Hong Kong Tax Tips: Avoid Fines and How to Make Things Right 

Mistakes happen—it’s part of being human. Filling out tax forms incorrectly or failing to report income is more common than you think. Many people mistakenly believe that simply admitting a mistake and paying back taxes is enough to resolve the issue. 

However, the reality is quite different! The Inland Revenue Department (IRD) can go back years to recover unpaid taxes and impose additional penalties. Just because you haven’t received a letter from the IRD doesn’t mean you’re in the clear. 

Let’s look at how to take the right steps to remedy this situation.

Clarifying Misconceptions 1: Is Paying Back Taxes Enough?

Take Case D8/22 as an example. The individual switched jobs during the 2018/19 tax year and only reported income from their new employer. As a result, the tax office sought to collect taxes related to income from their previous employer and slapped on a penalty of HKD 4,500 for the oversight. The taxpayer appealed, claiming they did not receive documentation from their former employer and that the mistake was unintentional. Unfortunately, the appeal was denied, and they were also ordered to pay additional legal fees.

The committee’s ruling clarified that the taxpayer could have easily checked their income for that tax year using bank statements or online banking, without needing their former employer’s information. Moreover, the former employer had already submitted the necessary notices to IRD regarding the taxpayer’s employment status. The taxpayer failed to provide evidence that they didn’t receive this notice or took appropriate follow-up actions. Thus, claiming “negligent reporting” was not a valid defense.

Clarifying Misconceptions 2: Does Admitting Mistake Right Away Mean No Consequences?

Timely tax payment is a taxpayer’s responsibility. Even if the taxpayer paid the owed taxes after the oversight, it doesn’t provide a reasonable excuse for submitting an incorrect tax return. 

IRD can still charge you an additional fine on the incorrect filling of tax return after you admitted the mistake and pay the omitted tax payment.

Seek Professional Guidance to Avoid Headaches

In fact, if you discover or are notified of any underreporting or errors, consult a professional accountant before taking any action. Don’t assume that admitting a mistake is the best way forward. A qualified accountant can handle the situation appropriately, greatly reducing the likelihood of incurring penalties.

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