2023-06-14Hong Kong Tax - Advance Ruling
A ruling will only be given for a seriously contemplated arrangement with full particulars set out. The ruling is binding on the Commissioner of Inland Revenue Department and is valid within the period stated in the ruling. However, the ruling on any specific case should not be relied upon for other cases.
According to Part 1 of Schedule 10 of Hong Kong Inland Revenue Ordinance (“IRO”) , advance ruling will not be provided in certain subject matters, grounds or circumstances. For example, the matter on which a ruling is sought relates to the imposition or remission of a penalty, whether a tax return or other information provided by a taxpayer is correct or not, etc.
An objection can only be lodged after a taxpayer has received the relevant tax assessment form the Inland Revenue Department (“IRD”) while an application for an advance ruling should be submitted early in the year of assessment to which the proposed ruling relates.
The fees payable in respect of an application for a ruling is specified under Part 2 of Schedule 10 of the IRO are as follows:As you can see from the above, the application fee paid to IRD for an advance ruling involves a considerable amount of money. In addition, you may have to incur additional fees if you would like to appoint a professional tax agent to process such application. It may not be cost-effective to get an advance ruling on a tax arrangement that only involves a small sum of money.
(Note: if the time spent by IRD in respect of the ruling procedures exceeds the expected time, additional fees may be imposed.)
(i) for a ruling on whether profits are to be treated as chargeable to profits tax under section 14 of the IRO as arising in or derived from Hong Kong
HK$45,000
(ii) for a ruling on whether remuneration is to be treated as chargeable to salaries tax under section 9A of the IRO
HK$15,000
(iii) for any other ruling
HK$15,000
A ruling is not to be made on how a provision of IRO applies if the provision relates to:
a.
the imposition or remission of a penalty;
b.
the correctness of a return or other information supplied by a person;
c.
the prosecution of a person;
d.
the recovery of a debt owing by a person; or
e.
the computation of income or loss under section 50AAF or 50AAK of IRO.
a.
the application seeking the ruling would require IRD to determine or establish any question of fact.
b.
IRD considers that the correctness of the ruling would depend on the making of assumptions, whether in respect of a future event or any other matter;
c.
the matter on which the ruling is sought is subject to an objection or appeal, whether in relation to the applicant or any other person; or
d.
the matter on which ruling is sought is the subject of a return which has been or is due to be lodged.
IRD may refuse to make a ruling if:
a.
IRD considers that the arrangement in relation to which the ruling is sought is not seriously contemplated by the applicant;
b.
the application is frivolous or vexatious;
c.
IRD considers that the applicant has not provided sufficient information in relation to the application; or
d.
IRD considers that it would be unreasonable to make a ruling in view of the resources available with IRD.
Although not specifically stipulated in Part 1 of Schedule 10 of the IRO, an application for a ruling would be generally declined in the following circumstances:
a.
the ruling application contains alternative proposals or courses of action on the part of the applicant;
b.
the matter is primarily one of fact and the circumstance are such that all the pertinent facts cannot be established at the time of the application for the ruling;
c.
the ruling requires an opinion as to generally accepted accounting principles or commercial practices;
d.
the matter is the law concerned with the administration of the tax system; or
e.
the issue involves the interpretation of a foreign law.
Advance Ruling Application Time Frame
- https://www.ird.gov.hk/eng/pol/aru.htm
- https://www.ird.gov.hk/eng/ppr/arc.htm
- https://www.ird.gov.hk/eng/pdf/dipn31.pdf