Wilson Accounting Limited
Tax Investigation Service
Taxation in Hong Kong
In addition to the advantages of many countries and regions, Hong Kong also provides the most ideal business environment for enterprises to expand their business in terms of taxation.
As a professional consulting firm based in Hong Kong, Brilliance has rich experience in taxation, accounting, auditing, risk management, tax filing, etc., and can respond to the various needs of enterprises, combined with the characteristics of the industry, and effectively solve problems for investors and achieve their vision.
Glorious Chen’s tax investigation advisory team is composed of Hong Kong tax consultants with many years of experience in Hong Kong’s tax laws and regulations. With a deep understanding of the client’s business and industry, we can assist the client to solve the problem from the tax investigation and identify the risks and opportunities in the operation for the client. Helping clients improve compliance and maximize tax benefits.
Our consultants are committed to designing innovative and comprehensive tax solutions for each client’s different circumstances in a professional and rigorous manner, and can provide professional advice to clients on issues such as multinational group tax and individual taxation, so as to help clients find tax savings.
Our tax services include:
- Filing Extensions and Objections
- Tax Litigation
- Corporate tax planning services
- Corporate tax investigation and consulting
- Hong Kong personal tax planning
The main taxes to be levied under the Inland Revenue Ordinance in Hong Kong are as follows:
- Profits tax
- Salaries tax
- Property Tax
Tax Audit – Field Audit and Tax Investigation
Your company has received a letter from the Inland Revenue Department (IRD) with a file number starting with 4A, 4B, 4C in the upper left corner, which means that you have unfortunately been opened by the IRD for investigation. In this case, a tax representative VCPA should be appointed to deal with the IRD, and the processing time will normally be about three months to two years, depending on whether the taxpayer can provide the information required by the IRD to complete the investigation.
The Inland Revenue Department (IRD) will issue judgment judgments online on a regular basis to alert other taxpayers:
https://www.ird.gov.hk/chi/ppr/pca.htm
Tax Audit – Field Audit and Tax Investigation is divided into the following three main categories
Tax Audit – Field Audit and Tax Investigation is divided into the following three main categories
Common Assessment Methods for Tax Investigations:
Tax Investigation Process:
How to Assist Taxpayers in Handling Tax Investigations:
Prosecution under section 80 of the Inland Revenue Ordinance (punishable by fine):
- Failure to notify the Commissioner of Inland Revenue in writing within the prescribed time is chargeable to profits tax
- Making incorrect statements to claim dependent parent allowance
- Failure to inform the Commissioner of Inland Revenue of the employee's cessation of employment and pre-departure from Hong Kong
- Understatement of directors' remuneration
Prosecution under section 82 of the Inland Revenue Ordinance (punishable by imprisonment):
- Making a false statement to claim deductions for "expenses of self-education", "home loan interest", "approved charitable donations" and "dependent parent allowance".
- Underreporting of rental income
- Maintaining false books or accounting records to inflate the amount of purchases made by the company or reduce the company's sales
Penalty policy under section 82A of the IRO:
The penalty may be increased or decreased on a case-by-case basis (up to 25%)
Group (a): Fines ranging from 15% to 260% Taxpayers deliberately ignore the law by deliberately concealing the law, including preparing false books of accounts for a long time, misrepresenting salary expenses, making fictitious entries or repeatedly underreporting multiple misstatements, etc.
Group (b): Fines ranging from 10% to 200% Taxpayers who recklessly omit to declare their income are guilty of less serious offences, including misappropriation of business income, non-crediting of proceeds from the sale of scrap materials, or negligence and omission.
Group (c): Penalty from 3% to 150% Taxpayers fail to exercise reasonable care and thus omit to report income, e.g. top-up fees on tenancy agreements, one-off commissions, etc.
If you have any tax/filing questions, please email us at: info@wal.com.hk Contact our professional consultants and we will advise you
You can provide more information so that we can understand your company situation and provide tax assistance:
- Last year signed audit report
- Correspondence from the Inland Revenue Department (ie: Letters of enquiry from the Inland Revenue Department)
General Questions
Generally speaking, when the Inland Revenue Department (IRD) finds that certain enterprises have the following signs or do not comply with certain criteria, they may be subject to on-site investigation and tax investigation, and industries with examples of tax evasion that are mostly in cash transactions or involve commissions may be more likely to be suspected by the IRD, so more attention should be paid to them:
- a third party reports to the Inland Revenue Department;
- failure to provide material information to the Assessor;
- Referral to the Inland Revenue Department through other government departments;
- Tax evasion by corporations and affiliates – conducting a large number of suspicious transactions;
- Business expenditures have unsolicited funds or private expenditures;
- Incomplete or inadequate preservation of the company’s financial and business records;
- Failure to file tax returns on time/failure to file tax returns for many years;
- In the audit report, the auditor raised a qualified opinion on the accounts;
- Compared with its peers, the company’s profitability is unreasonably low, but it continues to operate;
However, the easiest “indication” is that when a taxpayer receives a letter from the IRD with file number 4A, 4B or 4C, it means that the IRD will investigate the case.
Once the Inland Revenue Department (IRD) suspects that a taxpayer has committed tax evasion, tax avoidance and tax evasion, etc., it will authorise an assessor to conduct an “on-site audit” and a “tax investigation” in accordance with the Inland Revenue Ordinance, which may investigate the financial situation of an individual, a company or even a family.
In addition, if a taxpayer uses an “overly aggressive” scheme to avoid tax, it may be classified as an anti-avoidance case.
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- Field AuditWhen a taxpayer is found to be in non-compliance, an on-site audit is usually conducted, which mainly examines the taxpayer’s accounting books and records, and also visits the taxpayer’s business premises to ensure that the information in the tax return is correct. The focus of the audit is generally on the tax returns filed in the most recent year of assessment, and the field auditors will extrapolate the differences in the previous years of assessment based on the results and determine the amount of understated profits.
- Tax Investigation If the Assessor considers that a taxpayer is suspected of tax evasion (usually in very serious cases or criminal prosecution), he will conduct a more in-depth tax investigation and take punitive action against the taxpayer who is suspected of tax evasion. The scope of the investigation is normally extended to the previous six years of assessment from the year of assessment in which the operation commenced. If a case of fraud or wilful evasion is found, the scope of investigation will be extended to 10 years of assessment.
Yes, [File Number] including relevant severity, nature of investigation, etc. e.g. 4C6-B987654-ABC(10),
4C6/7 represents the taxpayer’s case in the anti-avoidance category, and the common case is that the taxpayer uses the past aggressive tax avoidance behavior, but it should be noted that if the case starts with 4B8 represents the taxpayer in the criminal prosecution category, the general IRD will require the taxpayer and the lawyer to attend together.
The B987654 of the second subparagraph,
- A stands for Anti-avoidance
- B is for Tax investigation
- C is for Field audit
The last (10) represents the Revenue Tower:
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- 37/F (Prosecution Cases),
- 10th Floor [Field audit],
- 35th Floor [Tax investigation and Field audit]
