Tax Disputes & Investigations
Hong Kong has a relatively simple tax system in comparison to most other of the tax systems in the world. However, regardless how simple the tax system is, as the tax laws are based on legal principles, the enforcement of those tax laws is often contested and may create tax disputes.
Tax disputes arise mostly because there is a disagreement between the taxpayer and the Hong Kong Inland Revenue Department (“the IRD”) as to the application of the legal principle (for example, one of the most disputed areas is regarding source or taxability of income), and/or to the facts and circumstances.
In general, the process of a tax dispute is:
Tax Investigations & Field Audit
Unlike a tax dispute, which is generally initiated by the taxpayer, a tax investigation or tax audit is initiated by the IRD if the IRD has doubts regarding the sources of income, the completeness and accuracy of the tax returns filed by taxpayers (in respect to both companies and individuals). For example, one of the most focused tax audit areas in recent years is in regards to a company’s permanent establishment. In general, tax audit/investigation is carried out by the Field Audit and Investigation Unit (“FAI”) of the IRD.
In general, the process of a tax investigation is:
Prevention of Tax Disputes & Investigations
HKWJ Tax Law & Partners can assist you to identify and mitigate potential tax disputes and investigations by:
There is a unit in the Hong Kong Inland Revenue Department (IRD) specialised in tax audit and investigations. They do in-depth review and investigations on cases selected. The selected taxpayers will likely have to spend a lot of time and manpower on dealing with the tax audit investigation, hence is best to engage a professional tax lawyer to:
For tax dispute
For tax investigation