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Hong Kong

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Hong Kong Provides Penalty Relief for Tax Settlement by Installments

The Hong Kong Inland Revenue Department has announced penalty (surcharge) relief for installment plans in light of the prevailing economic conditions and the financial difficulties that some taxpayers may be facing. Click the following link for the full text of the announcement, which includes additional details on how to apply for relief. Further to the surcharge relief, the Hong Kong Government announced a series of other measures to support enterprises and employment.

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Relief Measure: Conditional waiver of surcharges for instalment settlement of demand notes for the Year of Assessment 2018/19

Who can apply

Taxpayers who encounter financial difficulties in settling their tax bills on time may apply to the Inland Revenue Department (IRD) for payment of tax by instalments before the due date of the tax demand notes.

The Inland Revenue Ordinance provides that a surcharge of not exceeding 5% on the amount of tax outstanding after the due date may be imposed and a further surcharge of not exceeding 10% may also be imposed on the amount remaining unpaid (including tax and 5% surcharge already imposed) after 6 months from the due date.

In light of the prevailing economic condition and the financial difficulties that some taxpayers (including individuals and companies) might be facing, the Government announced on 4 December 2019 a further relief measure on tax payment. For instalment plans approved by the Inland Revenue Department allowing taxpayers in financial difficulties for settlement of Salaries Tax, Profits Tax and Personal Assessment demand notes issued between December 2019 and the year 2020 for the Year of Assessment 2018/19, provided that the instalment plans are duly adhered to, no surcharge will be imposed for a maximum period of one year counting from the respective due dates of the demand notes.  If the tax demanded under the first instalment of the demand note has been settled on or before the due date and instalment plan is only granted for settlement of the tax demanded under the second instalment, the one year period will count from the due date for the second instalment.

If payments are not made according to the approved instalment plan, the instalment arrangement will be cancelled and a surcharge of not exceeding 5% on the amount then outstanding will be imposed. A further surcharge of not exceeding 10% may also be imposed on the amount of tax and 5% surcharge remaining unpaid 6 months after the date of imposition of the 5% surcharge.

The above special arrangement is applicable to Salaries Tax, Profits Tax and Personal Assessment demand notes.

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