In this course · 1 of 8
Course 9
Stay safe with the IRD
8 lessons · 10 min
- 1What are the penalties for filing a Hong Kong profits tax return late?
- 2What is an estimated assessment and what should I do if I receive one?
- 3How long do I have to object to a Hong Kong tax assessment?
- 4How far back can the Hong Kong IRD audit my company?
- 5How long must I keep business records in Hong Kong for tax?
- 6How do I change my tax representative in Hong Kong?
- 7Does a dormant Hong Kong company still have tax obligations?
- 8Do I need an IRD notice of no objection to deregister a Hong Kong company?
The short answer
A first late filing of a Hong Kong profits tax return is usually penalised at about 10% of the tax undercharged (the tax left unpaid), or 20% if the return is filed after two or more estimated assessments; repeat offences cost more. By law the Inland Revenue Department can prosecute under section 80 or charge additional tax of up to three times the tax undercharged under section 82A.
Legal penalties. Without a reasonable excuse, failing to file a return in time or to notify chargeability can lead to:
- Prosecution under section 80(2): a fine of HK$10,000 plus a further fine of up to three times the tax undercharged.
- Additional tax under section 82A instead of prosecution: up to three times the tax undercharged.
Policy scale for profits tax (no field audit). The Inland Revenue Department's (IRD's) penalty policy uses these starting points, adjusted for the facts:
| Offence | Return filed late | Filed after two or more estimated assessments |
|---|---|---|
| First | 10% of tax undercharged | 20% |
| Second within 5 years | 20% | 30% |
| Third or more within 5 years | 35% | 50% |
Factors include length of delay, the amount of tax, the reasons and any remedial steps. The percentages are general guidance only.
Other consequences. The IRD can issue estimated assessments. A return also may be treated as invalid if not accompanied by the required documents.
To reduce risk
- Use the Block Extension Scheme through a tax representative.
- File on time even if the accounts are incomplete, or ask for an extension in writing at least 14 days before the due date.
A delay in an extension request is not a defence by itself.
Legal basis and sources
The law
- Inland Revenue Ordinance (Cap. 112), s.80
- Inland Revenue Ordinance (Cap. 112), s.82A
General information for business owners, not legal, tax or professional advice. Rules change, so check the sources or ask a licensed professional before you act.
Was this lesson useful?
Upvote it and it moves up for the next reader who asks.
