The Field Audit and Investigation Unit of the Hong Kong Inland Revenue Department (“IRD”) is responsible for conducting tax field audits and investigations on businesses and individuals with a view to fight against possible tax evasion and avoidance.In field audit, IRD officers visit taxpayer’s business premises and examine the accounting records kept by the taxpayer in order to see if the reported profits are correct.

Documents Subject to Stamp Duty in Hong Kong: The Hong Kong Stamp Duty Ordinance (Cap.117 of the Laws of Hong Kong) imposes duty on certain types of documents, which are mainly as follows:-Conveyance on sale (i.e. Assignment);Agreement for sale of immovable property;Lease of immovable property (i.e. Tenancy Agreement);Transfer of Hong Kong stock.

The transfer of shares in a Hong Kong company must be stamped. Stamp duty on contract notes are charged on the sales consideration or the fair market value., whichever is the higher. The rate of duty is 0.1% payable by each of the purchaser and seller involved in a transaction, giving an effective rate of 0.2%.

The law specifically provides that lease premium is assessable to property tax in the same way as rent. If you have received lease premium, the amount shall be included in the assessable value of the property in the year of commencement of the lease concerned.

Apart from rental income, do you earn assessable salaries income and/or business income? If yes, you may reduce your tax by electing Personal Assessment.Have you borrowed money to purchase the property and paid interest? If yes, you may elect for personal assessment to claim deduction of interest.

Hong Kong does not have capital gain tax and under usual circumstances, gains from disposal of property are not subject to tax.Under Hong Kong tax law, “profits arising from the sale of capital assets” are outside the scope of charge for profits tax. Therefore, if the property sold is a capital asset, the profit arrived from the disposal will not be subject to tax. On the other hand, if the purchase and sale of property was in the nature of trade, the profits will be assessable to profits tax.

Share option is the right to acquire shares within a period of time in the future. If your employer granted share option to you, you will be assessed to tax on a notional gain, i.e. not when the option is granted to you, but when you exercise, assign or release the option.There are many types of share option schemes. But in general, the tax benefit of the share option is the difference between the price paid and the market price at the time of exercise.

Salaries Tax is charged for each year of assessment on individuals in respect of income arising in or derived from Hong Kong which is received or receivable during the year, irrespective of the location of payment. “Income” includes: Income from an office, employment (on a full-time, part-time or casual basis) or pension from a former employer. Income in respect of services rendered in Hong Kong relating to an office or employment of profit.

Under the Hong Kong Inland Revenue Ordinance, there are 3 types of direct taxes, namely, Salaries Tax, Profits Tax and Property Tax. Personal Assessment is not a tax levy. It is a method of computation of tax that may lighten the tax burden of certain taxpayers who are also subject to Profits Tax and/or Property Tax, aside from Salaries Tax. However, there is no merit for electing Personal Assessment if the relevant taxpayer is only liable to pay Salaries Tax.

As previously discussed in our article regarding Hong Kong Non-residents, a non-resident who carries on a trade, profession or business in Hong Kong is chargeable to Profits Tax under section 14 of the Inland Revenue Ordinance (“IRO”) in respect of profits arising in or derived from Hong Kong from such trade, profession or business. This applies to both residents and non-residents of Hong Kong.