In terms of taxation, taxpayers must fulfill their basic responsibilities and must submit correct tax returns on time. Fictitious, false or elaborate arrangements cannot be used to evade taxation. Tax evasion includes (1) tax evasion and (2) tax avoidance. The most common tax evasion behaviors are:
-Omiting/underreporting income or profit;
-Incorrect statements regarding claims for deductions or allowances;
-Failure to notify the Hong Kong Inland Revenue Department of taxable matters.
In accordance with the penal provisions of the tax regulations, the Inland Revenue Department will prosecute according to the nature of the violation and the degree of the mistake, replace the prosecution with a fine, or issue an additional tax assessment.
The penalties of these tax regulations can also be applied to general tax avoidance cases. Therefore, taxpayers may not be able to avoid punishment through tax avoidance schemes. Whether the Inland Revenue Department will take punitive actions for tax avoidance depends on whether the tax avoidance plan is a false tax evasion plan. If a taxpayer is found to be dishonest or fraudulent in its tax avoidance, which involves the use of false or fictitious means, or the transaction is false or has not been empirically established, it will definitely impose penalties on the relevant taxpayer.
The above information is for reference only. If in doubt, we welcome your tax inquiries.