On 12 August 2020, the Hong Kong Inland Revenue Department announced that taxpayers who encounter financial difficulties in settling their tax bills on time may apply to the Inland Revenue Department (IRD) for payment of tax by instalments before the due date of the tax demand notes.
The Inland Revenue Ordinance provides that a surcharge of not exceeding 5% on the amount of tax outstanding after the due date may be imposed and a further surcharge of not exceeding 10% may also be imposed on the amount remaining unpaid (including tax and 5% surcharge already imposed) after 6 months from the due date.
To assist taxpayers (including individuals and companies) in making tax payments for the year of assessment 2019/20, for instalment plans approved by the IRD allowing taxpayers in financial difficulties for settlement of Salaries Tax, Profits Tax and Personal Assessment demand notes issued between August 2020 and August 2021 for the Year of Assessment 2019/20, provided that the instalment plans are duly adhered to, no surcharge will be imposed for a maximum period of one year counting from the respective due dates of the demand notes. If the tax demanded under the first instalment of the demand note has been settled on or before the due date and instalment plan is only granted for settlement of the tax demanded under the second instalment, the one-year period will count from the due date for the second instalment.
If payments are not made according to the approved instalment plan, the instalment arrangement will be cancelled and a surcharge of not exceeding 5% on the amount then outstanding will be imposed. A further surcharge of not exceeding 10% may also be imposed on the amount of tax and 5% surcharge remaining unpaid 6 months after the date of imposition of the 5% surcharge.
The above relief measure is not applicable to taxpayers who have to settle their tax liabilities before departing Hong Kong and taxpayers paying property tax.