Fortunately, you can apply for a tax holiday of up to six months by applying for an instalment plan, where some of the surcharges can be waived and are applicable to profits tax, payroll tax and personal income tax. This article will provide you with instructions on how to apply for tax installments so that you can easily deal with your tax worries.
Back to the list of tax filing questions and answers
Confident to tackle the tougher ones? Come see advanced tax examples and court cases
Table of Contents
What are tax installments?
How to apply for tax installment?
What are the documents required to apply for tax installment?
When will I receive an answer?
What are installment payments?
If a qualified taxpayer is unable to pay the tax on time due to financial difficulties, he/she can apply to the IRD to pay the tax by installments. If the tax remains unpaid after the expiration of the tax payment deadline, the tax authority will generally add a surcharge of not more than 5%; and if the tax and the 5% surcharge remain unpaid six months after the tax payment deadline, a surcharge of not more than 10% will be added.
Moreover, according to the experience of previous years, the exemption period is one year from the tax payment deadline and taxpayers who are unable to pay the tax on time due to financial difficulties can be exempted from the surcharge when they are approved to pay the tax in installments.
How to apply for installment payment?
For taxpayers who wish to apply for installment payment, they can apply in the following ways:
1. Fill out the application form (can be filled out electronically on the “Smart Convenience” platform)
A. Individual taxpayers/sole proprietors can download the IR1360 form;
B. Partnerships can download the IR1360A form;
C. Corporations can download Form IR1360B;
2. In person at the Tax Recovery Unit
Taxpayers can apply in person at the Tax Recovery Unit.
The Tax Recovery Unit is located at 5 Co-ordination Road, Kai Tak, Kowloon, Hong Kong and its office is located on the 4th floor of the Tax Centre.
What are the documents required when applying for tax instalments?
The following documents are required before making an application for payment of tax by instalments:
1. proposal for tax installment;
Fill out the application form with details such as the number of installments you wish to pay, the monthly payment amount and the repayment date.
2. A copy of your bank statement or passbook for the last 3 months;
3. details of income and expenses for the last 3 months;
A simple list of monthly income and expenses is not required, unlike the detailed audit report done by an accountant.
4. debt service information;
If there is a partnership business, the management accounts for the last three months, including the income statement and balance sheet, are required.
5. Cash flow status and projections.
When will I receive a reply?
After the applicant submits the application for tax installment, IRD will reply to the applicant within 21 working days. Applicants are able to obtain approval for different repayment periods depending on the actual situation, usually 6 months but not more than 12 months. It is important to note that failure to make timely payments will result in the loss of the special surcharge exemption. The above information is for reference only. If you have any questions or information about tax filing (personal tax return, corporate tax return, accountant tax return), you are welcome to contact our professional advisors and we will provide you with a free quote and consultation service later.