Three types of taxes are imposed under the Inland Revenue Ordinance
(a)Salaries tax
(b)Property tax
(c)Profits tax

The characteristics of the Hong Kong tax system are:
(a)Limited to income or profits sourced in Hong Kong
(b)No total income tax
(c)Low tax rate
(d)No tax on capital gains and dividend

The source of Hong Kong tax law is the Inland Revenue Ordinance, court cases and Board of Review decisions.

A tax return must be properly completed and supported by all required documents.

An assessor or a tax inspector may obtain information and/or document from the taxpayer or any other person in regard to any matter which may affect the tax liability and obligations of any person under the IRO.

A taxpayer has an obligation to inform chargeability to tax, complete tax returns, inform commencement and cessation of a source of chargeable income, inform change of address and inform departure from Hong Kong.

An employer has to inform commencement and cessation of employment of an employee, submit employer’s returns, inform departure from Hong Kong of an employee and to withhold all payments to withhold all payments to the employee for one month if the employee is leaving Hong Kong on cessation of employment.

An assessor may assess a person whom he considers to be chargeable to tax under the IRO after the time limit for submission of the tax return has expired or where he is of the opinion that the person is about to leave Hong Kong or that for any other reason it is expedient to make the assessment.

The assessor may assess in accordance with the tax return or make an estimated assessment if he refuses to accept the return.

An assessment must be made within 6 years after  end of the year of assessment.

A taxpayer may object against an assessment by giving a written notice of objection to the Commissioner with 1 month of the date of the notice of assessment unless the Commissioner extends the period for lodging objection if he is satisfied that the taxpayer was prevented from giving the notice of objection by absence from Hong Kong, illness or other reasonable cause.

After the objection if the assessor is unable to agree with the taxpayer, the case will be determined by the Commissioner. The taxpayer has a right to appeal to the Board of Review by giving a written notice to the Clerk to the Board within one month after the transmission of the Commissioner’s determination, stating the ground of appeal and enclosing a copy of the Commissioner’s determination.

Either the taxpayer or the Commissioner may appeal against the Board’s decision by requiring the Board to state a case for the the opinion of the Court of First Instance on a question of law.

An assessment is final and conclusive if no objection or appeal has been lodged or the objection or appeal is determined.

A taxpayer may apply to the assessor within 6 years after the end of the year of assessment concerned to correct an assessment on the ground that there has been an error or omission in a return or statement submitted or an arithmetical error in computing the assessable profits or tax payable.

If tax is not paid by the due date, 5% surcharge will be imposed. If tax is still not paid after 6 months, a further surcharge of 10% on the tax and first surcharge may be added.

Tax is payable notwithstanding any objection or appeal unless the Commissioner grants an unconditional or conditional holdover. A conditional hold over is one under which the taxpayer is required to purchase tax reserve certificates or to provide a banker’s undertaking.

If tax has been held over unconditionally and upon determination of the objection or appeal, tax is found to be payable, interest at court judgment rate will be chargeable on the tax unpaid.

Tax may be recovered by giving notice to the taxpayer’s debtors to pay over the debt to the IR, by taking civil action in the District Court and by preventing the taxpayer from leaving Hong Kong.

Provisional tax may be chargeable for salaries tax, profits tax and property tax.

A fine of $10,000 may be imposed for various minor offences such as failure to inform change of address or failure to submit employer’s return.

A taxpayer who submits incorrect return, provide incorrect information, fails to submit return in time or fails to inform chargeability to tax may be liable, if prosecuted, to a fine at level 3 (s.80(2)) and three time the tax undercharged or if  would have been undercharged or if no prosecution is instituted, to an additional tax at three times the tax undercharged or would have been undercharged (s.82A).

A taxpayer who is assessed to additional tax under s.82A may appeal to the Board of Review.

A taxpayer who wilfully evade tax may be prosecuted and may be liable to a fine at level 3, a further fine of three times the tax undercharged and to imprisonment for six months. If he is prosecuted under indictment, the penalty is a fine at level 5, a further fine of three times the tax undercharged and imprisonment for three years.