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14.2. Type of Assessment

Persons carrying on business in Hong Kong have their profits assessed yearly by way of annual tax returns.

After returns are filed, notice of assessment is issued to the taxpayer by the IRD. The assessment notice specifies provisional tax payment due for the current year (based on the previous year profits), as well as final tax payment for the previous year, which has been reconciled with the previous year's provisional tax payment made. As an interim administrative measure, the Inland Revenue Department will accept the profit tax returns for 2013-14, 2014-15 and 2015-16, with the assessable profits computed on a fair value basis. The Department has also indicated it is willing to extend the interim measure to the filing of 2016-17 returns.

The provisional profits tax is typically paid twice a year. The first payment is 75% of the provisional tax for the current year plus 100% of the reconciled final payment for the previous year. The second payment is 25% of the provisional tax for the current year.

When a business's accounting period does not match to Hong Kong's tax year, the profit for the accounting period is deemed to be the profit for the fiscal year in which the accounting period ends.