Tax Investigation and Filed Audit Support

Hong Kong is one of the lowest tax regimes in the world which requires a high degree of compliance of taxpayers. In order to protect government revenue, the IRD will review the submitted tax returns periodically by way field audit and investigation.

There are three tiers of audit :-

Desk audit

It is an examination of cases from the automated assessment. During the desk audit, the assessing officer would examine all aspect of case to see if there are any errors or omission of the reported profits and income. Usually the written enquiries will be issued to taxpayer for clarification on suspected figures. Taxpayers are obliged to furnish the required information as requested by the assessing officer.

Filed audit

Field audit will be initiated when the IRD detected irregularities or indication on of non-compliance with the Inland Revenue Ordinance.
In the course of field audit, the field auditor will not only examine books and records but also site visiting. Filed audit work is normally focused on the most recent year of assessment for which a tax return has been submitted. Field auditors will project differences for back years in accordance with the field audit findings. Other methods may also be applied to ascertain the understated amount of profits for the years involved.

Investigation

Investigation is an in-depth examination when tax evasion is suspected. An investigation normally covers 6 years of assessment prior to the year in question. For fraud or willful evasion, the investigation is extended to cover 10 years of assessment.
Below are the common methods for electing cases by the IRD to conduct audit :-
  • Incomplete or long outstanding reply to the IRD queries
  • Informer (e.g. ex-employees)
  • Newspaper and Magazines
  • Property transactions
  • Automatic Exchange of Financial Account Information
  • Exchange of Information.
Our Services
  • Meet up with directors and accounting staff of the Company for thorough understanding on the Company’s operation and financial affairs
  • Conduct preliminary review of the financial and tax positions of the Company and directors and explain the procedural matters of the tax audit exercise
  • Highlight the possible items which may be challenged by the IRD and conduct a rehearsal interview with the Company’s directors and accounting staff
  • Accompany the Company’s directors to attend interviews with the IRD’s officers
  • Handle enquires from the IRD and work out difference potential settlement basis
  • Negotiate with the IRD for a favourable basis of settlement (including penalty)
  • Deal with any other relevant matters until settlement with the IRD
For more information of our Hong Kong tax services, please contact our tax team by e-mail to tax@atrixbiz.com.
Reference
Inland Revenue Department, DIPN 11 < https://www.ird.gov.hk/eng/ppr/dip.htm >
Corporate Tax
Hong Kong adopts territorial tax system. Profits tax shall be charged on every person carrying on trade, profession or business in Hong Kong in respect of the profits arising in or derived from Hong Kong from such trade, profession or business regardless of the nationality, domicile or residence of a person.
Individual Tax
Hong Kong salaries tax is charged on every individual in respect of his/her income arising in or derived from any office, employment or any pension in Hong Kong. All income from a “Hong Kong sourced employment” is liable to tax irrespective of the locations for rendering the services, subject only to certain statutory exemptions.
Tax Investigation and Filed Audit Support
Hong Kong upholds simple tax system and its tax rate is one of the lowest in the world which requires a high degree of compliance of taxpayers. In order to protect government revenue, the IRD will review the submitted tax returns periodically by way of field audit and investigation.
Tax Policies in Hong Kong
Double Taxation Relief / Withholding Taxs / Advance Ruling in Hong Kong
/ Common Reporting Standard ("CRS") and Automatic Exchange of Financial Account Information ("AEOI")

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