06 May
Penalty Policy for Late Filing of Profits Tax Return

We have recently noticed an increase in penal actions taken by the IRD for late notification of assessable profits and this newsletter aims to remind our clients of their tax obligations and the consequences of late notification. As the IRD becomes more aggressive in imposing penal action, it is important to understand and comply with the IRD’s requirements for notification of your company’s chargeability and filing of the Profit Tax return in time to avoid any unpleasant action being taken by the IRD.


Taxpayers’ Obligations


It is the practice of the IRD not to issue Profits Tax return to every corporation on an annual basis. However, it is important to note that even if you do not receive a Profits Tax return, you are still required to:


  • inform the IRD in writing within 4 months after the end of the accounting period for that year of assessment if your company commences or recommences to earn assessable profits (before the set-off of any losses brought forward). Failure to do so may render your company liable to fine;


  • comply with the Companies Ordinance or other statutory requirements to prepare audited accounts annually. Therefore, you should not wait for the issue of a Profits Tax return to prepare annual audited accounts.


Penalty Policy for Assessing Additional Tax under Section 82A


Offences which do not involve any wilful intent to evade tax, and improper transfer pricing and profit attribution, are generally dealt with administratively by the imposition of monetary penalties in the form of additional tax under section 82A of the IRO.


For failure to notify chargeability to tax or failure to submit tax return in time, the penalty may be up to 3 times the amount of tax that would have been undercharged. The general relevant factors to be considered include the length of delay, the amount of tax involved, the reasons given for committing the offence, the attitude of and the remedial steps taken by the taxpayer.


For assistance, please contact Ms. Amie Cheung at