Apr. 2013 - Inland Revenue Department has issued tax returns for 2012/2013

Taxpayers should pay attention to the return filing due dates. Failure to file the return within the due date may lead to penalty action undertaken by the Inland Revenue Department (“IRD”).

Profits tax return filing

On 2 April 2013, the IRD issued bulk profits tax returns for the year of assessment 2012/2013 to corporations and partnership businesses.  Normally, profits tax returns are due for submission within one month from their dates of issue.  Same as previous years, the IRD has adopted a Block Extension Scheme which grants taxpayers who have tax representatives extended due dates to file their tax returns.  Under the Block Extension Scheme for the year of assessment 2012/2013, the extended due dates for filing the tax returns are:

Individual Tax Return Filing

The IRD will issue bulk individual tax returns for the year of assessment 2012/2013 on 2 May 2013.  Due dates for submission of the individual tax returns are within one month from their dates of issue.  For individuals who have tax representatives and not involving sole proprietorship businesses, a block extension for submission of the tax returns will be granted to 2 July 2013.  For those involving sole proprietorship businesses, an extension will be granted to 2 October 2013.

Notification of Chargeability to Tax

Taxpayer who is chargeable to tax (before the set-off of tax losses brought forward from prior years) should notify the IRD in writing no later than 4 months after the end of the basis period for that year of assessment unless a tax return has already been issued to the taxpayer for that year of assessment. 

For profits tax case, where a taxpayer has received tax returns in prior years and could reasonably expect that a return would be issued in the current year, there is no need to advise chargeability within the four-month period.  However, if a taxpayer has previously been advised that a profits tax return will no longer be issued annually or if it is a commencement case, the Commissioner of the Inland Revenue (“CIR”) must be notified within the stipulated period.  Upon receipt of such advice, the IRD will issue a tax return to the taxpayer for completion. 

Any taxpayer who, without reasonable excuse, fails to notify the IRD the chargeability to tax within the stipulated period may be subject to penalty action undertaken by the IRD.

Payments in Lieu of Notice

Employers are required to report the amount of payments in lieu of notice which accrue on or after 1 April 2012 in the employer’s returns.  It was the IRD’s practice, prior to the year of assessment 2012/2013, that payments in lieu of notice made in accordance with the terms of the employment contracts or the Employment Ordinance were not taxable for Hong Kong salaries tax purpose.  As such, it was not required to be reported in the employer’s returns and individual tax returns previously. 

However, the Court of Final Appeal’s decision in the case of Fuchs, Walter Alfred Heinz v CIR has clarified that payments in lieu of notice contractually agreed are income from employment and therefore chargeable to salaries tax. The IRD follows the judgment as from the year of assessment 2012/2013 onwards and will charge to salaries tax payments in lieu of notice which accrue on or after 1 April 2012.

In view of the above, employers are required to report payments in lieu of notice which accrue on or after 1 April 2012 in the employer’s return for the year ended 31 March 2013 and taxpayers are required to include the same amount as employment income in the individual tax returns for the year of assessment 2012/2013 onwards.

We would like to draw your attention that the IRD also issued employer’s returns for employers to report their employees’ remunerations for the year ended 31 March 2013 on 2 April 2013.  The returns are due for submission within one month from their dates of issue.