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What are the consequences of violating the Inland Revenue Ordinance? What is the penalty for assessing additional tax?

It is the basic responsibility of taxpayers in Hong Kong to submit tax returns on time and without errors. However, whether it is due to momentary negligence or deliberately defrauding the Inland Revenue Department, falsely reporting tax information, and other violations of the Inland Revenue Ordinance, you may be prosecuted and fined. The investigation will discuss the Inland Revenue Ordinance and assessment supplements. tax penalty.

Penalties under the Inland Revenue Ordinance?

According to Part 14 of the Inland Revenue Ordinance, if different persons violate the relevant ordinances in the following circumstances, the Hong Kong Inland Revenue Department may prosecute the persons, and the fines and consequences are listed below:

Employers should note:

For employers/company proprietors, any breach of the following without reasonable excuse,

• filing tax returns within a reasonable time, notifying the tax office of new employment arrangements, etc. (Article 52(2),(4) to (7),);

• keep business records, including records of assets and liabilities (required by section 51C), for a certain period of time,

The Inland Revenue Department may prosecute the person, and the convicted person will comply with the outstanding matters ordered by the court and be fined HK$10,000

Taxpayers should note:

For any taxpayer who, without reasonable excuse, violates the following matters,

• filing an incorrect tax return;

• making incorrect statements;

• provide incorrect information;

• Failure to file tax returns on time;

• Failure to notify the Department of taxable matters.

The Inland Revenue Department can impose up to three times the tax on the convicted person as a fine, and an additional fine of HK$10,000.

If judged to have intentionally evaded or facilitated tax evasion, including making omissions, making false statements, falsely claiming deductions or allowances, preparing false books of account, etc.,

Those convicted will be charged up to three times the amount of tax as a fine, an additional fine of HK$50,000, and a maximum jail term of three years.

I am assessed to need additional tax, what can I do?

When the Inland Revenue Department suspects that a taxpayer has violated the law, as long as it does not involve deliberate tax evasion, it will generally not initiate prosecution immediately. Instead, it will issue a notice to the taxpayer and require the taxpayer to submit a written statement within 21 days.

If the taxpayer wants to lodge an appeal, it can also lodge an appeal with the Tax Appeals Board within one month of the receipt of the notice. Once the result is that additional tax is required, it may be classified as a penalty case under Section 82A.

How much is the additional tax penalty?

According to Section 82A of the Inland Revenue Ordinance, cases requiring additional tax generally do not involve deliberate tax evasion and are classified into three categories: profits tax, salaries tax, property tax, and personal assessment.

The Inland Revenue Department will assess the amount of the penalty with reference to the following additional penalty rates:

Profits Tax Cases:

• First offense: 10% – 20% of tax undercharged.

• Repeat offense within 5 years: 20% – 30% of tax less collected.

• Three or more violations within 5 years: 35% – 50% of the tax deducted.

Salaries tax and property tax cases, personal assessment cases:

• First offense: 10% less tax collected.

• Repeat violation within 5 years: 20% less tax collected.

• Three or more violations within 5 years: 35% less tax.

Although the IRD will impose an additional penalty based on the above rate, it will also adjust the penalty by considering the following factors, up to 25% up or down depending on individual circumstances:

• degree of cooperation;

(Compromising, active, or aggravated; passive, evasive, or aggravated)

• the extent to which the facts are disclosed;

(Sincere and serious problem solving or relief; delay or obstruction of review or aggravation)

• how long the violation lasted;

(Occasional one-off or aggravated; repeated fouls or aggravated)

• taxpayer background;

(Illiteracy or low educational attainment or reduced)

• Business size and underreporting.

(The underreported amount is smaller or reduced; the underreported amount is larger relative to the scale)

Finally, the Inland Revenue Department may also conduct on-site audits and investigations on the above-mentioned cases, which will have the opportunity to increase the chance of additional tax penalties and may impose heavier penalties.

The above information is for reference only. If you have any questions about the penalties of the tax regulations and additional tax penalties, we welcome your inquiries.

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