What happens when the IRD questions my offshore profits claim?
The IRD assessor has power to ask for full information on any matter affecting tax liability, including detailed questions about how a transaction was carried out. You should respond with documents, not assertions. If the claim is rejected you can object within one month, and wrongly claiming offshore status can lead to additional tax.
Assessors have a statutory duty to raise assessments and to make enquiries. Under section 51(4) they can require information on any matter that may affect liability. The IRD's own practice note says a request for details of the operations of a transaction is a reasonable demand.
Typical questions
- Who negotiated and signed the contracts, and where were they when they did so?
- Where were goods sourced, shipped and sold?
- Who are the staff and directors, where do they work, and what do they do?
- Where is the money received and which bank accounts are used?
- For interest and service fees: where was the lender or service provider acting?
How to prepare
- Keep a contemporaneous record of operations; reconstructing it later is harder.
- Answer by the deadline in the IRD's letter and send copies of the documents.
- Ask your tax representative to handle correspondence.
If the claim fails
The IRD will raise an assessment that includes those profits. It may also consider additional tax under section 82A if the return was incorrect without reasonable excuse. You have one month from the date of the notice of assessment to lodge a written objection stating your grounds. Where an objection is made, the IRD may agree to hold over some of the disputed tax, sometimes on condition that you buy Tax Reserve Certificates.
Legal basis
- Inland Revenue Ordinance (Cap. 112), s.51(4)
- Inland Revenue Ordinance (Cap. 112), s.64
- Inland Revenue Ordinance (Cap. 112), s.82A
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
- What is an estimated assessment and what should I do if I receive one?An estimated assessment is a tax charge the IRD raises on its own estimate when a return has not been filed by the due date. Do not ignore it: file the correct return and lodge a written objection within one month of the notice date, and ask to hold over the tax if appropriate.
- How far back can the Hong Kong IRD audit my company?The IRD's field audit and investigation normally cover the 6 years of assessment before the year the investigation starts. Where there is fraud or wilful evasion, it extends to 10 years. Ordinary additional assessments are generally limited to 6 years after the year of assessment ends.
- When will a new Hong Kong company receive its first profits tax return?The IRD generally issues the first Profits Tax Return about 18 months after the date of incorporation. A first-time recipient has 3 months from issue to file. If you are chargeable to tax and receive nothing, you must notify the IRD in writing within 4 months after the end of the basis period.
- What is the filing deadline for the Hong Kong profits tax return?The due date is printed on page 1 of the return, normally one month from issue. First-time recipients get 3 months, and e-filers under the e-notice get 2 months. Represented taxpayers usually get later dates under the Block Extension Scheme, depending on the accounting year-end.
- How does the Block Extension Scheme work for profits tax returns (N, D and M codes)?With a tax representative, the due date depends on your accounting year-end code. For 2025/26: N code no extension; D code (December) 31 August 2026 on paper, 2 October 2026 if e-filed; M code (1 January to 31 March) 30 November 2026 on paper, 30 December 2026 if e-filed. The D and M dates were later extended from 17 August and 16 November.