How can I hold over (reduce) my provisional profits tax?
You can apply in writing to pay less or none of your provisional profits tax on prescribed grounds, most commonly if profits for the year are likely to be below 90% of the base figure. Apply at least 28 days before the due date or within 14 days after the demand note is issued, whichever is later.
Provisional profits tax is a payment on account, so if your profits have fallen you can ask to hold over part or all of it. The grounds in the Inland Revenue Ordinance include:
- Assessable profits for the year are, or are likely to be, less than 90% of the profits for the preceding year (or of the estimated sum on which provisional tax was charged). Send properly signed draft accounts covering at least 8 months.
- A loss brought forward for set-off was omitted or is incorrect.
- You have ceased, or will cease before year-end, and profits will be lower.
- You have elected personal assessment and it will likely reduce your tax.
- You have objected to the preceding year's assessment.
Time limit. The application must be lodged not later than 28 days before the payment due date, or 14 days after the date the demand note was issued, whichever is later. If you have paid the first instalment you can still apply for the second, subject to the same limits.
How. In writing, using Form IR1121, sent to the IRD.
Note: being chargeable at the two-tiered rates is not a ground for holdover (except for 2018/19).
Legal basis
- Inland Revenue Ordinance (Cap. 112), Part 10A (provisional profits tax), s.63E (holding over)
Sources
Applies to YA 2025/26 · Last reviewed 29 October 2026
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.
Related questions
- How does provisional profits tax work in Hong Kong?Provisional profits tax is an advance payment charged for a year of assessment, calculated from the previous year's assessed profits. It is then offset against the final tax for that year, with any excess applied to the next year's provisional tax or refunded. It is paid in instalments set out on the demand note.
- What tax reduction did the 2026-27 Budget give to Hong Kong businesses?The 2026-27 Budget provides a one-off 100% reduction of profits tax for year of assessment 2025/26, capped at HK$3,000 per business. It applies to the final tax, not to provisional tax, and needs no application. Profits tax rates were not changed. The legislation was passed on 13 May 2026 and gazetted on 22 May 2026.
- Which business expenses are deductible for Hong Kong profits tax?Expenses are deductible to the extent they are incurred in producing chargeable profits, and are not of a capital nature or private. Typical allowable items include rent of business premises, staff costs, bad debts, repairs, trade mark registration, MPF contributions for employees, and approved charitable donations within limits.
- What expenses cannot be deducted for Hong Kong profits tax?The law prohibits deductions for domestic or private expenses, capital losses and expenditure, insurance recoveries, rent of premises not used for the business, profits tax and other IRO taxes, and remuneration or interest paid to a sole proprietor or partners and their spouses.
- How are depreciation allowances calculated in Hong Kong?Accounting depreciation is not deductible. Instead the IRD gives statutory allowances: plant and machinery get a 60% initial allowance plus annual allowances of 10%, 20% or 30% on a reducing balance; industrial buildings 20% plus 4%; commercial buildings 4% a year. Certain assets can be written off immediately.