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One-off profits tax reduction for the year of assessment 2018/2019 in Hong Kong

The Legislative Council passed the Inland Revenue (Amendment) (Tax Concessions) Bill 2019 on 6 November 2019. It gives effect to the tax concessions proposed by the Government in 2019, including the profits tax reduction for the year of assessment 2018/2019 by 100 per cent, subject to a ceiling of      $ 20 000 per case.
 
The year of assessment is the year ended 31st March. Thus, the year ended 31st March 2019 should be referred as year of assessment 2018/2019. Generally, the assessable profits for the year of assessment is based on the accounting period ending within that year of assessment.
 
Taxpayers should file their profits tax returns the year of assessment 2018/19 as usual and the Inland Revenue Department applies the appropriate reduction in the final assessment. For any final assessment for 2018/19 issued before the enactment of the law, the Inland Revenue Department is obliged to make a reassessment. Taxpayers do not need to make any applications or enquiries to the Department.
 
The proposed tax reduction will only be applicable to the final tax for the year of assessment 2018/19, but not to the provisional tax of the same year. Therefore, taxpayers are still required to pay their provisional tax on time despite the proposed reduction. The provisional tax paid will be applied to pay the final tax for the year of assessment 2018/19 and the provisional tax for the year of assessment 2019/20. Excess balance, if any, will be refunded.
 
As the tax reduction is to reduce the 2018/19 final tax that will be charged, it will only be reflected in the notices of profits tax assessment for 2018/19 that will be issued starting from the third quarter of 2019.
 
The proposed one-off reductions will benefit 145 000 tax-paying corporations and unincorporated businesses.
 
Sources:
https://www.ird.gov.hk/eng/ppr/archives/19110603.htm
https://www.ird.gov.hk/eng/tax/budget.htm#a01
https://www.ird.gov.hk/eng/faq/budget2019_20.htm
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