Field Audit and Tax Investigation
Navigating a tax investigation can be a daunting and stressful experience. We understand the intricacies of tax investigations in Hong Kong and are here to guide you through the process with confidence and ease.
If you receive a letter from the Inland Revenue Department, the file number on the upper left corner is 4A, 4B, 4C, meaning that you are unfortunately being opened the file for investigation by the Tax Office . At this time, the appointment of a tax representative 展群CK ® to work with the Inland Revenue Department will normally take about three months to two years, depending on whether the taxpayer can provide the information required by the Inland Revenue Department to close the investigation case.
The Inland Revenue Department will issue judgment prosecutions on the Internet on a regular basis to alert other taxpayers to:
Tax Audit - Field Audit and Tax Investigation have 3 major categories:
Tax investigation – very serious case and taxpayer will be investigated on all years under concern and potentially sued for criminal prosecution
Field audit – most cases are field audits, using projection method based on one year results
Anti-avoidance – preventing taxpayers from using aggressive tax avoidance schemes
In fact, the file number will actually show a lot of important information, such as severity, investigation nature and so on
4B8 represents the taxpayer case as a criminal prosecution group and the general Revenue Department will require taxpayers and legal representative to attend the meetings
4C6 / 4C7 represents taxpayer cases as anti-tax avoidance groups, and the common case is that taxpayers use past aggressive tax avoidance practices
Second subdivision of A123456，
A represents Anti-avoidance、
B represents Tax investigation、
C represents Field audit、
D represents Review case
The last part (16 / 17) represents which floor of Inland Revenue Centre:
Common cases of Tax Audit - Field Audit and Tax Investigation:
1. Source of funds to purchase immovable or movable properties
2. Owners of sole proprietor
3. Cash transactions business
4. Commission business (insurance agents / properties agents
5. Insufficient business records
6. Significant private expenses
7. Business revenue deposit into personal accounts
8. Late submission of Tax Returns or delay in replying IRD's enquiries
Common assessment methods for tax investigations:
1. Asset betterment method
2. Bank accounts analysis method
3. Income projection method
How CK Tax assists taxpayers in handling Tax Audit - Field Audit and Tax Investigation:
1. Review the documents to be submitted to the Inland Revenue Department, including accounting books, bank statements, income / expenses invoices etc
2. Review the tax filing status of the taxpayers
3. Prepare Bank Deposit / Withdrawal Analysis
4. Review the accounting ratios of the Companies (Gross Margin, Inventory Levels, Accounts Receivables / Accounts Payables ratios or financial expenses etc)
5. Review staff expenses, whether match with 56B or 56M forms
6. Review the tax deductibility of the expenses under Inland Revenue Ordinance
7. Review Source of fund for purchasing properties
8. Understand tax status of relatives of taxpayers
9. Communicate and understand with the Inland Revenue Department
10. Assist in preparation work and conduct mock interviews before Initial Interview with the Inland Revenue Department
11. Attend Initial Interview with taxpayers and case officers of the Inland Revenue Department
12. Attend onsite visit at taxpayers' office
13. Review interview notes issued by the Inland Revenue Department, provide comments and updates on the interview notes
14. Assist taxpayers to negotiate with the Inland Revenue Department for a mutually acceptable basis to settle the tax audit case
15. Submit Settlement Proposal to close the tax audit case
Tax investigation and dispute resolution services provided by CK Tax include:
Tax Investigation Support and Advisory: Our team of experienced tax professionals will help you understand the scope and nature of the tax investigation, advising you on your rights and obligations throughout the process. We will work closely with you to develop a strategic approach, ensuring that you are well-prepared for meetings and correspondence with the Inland Revenue Department.
Documentation Review and Analysis: Proper documentation is crucial in tax investigations. Our team will conduct a thorough review of your financial records, identifying any discrepancies or areas of concern. We will assist you in gathering and organizing relevant documentation, ensuring that your records are complete, accurate, and compliant with Hong Kong's tax regulations.
Voluntary Disclosure and Negotiation: In cases where errors or omissions are discovered, voluntary disclosure to the tax authorities can help mitigate penalties and reduce the risk of prosecution. Our team will advise you on the best course of action and assist you in preparing and submitting a comprehensive voluntary disclosure. We will also represent you in negotiations with the Inland Revenue Department, aiming to achieve a fair and reasonable settlement.
Post-Investigation Compliance and Advisory: Once the tax investigation is resolved, it is essential to maintain ongoing compliance with Hong Kong's tax regulations. Our team will provide you with practical advice and recommendations to ensure that your tax affairs remain in order and that you are well-prepared for any future tax inquiries.
Let CK Tax be your trusted partner in managing tax investigations and disputes. Our knowledgeable and experienced team is committed to protecting your interests and achieving the best possible outcome.
Penalty Provisions under Section 80 of the Inland Revenue Department:
Failure to notify the Commissioner of Inland Revenue of profits tax in writing within a specified period of time
The Commissioner of Inland Revenue was not informed of the information on employees ' cessation of employment and departure before leaving Hong Kong
Make an incorrect statement and claim the dependent parent allowance
Underreport of directors ' remuneration
Penalty Provisions under Section 82 of the Inland Revenue Department (Criminal cases):
Make a false statement in order to claim the deduction of "personal education expenses", "home loan Interest", "approved charitable donation", "Dependent parent allowance"
Underreport of rental income
Keep false books or accounting records to exaggerate the company's purchase amount or reduce the company's sales
Penalty Provisions under Section 82A of the Inland Revenue Department
Group (a) - cases where the taxpayers show intentional disregard to the law and adopt deliberate cover-up tactics involving the preparation of a false set of books, padded wage rolls and fictitious entries or multiple omissions over a long period of time.
Group (b) - cases with slightly less serious acts of omission resulting from recklessness including the "hand in the till" type of evasion, failure to bring to account sales of scrap, and sheer gross negligence.
Group (c) - cases where the taxpayers fail to exercise reasonable care and omit profits/ income such as lease premium, one-off commission, etc.
Aggravating and mitigating factors in determining the ultimate penalty
Penalty may be scaled upwards or downwards to a maximum of 25% in the generality of cases.
For further information, please contact 展群CK ®:
a. Phone at (852) 3502 7392
b. Whatsapp at (852) 5227 9242
c. Email at firstname.lastname@example.org