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Trust or Company Service Provider Licence

(TCSP Licence): TC000088

 
 Tax Audit
Field Audit and Tax Investigation

If you receive a letter from the Inland Revenue Department, the file number on the upper left corner is 4A, 4B, 4C, meaning that you are unfortunately being opened the file for investigation by the Tax Office . At this time, the appointment of a tax representative 展群CK ® to work with the Inland Revenue Department will normally take about three months to two years, depending on whether the taxpayer can provide the information required by the Inland Revenue Department to close the investigation case.

The Inland Revenue Department will issue judgment prosecutions on the Internet on a regular basis to alert other taxpayers to:

https://www.ird.gov.hk/chi/ppr/pca.htm

 

Tax Audit - Field Audit and Tax Investigation have 3 major categories:

  • Tax investigation – very serious case and taxpayer will be investigated on all years under concern and potentially sued for criminal prosecution

  • Field audit – most cases are field audits, using projection method based on one year results

  • Anti-avoidance – preventing taxpayers from using aggressive tax avoidance schemes

 

In fact, the file number will actually show a lot of important information, such as severity, investigation nature and so on

 

4B8-A123456-ABC(37)

 

  • 4B8 represents the taxpayer case as a criminal prosecution group and the general Revenue Department will require taxpayers and legal representative to attend the meetings

  • 4C6 / 4C7 represents taxpayer cases as anti-tax avoidance groups, and the common case is that taxpayers use past aggressive tax avoidance practices

  • Second subdivision of A123456,

    • A represents Anti-avoidance、

    • B represents Tax investigation、

    • C represents Field audit

  • The last part (37) represents the Floor of Inland Revenue Tower:

    • 37/F criminal prosecution case

    • 10/F Field audit

    • 35/F Tax investigation and Field audit

 

Common cases of Tax Audit - Field Audit and Tax Investigation:

1. Source of funds to purchase immovable or movable properties

2. Owners of sole proprietor

3. Cash transactions business

4. Commission business (insurance agents / properties agents

5. Insufficient business records

6. Significant private expenses

Common assessment methods for tax investigations:

1.  Asset betterment method

2.  Bank accounts analysis method

3.  Income projection method

 

Penalty Provisions under Section 80 of the Inland Revenue Department:

  • Failure to notify the Commissioner of Inland Revenue of profits tax in writing within a specified period of time

  • The Commissioner of Inland Revenue was not informed of the information on employees ' cessation of employment and departure before leaving Hong Kong

  • Make an incorrect statement and claim the dependent parent allowance

  • Underreport of directors ' remuneration

Penalty Provisions under Section 82 of the Inland Revenue Department (Criminal cases):

  • Make a false statement in order to claim the deduction of "personal education expenses", "home loan Interest", "approved charitable donation", "Dependent parent allowance"

  • Underreport of rental income

  • Keep false books or accounting records to exaggerate the company's purchase amount or reduce the company's sales

Penalty Provisions under Section 82A of the Inland Revenue Department

Group (a) - cases where the taxpayers show intentional disregard to the law and adopt deliberate cover-up tactics involving the preparation of a false set of books, padded wage rolls and fictitious entries or multiple omissions over a long period of time.

  

Group (b) - cases with slightly less serious acts of omission resulting from recklessness including the "hand in the till" type of evasion, failure to bring to account sales of scrap, and sheer gross negligence.

  

Group (c) - cases where the taxpayers fail to exercise reasonable care and omit profits/ income such as lease premium, one-off commission, etc.

Penalty may be scaled upwards or downwards to a maximum of 25% in the generality of cases.

 

Aggravating and mitigating factors in determining the ultimate penalty

For further information, please contact 展群CK ®:
a. Phone at (852) 3502 7392
b. Whatsapp at (852) 5227 9242
c. Email at info@ck-tax.com