Taxes paid during the objection period and final settlement

If a taxpayer lodges an objection in writing to the IRD against an assessment issued for a particular year of assessment, the IRD will immediately examine the objection, amend the assessment as far as possible and inform the taxpayer of the final amount of tax reduction. However, if the IRD considers that the objection cannot be processed immediately, it will take a longer time to conclude the case as further information is required from the taxpayer to consider how the assessment should be revised. In such cases, IRD will issue an unconditional or conditional holdover order to the taxpayer, informing him of the amount of tax deferred.

Unconditional Holdover Order

If the IRD does not accept the revised assessment, the taxpayer will be required to pay the amount of tax that has been unconditionally held over by the IRD and, in addition, to pay interest on that portion of the tax at the rate published by the court. If a taxpayer has initially paid the tax originally calculated and the IRD eventually accepts the revised assessment, the IRD will refund the overpayment, but the IRD will not pay the taxpayer interest on the refund.

Conditional Holdover Order

However, until an agreement is reached with the IRD, the taxpayer may not be willing to pay the tax in full and may also not be willing to pay the interest calculated in the event that the case is lost. In such cases, the taxpayer may accept the IRD’s request to purchase TRCs as security for payment and conditionally hold over the tax in dispute. The Commissioner of Inland Revenue will issue TRCs for a specified amount and the TRCs will be used to pay the tax in dispute, with interest calculated at simple interest.

If the objection or appeal is finally determined and the taxpayer wins the objection, the IRD will refund the amount of tax overpaid and the interest on the overpaid amount of tax in savings from the date of issue of the TRCs to the date of final determination of the objection or appeal. Taxpayers should note that only the total amount of tax refunded by the Inland Revenue Department is eligible for the corresponding interest.

The above information is for reference only. If you have any questions, we welcome your tax enquiries.