By K.F. Yan, Senior Accounting Manager
If you disagree with an assessment, you may lodge an objection and appeal. Under section 64(1) of the Inland Revenue Ordinance (“IRO”), a notice of objection must be received by the Commissioner within one month after the date of the notice of assessment. It must be in writing format and state precisely the grounds of objection to the assessment. Per Departmental and Interpretation Practice Notes (“DIPN”) No.6 Revised, wording like “the assessment is not agreed” is not going to be accepted. Alternatively, you can also complete the Form I.R. 831 for objection/application for revision of assessment, and return it to the Inland Revenue Department (“IRD”) either by post (P.O. Box 28777, Gloucester Road Post Office, Hong Kong) or by fax (2877 1232).
The Commissioner has discretionary power to extend the permitted period of one month in cases where he is satisfied that, owing to your absence from Hong Kong, sickness or other reasonable causes which prevented from lodging the objection within the specified time. In practice if you have not received the assessment before, you can write to IRD asking for duplicated copy of assessment as well as acceptance of your late objection. Since IRD send assessments to taxpayers by ordinary post, some may have been lost during transit of posting, it is likely IRD will accept by concession in case taxpayers claim non-receipt of assessment.
If the objection is against an estimated assessment issued because of the failure to lodge a return, a properly completed return together with the accounts, where applicable, must also be submitted with the notice of objection at the same time limit. The same requirement applies when an objection is lodged against an estimated assessment which was raised under section 59(2) (b) of IRO because your return was not accepted. An objection against any such estimated assessment is not valid unless a valid return has been lodged.
You can also object against additional tax assessment. Usually speaking, there are two circumstances under which an additional assessment under section 60 (1) of IRO may be raised by an assessor. The first situation is when an assessor is of an opinion that the tax has been assessed or has been assessed at less than the proper amount. The other scenario which is seldom happen when an assessor if of an opinion that the whole or part of tax repaid to you has been repaid by mistake. An additional assessment would be raised against you within the year of assessment or within 6 years after the expiration of that year of assessment. However, under the case of fraud or willful evasion, the additional assessment may be made at any time within 10 years after the expiration of that year of assessment.
The right to object only apply when an assessment has been made. Where no tax is payable, that is where there is a loss, even after the disallowance of a disputed item, no objection can be made under section 64 of IRO. However, when the disputed loss is applied against subsequent profits leaving a net assessment, an objection can be made against the net assessment.
Upon receipt of an objection, it will firstly be examined to see whether it fulfils the requirements of a valid objection. If not, under DIPN No.6 Revised, yourself and your representative will be informed of any defects promptly by an Assistant Commissioner or an assessor and advised of any action which could make it a valid objection. If it is a valid objection, it will be acknowledged by an Assistant Commissioner or an assessor who will also advise whether or not any of the tax has been stood over pending the result of the objection or appeal. The Commissioner is empowered to order the holdover of payment of tax or provide security for the payment of the tax by purchasing a certificate issued under the Tax Reserve Certificates or by furnishing a banker’s undertaking.
When you and assessor fail to negotiate an agreement for the resolution of an objection in the preliminary stages, the objection is referred to the Commissioner for determination under section 64(4) of IRO. At this stage depend on complexity or urgency of the case, a draft statement of facts based upon information available to the IRD might send to you for comment, together with a request for further information or arguments. A determination will fall if no reply is received in 21 days.
The Commissioner is entitled to confirm, reduce, increase or annul the assessment in question. Within one month of a determination being made, the Commissioner must inform you in writing of the determination and the reason for it. The Commissioner will also provide to you a statement of the facts which taken into consideration when the determination is made.
If you do not appeal against the Commissioner’s determination, the assessment as determined becomes final and conclusive.
If you have any questions regarding the topic discussed above, please contact us at info@sg-cs.com for further assistance.