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What are the consequences of paying taxes late? 4 measures for the tax bureau to recover tax arrears!

Consequences of late tax payment

Taxpayer’s obligations

After receiving the tax return, Hong Kong citizens are obliged to return it to the Inland Revenue Department within one month of the date of issue as stated in the tax return, and to pay tax on time when the notice of assessment is received. If the tax is not paid on time due to various reasons during the period, the consequences may not be as simple as a fine! Let this article tell you all about it.

Consequences of late tax payment

According to the Inland Revenue Ordinance, if a person fails to pay the tax on or before the date specified on the notice of assessment, the tax is in arrears. The Inland Revenue Department will immediately take the following statutory measures aimed at safeguarding tax revenues and recovering overdue tax payments from taxpayers in arrears.

1. Imposition of surcharges and fines

In two cases, if the tax is not paid within half a year (the first instalment), the Inland Revenue Department will levy a surcharge of 5% of the tax owed, and the second instalment will be deemed to be due immediately; if the tax payment date If the payment remains unpaid after six months, the remaining tax will be subject to a 10% surcharge.

2. Employers, banks, tenants, debtors, etc. will be notified of tax arrears

Not only the taxpayer has to bear the consequences, other third parties may also be notified by the Inland Revenue Department by issuing a tax recovery notice.

The “Inland Revenue Ordinance” stipulates that if the taxpayer has not fully paid the taxes and surcharges, the Inland Revenue Department will issue a notice to third parties including the taxpayer’s employer, bank, tenant, debtor, customer, etc.

And after receiving the tax recovery notice, they shall within the statutory time limit, hand over to the Inland Revenue Department the money (if any) held by the taxpayer in arrears and not exceeding the amount of the tax in arrears . If the person fails to do so, he is personally liable for the full amount of the tax required to be paid.

However, if it is received by the employer, the employee’s salary may be deducted in compliance with the Employment Ordinance, but the total deduction cannot be more than half of his salary for the period.

3. or be sued by the court

The Inland Revenue Department may apply to the District Court to bring a civil action against the tax delinquent. In the event of a court judgment, the taxpayer may have to pay court fees, fixed costs and other legal fees from the commencement of the claim litigation to the date of full settlement of the judgment debt, in addition to the payment of the overdue tax that has already been paid. Interest.

Once the court has ruled that the debt is still outstanding, the Inland Revenue Department can apply for attachment of the taxpayer’s movable property; it can even file an application for bankruptcy/winding up.

4. May be refused entry

If the taxpayer intends to leave Hong Kong, or even intend to live outside Hong Kong, the Commissioner of Inland Revenue has the right to apply to the District Court for an order to prevent the taxpayer from leaving Hong Kong, provided that the tax has not been paid.

Taxpayer’s obligations

Finally, taxpayers should:

Pay taxes on time;

Even if an objection is raised, the tax must be paid before the tax payment date as instructed, unless the Bureau agrees to hold off the tax payment;

If you plan to leave Hong Kong, you should complete the tax clearance procedures before departure, including clearing all taxes due.

If you have financial difficulties, you should apply for instalment payment before the tax payment due date.

The above information is for reference only. If you have any questions about tax declaration and accounting, we welcome your inquiries.

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