The tax season starts in May every year. After tax assessment, taxpayers need to pay two installments. If taxpayers are unable to pay the tax due to sudden changes in working environment or financial pressure, they can try to apply for Holdover of Provisional Tax from the Inland Revenue Department (IRD) to help them tide over the financial difficulties, and this article will introduce the application method and conditions for Holdover of Provisional Tax in detail.
How to apply for Holdover of Provisional Tax?
If a taxpayer wishes to apply for holding over of provisional tax, at present, the Inland Revenue Department (IRD) only accepts applications on Form IR1121, which can be downloaded from IRD’s website, and the completed form can be returned to IRD through the following channels:
– By mail (Address is “P.O. Box 28487, Gloucester Road Post Office, Hong Kong”, please ensure that the postage is sufficient);
– By fax (to fax number 2519 6896);
– You can apply for holdover of provisional tax electronically through your eTAX account.
What is the deadline for applying for holding over of provisional tax?
Applications for holding over of provisional tax should be submitted to the Inland Revenue Department (IRD) within the following deadlines, whichever is later:
– 28 days before the due date for payment of provisional tax; or
– 28 days before the due date for payment of provisional tax; or 14 days after the date of issue of the notice for payment of provisional tax;
If a taxpayer has already paid the first installment of the two installments of provisional tax, he/she may still apply for holding over the payment of the whole or part of the second installment of provisional tax, provided that he/she complies with the application deadline and the reasons as stipulated in the Inland Revenue Ordinance.
Generally speaking, the Inland Revenue Department (IRD) will only approve an application for holding over the payment of provisional tax if there are sufficient and reasonable grounds for the application, and the reasons why an application for holding over the payment of provisional tax is more likely to be successful in respect of salaries tax, profits tax and property tax are set out below:
Provisional Salaries Tax
For the year of provisional tax, the taxpayer will have unaccounted-for allowances (e.g. Child Allowance for a new born child in the following year);
the taxpayer will have more deductible allowances for the year of provisional salaries tax (e.g. expenses on self-education, eligible premiums for voluntary medical insurance policies which exceed the amount specified in the previous year);
the taxpayer’s chargeable income for the following year of assessment is, or is likely to be, less than 90% of the actual amount of his/her chargeable income for the preceding year;
the taxpayer has ceased or will cease to earn salary income (e.g. unemployment, retirement and reduction of salary) for the year of provisional assessment
the taxpayer has lodged an objection to the assessment of Salaries Tax for the previous year.
Provisional Profits Tax
The taxpayer’s assessable profits are, or are likely to be, less than 90% of the assessable profits for the preceding year or 90% of the provisional profits tax for the year of assessment. (Accounts must be provided and signed within at least 8 months);
any losses carried forward for offset in that year of assessment have been omitted or are incorrect;
the taxpayer has ceased to carry on your trade, profession or business and the assessable profits for that year of assessment are less than the assessed profits for the preceding or following year.
You have objected to your profits tax assessment for the previous year.
Provisional Property Tax
The assessable value of the taxpayer’s property for the year of provisional tax is, or is likely to be, less than 90% of the assessable value of the property for the preceding year or less than 90% of the estimated assessable value for the year of provisional tax;
the taxpayer is no longer the owner of a property or will cease to be the owner of the property before the end of the year of assessment of the provisional tax, thereby reducing the assessable value of the provisional tax;
the taxpayer has made an election for Personal Assessment for the year of provisional tax and you may pay less tax under this method;
The taxpayer has objected to the property tax assessment for the previous year.
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