Hong Kong Taxation: Law and Practice 2012–13 Edition

7. Returns and Information to Be Supplied, Penalties

Chapter 7 ■ Returns and Information to Be Supplied, Penalties 7.1 Legislation 596 7.2 Returns and Information 596 7.2.1 Returns — general 596 7.2.2 Persons responsible 599 7.2.3 Returns by employers 600 7.2.4 Information 601 7.2.5 Statement of assets and liabilities 603 7.2.6 Search warrants 605 7.2.7 Business records 607 7.3 Service of Notices 608 7.4 Penalties 609 7.4.1 Omissions, failure to make returns, etc. 611 7.4.2 Penalty assessments (additional tax) 615 7.4.3 Fraud and wilful evasion 623 7.4.4 Miscellaneous 626 596 Hong Kong Taxation 7.1 Legislation The law covering returns and information to be provided by taxpayers and others is contained in Part IX of the IRO, Secs. 51 to 58. Penalties in respect of returns, information and other matters are covered by Part XIV, Secs. 80 to 84. 7.2 Returns and Information Most of the provisions in Part IX deal with returns and information in general in respect of all taxes covered by the IRO, but there are some provisions which deal specifically with only Salaries Tax or Profits Tax. 7.2.1 Returns — general An assessor has the power to issue a return, in a form specified by the Board of Inland Revenue, to any person and to require him to complete and submit the return within a reasonable time as stated in the notice to him. This provision applies to returns in respect of each of the income taxes as well as composite tax returns covering all three taxes (Sec. 51(1)). The same powers apply in respect of returns required for Personal Assessment purposes (Sec. 51(2A)). Where a Personal Assessment return is issued to a married person, a notice is also required to be sent to that person’s spouse and they are required to submit a return of their joint incomes (Sec. 51(2B)). However, since the introduction of composite tax returns from the 1993/94 year of assessment, there have been no separate Personal Assessment forms and, therefore, Secs. 51(2A) and (2B) have little practical application. Indeed, when composite tax returns were introduced , Sec. 51(2C) was added to the IRO which provides that compliance with a notice issued under Sec. 51(1) is to be deemed to be compliance with a notice issued under Sec. 51(2A) or Sec. 51(2B). The form in which the return is to be made is laid down by the Board of Inland Revenue pursuant to Sec. 51AA and, if a statement purporting to be a return is submitted which does not conform in every material particular with the required form, it will be rejected and the taxpayer will be treated as if he had not made a return. In this regard, see CIR v Mayland Woven Labels Factory (HKTC 627). Historically, returns were required to be made on printed paper forms. Nonetheless, provisions now exist for returns to be made in electronic form over the internet (Sec. 51AA(2)) or by telefiling (Sec. 51AA(3)). Because of the nature of these alternative methods of filing, there are Chapter 7 Returns and Information to Be Supplied, Penalties 597 (currently at least) limitations as to the matters they can deal with. As such, these filing methods can only be adopted in cases specified by the Commissioner. The Commissioner is empowered by Sec. 51AA(5) to specify classes or descriptions of persons or returns permitted to be filed electronically or through the telefiling system by publication of a notice in the Gazette, which in fact has been done. The Commissioner, pursuant to Secs. 51AA(6) and (7) is also empowered to specify matters relating to, inter alia, attachments, digital signatures and passwords in relation to electronic filing and telefiling; nonetheless, it remains the Board of Inland Revenue’s responsibility to specify the system, templates and information required to be provided for electronic filing (Secs. 51AA(2)(a) to (c)). Interestingly, in the case of telefiling the Board of Inland Revenue’s responsibility is limited to specifying the information required to be provided by taxpayers. Note, however, that from the 2007/08 year of assessment, the Commissioner has not specified any circumstances where telefiling is permitted; accordingly, this service is effectively no longer available. In practice, one month is normally allowed for the submission of returns of income and...