Tax Disputes & Investigations
Hong Kong has a relatively simple tax system in comparison to most other of the tax systems in the world. However, regardless how simple the tax system is, as the tax laws are based on legal principles, the enforcement of those tax laws is often contested and may create tax disputes.
Tax Disputes
Tax disputes arise mostly because there is a disagreement between the taxpayer and the Hong Kong Inland Revenue Department (“the IRD”) as to the application of the legal principle (for example, one of the most disputed areas is regarding source or taxability of income), and/or to the facts and circumstances.
In general, the process of a tax dispute is:
- File an objection
- If no agreement is reached during the objection stage, the dispute will be pass on to the IRD Appeal Section for the Commissioner of Inland Revenue (“the Commissioner”) to make a determination
- In case you wish to appeal against the determination of the Commissioner, you may appeal the Commissioner’s determination to the Board of Review
- A taxpayer may further appeal to the High Court (i.e. Court of First Instance and the Court of Final Appeal) if the taxpayer is dissatisfied with the decision decided by the Board of Review on a question of law
Tax Investigations & Field Audit
Unlike a tax dispute, which is generally initiated by the taxpayer, a tax investigation or tax audit is initiated by the IRD if the IRD has doubts regarding the sources of income, the completeness and accuracy of the tax returns filed by taxpayers (in respect to both companies and individuals). For example, one of the most focused tax audit areas in recent years is in regards to a company’s permanent establishment. In general, tax audit/investigation is carried out by the Field Audit and Investigation Unit (“FAI”) of the IRD.
In general, the process of a tax investigation is:
- Taxpayer receives the tax notification. Between having received the tax notification and the first meeting/initial interview, the taxpayer should retrieve all documents/information requested in the notification.
- Attend initial interview. In general, the taxpayer has 10 to 14 days after having received the tax notification to contact the FAI to arrange for the initial interview.
- The FAI is to conduct field audit.
- FAI will review the taxpayer’s tax position after the field audit has been conducted.
- Attend settlement meeting
- Propose a fine. In the case of understatement, the FAI will assess the assessable profits that had been understated and impose a penalty on the taxpayer. Whereas in the case of tax evasion, the FAI may transfer the case to the Department of Justice for criminal prosecutions as well as assessing the understated profits and imposing a penalty
Prevention of Tax Disputes & Investigations
HKWJ Tax Law & Partners can assist you to identify and mitigate potential tax disputes and investigations by:
- Conducting regular tax health check to identify possible tax risks
- Advising on preparation of necessary documents to substantiate tax position
- Advising commercial or tax substance in order to substantiate claim
- Applying for an advance ruling with the IRD before engaging in any activity/transaction
Our Services
There is a unit in the Hong Kong Inland Revenue Department (IRD) specialised in tax audit and investigations. They do in-depth review and investigations on cases selected. The selected taxpayers will likely have to spend a lot of time and manpower on dealing with the tax audit investigation, hence is best to engage a professional tax lawyer to:
- Provide professional assistance to clients who are selected for tax audit
- Assist to plan a proper strategy to reduce the tax and/or penalty (if any) as much as possible for cliemt
- Attendi interviews with the IRD, handling tax enquiries from the IRD, preparing and filing settlement proposals to the IRD
As your legal and tax representative, HKWJ Tax Law & Partners can assist you with manage and resolve tax disputes and tax audit or investigations with the IRD during any stage of the process. Our services include but are not limited to:
For tax dispute
- Assist with preparing and filing of an objection (including late objection)
- Assess and advise whether there is merit for litigation/whether litigation is appropriate
- Advise, assist and represent in appeal and litigation procedures
For tax investigation
- Formulate strategy to handle the tax investigation
- Retrieve all documents/information requested, estimate the time required to retrieve documents/information if not readily available, and arrange for interview
- Accompany you to interview, field audit and settlement meeting
- Prepare settlement proposal/further proposal to the IRD on behalf of you
Services
- Accounting
- Audit
- Company Incorporation
- Company Secretary
- Crypto Tax
- Estate Planning
- HR services
- International Tax
- invoice processing outsourcing
- Mainland China Tax
- Payroll outsourcing
- Processing Agent
- Profits Tax
- Property Tax
- Salaries Tax
- Stamp Duty
- Tax Disputes & Investigations
- Tax substance checker
