Late Tax Filing Consequences for HK Company
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Inland Revenue Ordinance (Cap. 112) provides that tax charged under the provisions of the Ordinance shall be paid in the manner directed in the notice of assessment on or before a date specified in such notice. Any tax not so paid shall be deemed to be in default. If the first instalment is not paid by the date specified on the notice of assessment, the second instalment will become immediately due. The entire balance of the total tax payable in the notice of assessment remaining unpaid shall be deemed to be in default and will be immediately recoverable.
Consequences of Late Tax Filing
The Inland Revenue Department (“IRD”) may take punitive actions for failure to file the profits tax return by the due date:
(1) Prosecution
The Commissioner of Inland Revenue (“CIR”) may prosecute the taxpayer who has failed to file the profits tax return by the due date without reasonable excuse. The court may impose a fine up to HK$10,000 and a fine of three times the amount of tax undercharged.
(2) Compound offer
The CIR may compound the offence in lieu of prosecution or assess an additional tax as penalty not exceeding three times the amount of tax undercharged. The CIR will not prosecute the taxpayer under the conditions that the taxpayer submits the completed tax return and accepts the compound offer within a specified time limit.
(3) Additional tax
If the taxpayer failed to file the tax return by the due date, the CIR is empowered to take penal action against the taxpayer for late filing. The CIR will impose a penalty on the taxpayer in form of an additional tax. The maximum amount of penalty assessment for additional tax is three times the amount of tax undercharged when the CIR considers that the taxpayer, without reasonable excuse, failed to file the tax return within the due date. The taxpayer has the right to make a written representation, within the time specified by the IRD, to explain the reasons of late filing for the consideration of the CIR when making the additional tax assessment.
(4) Estimated assessment
The CIR may estimate the assessable profits and raise an assessment accordingly. If the taxpayer wishes to make an objection, it must be lodged within one month after the issue date of the estimated assessment and must be accompanied by a completed profits tax return.Otherwise, the estimated assessment will become final and conclusive. Therefore, the tax assessed will become payable. The taxpayer may suffer if the estimated assessable profits exceed the actual profit. The CIR may also raise additional estimated assessments if no valid objection is filed for the estimated assessment.
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