OVERVIEW
The Inland Revenue Ordinance (Cap. 112) creates a stringent statutory framework to ensure tax compliance across Hong Kong. The Inland Revenue Department (IRD) routinely initiates targeted investigations, field audits and criminal prosecutions against individuals, corporate directors and businesses to combat tax evasion and non-compliance.
Key Statutory Offences: Prosecutions under the Ordinance generally fall into two categories: standard compliance failures and wilful tax evasion. The principal offences include:
- Making Incorrect Returns: Filing a tax return that contains false or inaccurate figures without a reasonable excuse.
- Failing to Submit a Return: Failing to complete and submit statutory tax returns within the prescribed time limits.
- Giving Incorrect Information: Providing inaccurate facts, misleading statements or false omissions to the IRD during an audit or general inquiry.
- Wilful Tax Evasion: Deliberately and fraudulently evading tax, or assisting another person to evade tax, with the requisite intent—for example, by hiding income, fabricating expenses or maintaining double accounting books.
- Failure to Keep Accounting Records: Failing, without reasonable excuse, to maintain proper, sufficient and accurate business and transaction records for the statutory minimum period of seven years.
TAX OFFENCE
Making Incorrect Returns Without Reasonable Excuse
Relevant provisions: Section 80(2)(a) and (b) of the Inland Revenue Ordinance (Cap. 112).
Overview: This offence occurs when a taxpayer or business, without reasonable excuse, submits a tax return containing inaccurate data, understates income, or claims deductions or allowances to which it is not entitled due to carelessness, negligence or poor oversight, but without the explicit intent to evade tax required by section 82.
Maximum penalty: A fine of HK$10,000 and a further fine of up to three times the amount of tax undercharged, or that would have been undercharged, as a result of the offence.
TAX OFFENCE
Failing to Submit a Return in Time
Relevant provision: Section 80(2)(d) of the Inland Revenue Ordinance (Cap. 112).
Overview: This offence occurs when a taxpayer or business, without reasonable excuse, fails to complete and submit a tax return required by a notice from the Inland Revenue Department within the prescribed time. It covers failure to file by the original statutory deadline or any validly extended deadline.
Maximum penalty: A fine of HK$10,000 and a further fine of up to three times the amount of tax undercharged. The court may also order the convicted person to furnish the return within a specified time.
TAX OFFENCE
Giving Incorrect Information
Relevant provision: Section 80(2)(c) of the Inland Revenue Ordinance (Cap. 112).
Overview: This offence occurs when a person, without reasonable excuse, supplies incorrect information concerning a matter that affects that person's, or another person's, liability to tax. It may apply to inaccurate facts, misleading statements or material omissions supplied during an audit, investigation or other enquiry by the Inland Revenue Department.
Maximum penalty: A fine of HK$10,000 and a further fine of up to three times the amount of tax undercharged, or that would have been undercharged, as a result of the offence.
TAX OFFENCE
Evading Tax with Intent
Relevant provision: Section 82(1) of the Inland Revenue Ordinance (Cap. 112).
Overview: This is the more serious offence involving deliberate conduct. Section 82 applies where a person acts wilfully, with intent to evade tax or to assist another person to evade tax. It covers conduct including omitting assessable sums, making false statements or entries, signing an untrue return, giving false answers, maintaining false accounts or records, and using fraud, art or contrivance to evade tax.
Maximum penalty: A fine of HK$50,000, a further fine of up to three times the amount of tax undercharged, and imprisonment for three years.
TAX OFFENCE
Failure to Keep Accounting Records
Relevant provisions: Sections 51C and 80(1A) of the Inland Revenue Ordinance (Cap. 112).
Overview: Section 51C requires a person carrying on a trade, profession or business in Hong Kong to keep sufficient records, in English or Chinese, of income and expenditure so that assessable profits can be readily ascertained. Business records must generally be retained for at least seven years after completion of the transactions to which they relate. Failure to comply without reasonable excuse is an offence under section 80(1A).
Maximum penalty: A fine of HK$100,000. The court may also order the convicted person to perform, within a specified time, the act that the person failed to perform.
HOW MCS CAN ASSIST
Advice and representation
MCS can assess the charge, the statutory elements and the prosecution evidence; advise on interview, plea, trial and sentence; and identify any defence or evidential issue available on the facts.