On 4 September 2019, the Hong Kong Inland Revenue Department updated its web page on penalty policies related to international tax matters, including fines and criminal penalties, for noncompliance with international tax obligations.
The penalty policy statement explains how the Commissioner administers the punitive provisions. The relevant punitive provisions empower the Commissioner, depending on the nature and/or the degree of culpability of the offence and at his discretion, to institute prosecution, to compound or to assess additional tax (which is a form of penalty) in respect of the offence. Factors which may affect the course of action to be taken include the strength of evidence, the amount of tax undercharged or would have been undercharged (hereinafter collectively referred to as “tax undercharged”), the sophistication of the scheme and the period of time over which the offence was committed.
The new page contains information on penalties related to the exemption from double taxation, exchange of information, transfer pricing requirements, advance pricing agreements, the mutual agreement procedure (MAP) and arbitration.
Depending on the nature of the offense, penalties include fines of HKD 10,000 or HKD 50,000, further fine of treble the amount of the tax undercharged and a possible 3-year imprisonment.
