{"id":863,"date":"2021-11-11T01:34:24","date_gmt":"2021-11-11T01:34:24","guid":{"rendered":"https:\/\/pacersconsulting.com\/?p=863"},"modified":"2022-07-14T17:20:56","modified_gmt":"2022-07-14T09:20:56","slug":"what-you-might-not-have-known-about-provisional-tax","status":"publish","type":"post","link":"https:\/\/pacersconsulting.com\/en\/blog-en\/taxation-en\/what-you-might-not-have-known-about-provisional-tax\/863\/","title":{"rendered":"What You Might Not Have Known About Provisional Tax"},"content":{"rendered":"\n<h1><\/h1>\n\n\n\n<p>No matter if you are an employer or employee, you may lose your footing on tax assessment notices regarding personal income or company revenue. Specifically, there is a tax item on assessment notices named &#8220;provisional tax&#8221;, and we will be introducing this type of tax in this article. Read on to learn more about this type of tax, as well as strategies for applying for a holdover of provisional tax.<\/p>\n\n\n\n<h2>Provisional Tax<\/h2>\n\n\n\n<p>Provisional tax is required from taxpayers by the government to pay part of the coming year&#8217;s tax in advance. Generally speaking, the Inland Revenue Department will make an estimate based on the taxpayer&#8217;s income and expenditure of the current year.<\/p>\n\n\n\n<h2>Are provisional tax rates greater than general tax rates?<\/h2>\n\n\n\n<p>In recent years, the government has had different tax concessions, but when estimating provisional taxes, the Inland Revenue Department does not assume that there will be tax concessions in the coming tax year. Thus, the rates of provisional taxes are usually higher than general taxes.<\/p>\n\n\n\n<p>What happens if I overpay the coming year\u2019s provisional tax?<\/p>\n\n\n\n<p>When assessing taxes in the coming year, the provisional tax paid for this year will be deducted first, and if there is balance remaining, the provisional tax for the following year will be deducted.<\/p>\n\n\n\n<h2>Can I not pay provisional tax?<\/h2>\n\n\n\n<p>Short answer: no. Provisional tax is regarded as a type of tax, and taxpayers must pay on or before the payment date specified in the tax assessment notice, otherwise it will be regarded as tax arrears. However, if there are sufficient reasons, you as a taxpayer have the right to apply for a holdover of provisional tax.<\/p>\n\n\n\n<h2>How to Apply for Holdover of Provisional Tax<\/h2>\n\n\n\n<p>The IR1121 form is available on the website of the IRD. Return the form to the IRD after filling in by the following ways:<\/p>\n\n\n\n<ol type=\"1\"><li>Mail to postbox 28487 of Gloucester Road Post Office, Hong Kong;<\/li><li>Fax to the IRD fax number 2519 6896; or<\/li><li>Apply through eTAX (only for eTAX account holders).<\/li><\/ol>\n\n\n\n<h2>Application Deadline<\/h2>\n\n\n\n<p>The application for a holdover of provisional tax must be submitted to the IRD within the following deadlines (whichever is later):<\/p>\n\n\n\n<ol type=\"1\"><li>28 days before the deadline for payment of provisional tax; or<\/li><li>Within 14 days after the issuance date of the notice for payment of provisional tax.<\/li><\/ol>\n\n\n\n<h2>Reasons for Application<\/h2>\n\n\n\n<p>When applying for a holdover of provisional tax payment, you should have suitable and convincing reasons in order for a successful application. The following are the reasons that usually lead to a high chance of success:<\/p>\n\n\n\n<h2>A. Profits tax<\/h2>\n\n\n\n<ol><li>The assessable profit in the new year of assessment may be less than 90% of the assessable profit in the previous year*;<\/li><li>(Example: The assessable profit for the year of assessment 2020\/21 is HK$300,000, and the assessable profit for the year of assessment 2021\/22 may be less than HK$270,000);<\/li><li>The assessable profit in the new tax year may be less than 90% of the assessable profit in the year of assessment for provisional tax*;<\/li><li>Any loss carried forward to offset the tax year is omitted or is inaccurate;<\/li><li>The company has ceased operations or will cease operations before the end of the tax year, and the assessable profit of that year may be less than the assessable profit of the previous year or the assessable profit in the year of assessment for provisional tax;<\/li><li>Having selected personal assessment for the year of assessment for provisional tax; or<\/li><li>Having objected to the profits tax assessment of the previous year.<\/li><\/ol>\n\n\n\n<p>**Note: When submitting the IR1121 form, it is necessary to submit information on the date when the company ceased to be a landlord (such as sales and purchase contracts), as well as rent received and rent receivable (such as lease agreements and rent receipts).<\/p>\n\n\n\n<p>*Note: When submitting the IR1121 form, relevant supporting documents must be submitted at the same time (e.g. accounts of no less than 8 months signed by the director).<\/p>\n\n\n\n<h2>B. Salaries tax<\/h2>\n\n\n\n<ol><li>In a new year of assessment, one is eligible for tax allowances that have not been calculated in the notice of payment for provisional tax. (For example, if your mother is 55 years old in the tax year of provisional tax, in the new tax year, you will be provided a dependent parent allowance of HK$25,000)*;<\/li><li>In a new year of assessment, the taxable income may be less than 90% of the previous year&#8217;s actual taxable income;<\/li><li>In a new year of assessment, the taxable income may be less than 90% of the estimated income in the year of assessment for provisional tax;<\/li><li>In a new year of assessment, tax deductibles include personal education expenses, recognized retirement plan contributions, residential care expenses, home loan interest, eligible premiums on the list of VHIS or eligible annuity premiums. Tax deductibles have been or are likely to be paid in the new tax year\u2019s Mandatory Provident Fund contributions, and the related expenses may likely exceed the amount specified in the year of assessment for provisional tax;<\/li><li>Has ceased or will cease to earn salaries as taxable income before the end of the provisional tax year of assessment**;<\/li><li>Lodging an objection to the salaries tax assessment of the previous year.<\/li><\/ol>\n\n\n\n<p>*Note: You must clearly provide detailed information about the related tax allowance when filling in the IR1121 form. (e.g. provide the dependent parents\u2019 name, date of birth, Hong Kong identity card number and whether they usually live in Hong Kong during the relevant year for dependent parent allowance)<\/p>\n\n\n\n<p>**Note: When filling in Form IR1121, it is necessary to clearly fill in the amount of estimated income for the entire tax year. (e.g. specify the estimated income from April 1, 2021 to March 31, 2022, and provide the reason for the decrease in income to apply for deferment of payment of provisional salaries tax for the year of assessment 2021\/22)<\/p>\n\n\n\n<h2>C. Property tax<\/h2>\n\n\n\n<ol type=\"a\"><li>The assessable value of the property in the new year of assessment may be less than 90% of the assessable value of the previous year*;<\/li><li>The assessable value of the property in the new year of assessment may be less than 90%* of the estimated assessable value in the year of assessment for provisional tax;<\/li><li>You are no longer the owner of a certain property, or you will no longer be the owner of the property before the end of the provisional tax year of assessment, thus reducing the assessable value of the provisional tax. You must submit the information about the date when you ceased to be the landlord, the rent received and the rent receivable together with the application form**;<\/li><li>Have selected personal assessment for the year of assessment for provisional tax;<\/li><li>You have lodged an objection to the property tax assessment of the previous year.<\/li><\/ol>\n\n\n\n<p>*Note: When submitting the form IR1121, the information about the rent received and the rent receivable must be submitted at the same time (e.g. lease agreement, rent list).<\/p>\n\n\n\n<p>**Note: When submitting the IR1121 form, it is necessary to submit information on the date when the company ceased to be a landlord (such as sales and purchase contracts), as well as rent received and rent receivable (such as lease agreements and rent receipts).<\/p>\n\n\n\n<h2>Conclusion<\/h2>\n\n\n\n<p>Although paying taxes is the duty of taxpayers, in times of economic difficulties, we should always strive to make our cash flow more flexible.<\/p>\n\n\n\n<p>Pacers is a company that provides multifaceted and professional consulting services. We are eager to grow with our clients, so if you encounter any issues on taxation, you\u2019re welcome to contact us through our website or email at <a href=\"mailto:info@pacersconsulting.com\">info@pacersconsulting.com<\/a>.<\/p>\n\n\n\n<p>Want to learn more about real-life examples in taxation? Follow us on <a href=\"https:\/\/www.facebook.com\/pacersconsulting\/\" target=\"_blank\" rel=\"noreferrer noopener\">Facebook<\/a>, <a href=\"https:\/\/www.instagram.com\/pacersconsulting\/\" target=\"_blank\" rel=\"noreferrer noopener\">Instagram<\/a>, and Google now to stay on top of our latest news!<\/p>\n","protected":false},"excerpt":{"rendered":"<p>No matter if you are an employer or employee, you may lose your footing on tax assessment notices regarding personal income or company revenue. Specifically, there is a tax item on assessment notices named &#8220;provisional tax&#8221;, and we will be introducing this type of tax in this article. Read on to learn more about this [&hellip;]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"off","_et_pb_old_content":"<p>[et_pb_section admin_label=\"section\"]<br \/>[et_pb_row admin_label=\"row\"]<br \/>[et_pb_column type=\"4_4\"][et_pb_text admin_label=\"Text\"]<\/p>\n\n<!-- wp:heading -->\n<h2><strong>Foreword<\/strong><\/h2>\n<!-- \/wp:heading -->\n\n<!-- wp:paragraph -->\n<p>The trend of emigration to foreign countries has been growing lately, and it is crucial that fulfil your tax responsibilities first if you want to be at ease when you leave Hong Kong. In this post, we\u2019ve compiled some basic tax responsibilities you\u2019ll have to fulfil before you leave, and we hope that this will set everyone\u2019s mind at rest when stepping out of Hong Kong. Specifically, we will be focusing more on key points for outbound Hong Kong employees.<\/p>\n<!-- \/wp:paragraph -->\n\n<!-- wp:heading -->\n<h2><strong>Who needs to clear tax?<\/strong><\/h2>\n<!-- \/wp:heading -->\n\n<!-- wp:paragraph -->\n<p>According to the Inland Revenue Ordinance, all outbound employees leaving Hong Kong for over a month have to notify the Inland Revenue Department, regardless of whether they plan on coming back. This allows the IRD to decide whether they have outstanding tax items that need to be paid before leaving Hong Kong. The above procedure is called \u201ctax clearance\u201d.<\/p>\n<!-- \/wp:paragraph -->\n\n<!-- wp:heading -->\n<h2><strong>Are there exemptions?<\/strong>     <\/h2>\n<!-- \/wp:heading -->\n\n<!-- wp:paragraph -->\n<p>Yes; if the employee has to leave Hong Kong frequently due to work, they do not have to notify the IRD.<\/p>\n<!-- \/wp:paragraph -->\n\n<!-- wp:heading -->\n<h2><strong>Procedures for Tax Clearance<\/strong><\/h2>\n<!-- \/wp:heading -->\n\n<!-- wp:list {\"ordered\":true} -->\n<ol><li>When handing in your resignation letter, you will have to notify your employer of your intention to leave Hong Kong, as well as your predicted date of departure. This is because employers have to file a \u201cNotification by an Employer of an Employee Who is About to Depart from Hong Kong\u201d, also known as Form IR56G, to the IRD at least one month before you depart, while also giving you a copy of the document.<\/li><li>Next, your employer should withhold the salary of your last month at work. If you, as the employee, do not clear all tax items you are supposed to clear, the IRD will require your employer to compensate with the amount of salary withheld. If you wish to reduce the amount of salary withheld, you could consider reducing the amount of working days in your last month of work.<\/li><li>You will also have to notify the IRD of your predicted date of departure (by phone, email, fax, or post). By doing so, the IRD will mail you a tax return form (BIR60) before your departure.<\/li><li>You will have to complete and return the tax return within the specified time limit. If you do not, if your employer\u2019s salary-withholding period is almost up, or if you run out of time before your departure, the IRD will issue a notice of assessment (the estimated amount of tax payable is usually susceptible to overestimation, therefore delaying the completion of your tax return is not recommended). If you encounter overestimated amounts of tax payable, you are allowed to dispute the assessment by filing an objection.<\/li><li>If you want to speed up the process of tax clearance, you can choose to bring along required documents (e.g. pay slips, MPF records, supporting documents for deduction claims, etc.) to the IRD in person. As the process takes time, it is recommended that you allow more time for your application. (Friendly reminder: as the IRD may check tax records of previous years, make sure that the supporting documents are complete.)<\/li><li>After assessment, the IRD will issue a notice for tax payment to you. You can choose to use cash, EPS, ATMs, or cashier\u2019s cheques to pay for all tax items immediately, and a letter of release will usually be issued on the same day. You may also choose to pay through online methods, by PPS, cheque, or a combination of the above methods, and the IRD will issue a letter of release after confirming payment (within two to ten working days). Even if you have no outstanding tax items to pay for, you must complete all tax clearance procedures before receiving a letter of release.<\/li><li>After your employer receives the letter of release, they are allowed to return the withheld salary. Thus, you will have fulfilled all your Hong Kong tax responsibilities, and are free to leave Hong Kong.<\/li><\/ol>\n<!-- \/wp:list -->\n\n<!-- wp:heading -->\n<h2><strong>What if I don\u2019t clear my tax?<\/strong>     <\/h2>\n<!-- \/wp:heading -->\n\n<!-- wp:paragraph -->\n<p>If a person does not go through tax clearance before leaving Hong Kong, they are liable to a Level 3 fine of HKD 10,000. The IRD may also obtain a court order to prohibit those who have not cleared their tax from leaving Hong Kong. To avoid unnecessary trouble, remember to clear your tax before you leave.<\/p>\n<!-- \/wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>Pacers is a company that provides multifaceted and professional consulting services. We are eager to grow with our clients, so if you encounter any issues on taxation, you\u2019re welcome to contact us <a href=\"https:\/\/www.tidio.com\/talk\/jtxpvj2u4yoow0rg44o5cybt3x2benje\">through our website<\/a> or email at <a href=\"mailto:info@pacersconsulting.com\">info@pacersconsulting.com.<\/a><\/p>\n<!-- \/wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>Want to learn more about real-life examples in taxation? Check out our Facebook, Instagram and Google profiles for the newest updates!<\/p>\n<!-- \/wp:paragraph -->\n\n<p>[\/et_pb_text][\/et_pb_column]<br \/>[\/et_pb_row]<br \/>[\/et_pb_section]<\/p>","_et_gb_content_width":""},"categories":[27],"tags":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v20.4 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>What You Might Not Have Known About Provisional Tax - Pacers Consulting<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/pacersconsulting.com\/en\/blog-en\/taxation-en\/what-you-might-not-have-known-about-provisional-tax\/863\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"What You Might Not Have Known About Provisional Tax - Pacers Consulting\" \/>\n<meta property=\"og:description\" content=\"No matter if you are an employer or employee, you may lose your footing on tax assessment notices regarding personal income or company revenue. Specifically, there is a tax item on assessment notices named &#8220;provisional tax&#8221;, and we will be introducing this type of tax in this article. 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Specifically, there is a tax item on assessment notices named &#8220;provisional tax&#8221;, and we will be introducing this type of tax in this article. 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