TAXATION

5. When will I have to pay an "adjudication fee"?

Subject to the payment of an adjudication fee (currently $50), any person may request the Collector of Stamp Revenue to express his opinion on whether an executed contract or document is chargeable with stamp duty, and on the amount payable. If you wish to claim exemption of any document from stamp duty, you can request the Collector to adjudicate the document.

Some documents specifically provided for under the Stamp Duty Ordinance are however exempt from the payment of adjudication fees. Examples of these documents include contract notes in consideration of debt, and instruments operating as gifts, etc. You should check with the Stamp Office for further details.

Request for adjudication should be submitted at the Stamp Office Counter together with the original instrument and relevant supporting documents. Electronic submission is not applicable.

VII. Estate Duty

The Estate Duty has been abolished with effect from 11 February 2006. The estate duty chargeable in respect of estates of persons dying on or after 15 July 2005 and before 11 February 2006 ("transitional estates") with the principal value exceeding $7.5 million has been reduced to a nominal amount of $100.

To get some general information on how to handle the legal documents for a deceased's estate, please go to another topic – Probate.

VIII. Objection and Appeal against Tax Assessment

1. If I received a Salaries Tax/ Profits Tax/ Property Tax assessment, and found that the income assessed and the tax charged are too high, can I raise objection against this?

Yes. If you disagree with an assessment, you may lodge an objection and an appeal.

Objections

• Filing an Objection 

You must lodge a written notice of objection with the Inland Revenue Department, stating the grounds for your objection clearly. Alternatively, you may complete the relevant parts of the Form IR831 for objection / application for revision of assessment, sign it and return it to the Inland Revenue Department either by post ( P.O. Box 28777, Concorde Road Post Office, Hong Kong) or by fax (2877 1232) or lodge a notice of objection via your eTax account.

If the income was estimated or you do not get the full entitlement to allowances, you should find out if the assessment was an estimated assessment raised under section 59(3) of the Inland Revenue Ordinance . If it is, you must submit a completed tax return together with your objection letter in order to validate your objection.

• Time Limit 

Within one month of the date the notice of assessment was issued, Inland Revenue Department must receive the notice of objection.

If the Commissioner of Inland Revenue determines that you were unable to file the objection within the specified period due to absence from Hong Kong, illness, or other legitimate grounds, the late objection may be taken into consideration. In your notice of objection or Form IR831, you must state the factors preventing you from filing an objection within the specified period.

• E-Objection

You can file a notice of objection against the assessment under Salaries Tax, Property Tax for solely owned properties, and/or Profits Tax for sole proprietorship businesses through the eTAX account if you have already registered one.

For more information on eTAX, please click here.

• Submission of Notice Electronically

It is acceptable to submit a notice of objection electronically. Information on the prescribed format, manner and procedure on electronic submission is available through this link.

• Payment of Tax or Standover of Tax

You must pay the tax on or before the date(s) mentioned in the notice of assessment, regardless of any notices of objection or appeal that you may file, unless the Commissioner of Inland Revenue Department orders that the payment of tax, in full or in part, be postponed pending the outcome of such objection or appeal.

• Processing of Objection Cases

An assessor may need more information or proof from you. You might receive a revised assessment or a proposed basis for a revised evaluation after taking into account the new and additional information. The Commissioner will take the objection under consideration and, within a reasonable amount of time, may confirm, lower, raise, or revoke the assessment. The Commissioner will give you written notice of the decision and its supporting arguments.

Appeals

• Appeals to Board of Review (Inland Revenue Ordinance) (“The Board”)

If you are still not satisfied with the determination of the Commissioner of the Inland Revenue Department, you may further lodge an appeal against such decision with the Board, which is an independent tribunal. Your appeal should be made in writing to the Clerk to the Board of Review (Inland Revenue Ordinance) within one month of the date of the Commissioner's written determination.

If the Board is persuaded that the appellant's failure to file the appeal within the specified time was due to a justifiable circumstance—such as illness or absence from Hong Kong—it may decide to extend the one-month appeal term.

After hearing the appeal, the Board may affirm, modify, increase, or annul the assessment that was the subject of the appeal, or it may decide to send the case back to the Commissioner with the Board's recommendation. The appellant may be required to pay a sum not to exceed $25,000 as costs to the Board if the Board does not lower or annul the assessment.
 

• Appeals to the Court

If the appellant or the Commissioner disagrees with a Board decision, they may each submit a summons application to the Court of First Instance of the High Court asking for permission to appeal the Board's ruling on a question of law. This is to be completed within a month of the day the Board makes its decision or the date of communication by which it notifies the public of its decision.

The appellant or the Commissioner who has been given leave to appeal to the Court of First Instance may appeal against the Board's ruling straight to the Court of Appeal with the permission of the Court of Appeal.

For more information, please refer to the the Inland Revenue Department’s Departmental Interpretation and Practice Notes No. 6.  As the procedures for making appeals to the courts are complex, you are recommended to consult professional tax and legal advisors if you wish to make such appeals.

IX. Advance Rulings (to obtain early decisions on uncertain tax matters)

A taxpayer may apply to the Commissioner of Inland Revenue, subject to the payment of a fee and certain regulations, for a ruling on how any provision of the Inland Revenue Ordinance applies to him/her or the arrangement specified in the application. A ruling will only be given for a seriously contemplated transaction with full particulars set out. The ruling is binding on the Commissioner and can be relied upon for the subsequent tax assessment. However, the ruling on any specific case should not be relied upon for other cases. Rulings are now published on the Inland Revenue Department's website for general reference.

According to Part I of Schedule 10 of the Inland Revenue, however, advance ruling will NOT be provided in certain cases. For example, the matter on which a ruling is sought involves the imposition or remission of a penalty, whether a tax return or other information provided by a taxpayer is correct or not, etc.

1. How is the advance ruling procedure different from an objection against a tax assessment?

An objection can only be lodged after a taxpayer has submitted the tax return AND received the relevant tax assessment from the Inland Revenue Department.

An application to the Inland Revenue Department for advance ruling (Form IR1297) for a relevant year of assessment must be made before the submission deadline of the relevant tax return for that year of assessment.

2. How much should I pay for an advance ruling?

The fees payable in respect of an application for a ruling as specified under Part II of Schedule 10 of the Inland Revenue Ordinance are as follows:

(Note: If the time spent by the Inland Revenue Department in respect of the ruling procedure is too long, additional fees may be imposed.)

The applicant has to also reimburse the Commissioner for any fees incurred for external advice, other costs and reasonable disbursements. Even if an application for ruling is withdrawn, the applicant still has to pay all of that mentioned above, subject to waiver in whole or in part of the Commissioner.

Since application fees for an advance ruling involve a considerable amount of money, it may not be cost-effective to get an advance ruling on a tax dispute that only involves a small sum of money.  You are recommended to consult professional tax advisors if you wish to make an advance ruling application.

3. If a person (other than the executor) keeps the Will and refuses to give it to the executor, what can the executor do?

Under r. 49(2) of Non-Contentious Probate Rules (Cap. 10A), the executor may make an ex parte application to the Registrar under s.7(3) of Probate and Administration Ordinance (Cap. 10) for the issue of a subpoena to bring in a will.  The application shall be supported by an affidavit setting out the grounds of the application, and if any person served with the subpoena denies that the will is in his possession or control, he may file an affidavit to that effect. It is not a prerequisite to obtain a court order before submitting this application.

3. I have received leave pay, are these taxable?

Any salary you earn while on leave as an employee is referred to as leave pay. This is treated as taxable income and a component of your income.

If your employment is terminated and you got cash in place of untaken leave, this cash payment is also considered to be a part of your income and is therefore taxed. You must report it in your Tax Return – Individual.

11. I made donations to a charity.  Can I claim deductions?

A taxpayer may deduct money given to the government for charitable purposes or to any charity that is exempt from tax under section 88 of the Inland Revenue Ordinance. To determine if the charity in question is a tax-exempt charity as defined under section 88, you can refer to the Inland Revenue Department's website. The minimum amount allowable for deduction is $100.

A taxpayer may also deduct any authorized charitable contributions made but not deducted by his or her spouse. Each year, you may only deduct up to 35% of your assessable income, less any deductions for outgoings, expenses, and depreciation allowances, or assessable profits. 

Not every donation made to tax-exempt organizations is deductible. Payments for lottery or raffle tickets, admittance to movies or charity events, the purchase of products at bazaars, and other forms of payment are examples of payments that are not recognized as permissible donations. 

It is advisable that you request receipts from the recipients and keep them on file for 6 years after the assessment year in which the donations were made has ended. You don't need to provide any supporting papers when submitting your Individual Tax Return. If your case is chosen for evaluation, you may be required to provide receipts for review. 

12. I paid for rents for my place of residence.  Is this deductible?

Domestic rent paid by a taxpayer for a qualified tenancy of a home used as the taxpayer's place of residence is deductible effective from 2022/2023 onwards. If there is a qualifying domestic tenancy, the taxpayer may be able to deduct the rent paid by his or her spouse (who is not residing apart from the taxpayer). In general, the maximum deduction for the tenancy is $100,000 for each year of assessment, subject to reduction of the ceiling in proportion to the number of co-tenants or, if the tenancy period covers only a portion of a year of assessment, in proportion to the period of tenancy falling within the year of assessment. 

To be eligible for the deduction, a written tenancy (or subtenancy) must be obtained for any domestic property and must be stamped in accordance with the Stamp Duty Ordinance (Cap. 117), with the exception of any domestic property leased by the government or the Financial Secretary Incorporated acting as the government's agent at a rent equal to the property's fair market value. 

A deduction for domestic rents will not be allowed if:

• the taxpayer or the taxpayer’s spouse (who is not living apart from the taxpayer) is a legal and beneficial owner of any domestic premises in Hong Kong; 
• the landlord of the rented property is an associate of the taxpayer or the taxpayer’s spouse (e.g. the landlord is the taxpayer’s spouse, or a parent, child, sibling or partner of the taxpayer or the taxpayer’s spouse, or a corporation controlled by the taxpayer or the taxpayer’s spouse); 
• the taxpayer or the taxpayer’s spouse (who is not living apart from the taxpayer) is provided with a place of residence by his / her employer or an associated corporation of the employer (including those who receive a refund of any rent paid); 
• the taxpayer or the taxpayer’s spouse (who is not living apart from the taxpayer) is a tenant or an authorised occupant of a public rental housing flat of the Hong Kong Housing Authority or the Hong Kong Housing Society; 
• the premises concerned are prohibited from being used for residential purposes; or the tenancy is prohibited by any law or a Government lease; 
• the rents are allowable as a deduction under any other provision of the Inland Revenue Ordinance; or
• the taxpayer or the spouse has entered into a lease purchase agreement in respect of the premises.