CentreO Blog

In combating tax evasion and avoidance, the Inland Revenue Department (IRD) of Hong Kong adopts the “Assess First, Review Later” approach as its assessment mechanism on tax returns and other supplementary information submitted by taxpayers while at the same time fully utilises advanced technology in selecting cases not subject to review and conducts automated assessment. IRD uses certain criteria for proper case selection depending on the current business environment in society and performing review annually.

Major reasons for being selected for investigation by Inland Revenue Department are listed below:

• The auditors’ report in respect of accounts of an incorporated business is heavily qualified
• Mainly cash transactions 
• A business has an unreasonably low turnover or profit as compared with other businesses in the same industry
• Failure to submit tax return on time in past years
• Failure to maintain sufficient business records
• A large scale of domestic and cross-border transaction between a company and its associated companies
• A company is operating on a going concern basis even though its profits encounter continued low growth or losses
• Profits significantly declined due to changes in group structure
• The taxpayer acquired valuable assets or injected a large amount of capital by using unknown sources of finance into a business
• Other cases referred by other government departments or reported by informers

For further information, please contact us

You may also read: WHAT TO DO WHEN RECEIVING A LETTER FROM INLAND REVENUE DEPARTMENT?

Donations qualified for tax-exempt charities or charitable purposes can be deducted. You can have options to claim from your net assessable income under salaries tax, assessable profits under profits tax and total income under personal assessment. Here you can get some brief idea about these deductions.

Eligibility for Deduction

You may claim a deduction for a donation of money to any approved charity under section 88 of the Inland Revenue Ordinance or to the Government for charitable purposes. You can also claim a deduction for any approved charitable donation made but not claimed by your spouse.

Amount of Tax Allowance

The whole deduction of approved charitable donations cannot be less than $100. The aggregate deduction shall not exceed 35% of your income after allowable expenses and depreciation allowances or assessable profits. If you have more than one source of income and you have elected for personal assessment, the unused portion of approved charitable donations under a tax type (such as profits tax) may be deductible under personal assessment. Last but the least, it must be a voluntary donation and in monetary term.

Donations Not Accepted as Tax Deductions

Not all payments to tax-exempt charities are deductible.  The following are not the examples of payments allowable donations:

• Payments for lottery or raffle tickets;  admission to film shows or charity shows; grave spaces
• Payments made for services such as saying prayers or the reservation of a space for ancestral worship
• Purchase of goods in bazaars
• Payments made to a church, a tax-exempt charity, through dropping cash in the donation bag without donation receipt.

Lodging a Claim for a Deduction

To lodge a claim, you should enter the total amount of approved charitable donations made during the relevant year of assessment in your Tax Return – Individuals (BIR60). This donation can be claim once.

For more information, please contact us 

You may also read:http://centreo.hk/what-to-do-when-i-receive-profit-tax-return-form/