How do I apply to hold over provisional tax?

The deadline

An application must be lodged not later than 28 days before the due date for payment of the provisional tax, or 14 days after the date of issue of the notice for payment, whichever is later[1]. Where the tax is payable in two instalments and the first has been paid by its due date, you can still apply to hold over all or part of the second, within the same time limit[1].

The IRD's FAQ works the rule through with dates. Its examples are provisional salaries tax notices, but the two-tier time limit it applies is the same one[2]:

Grounds for holding over provisional profits tax

An application must rest on one of these grounds[1]:

• the assessable profits for the year are, or are likely to be, less than 90% of the previous year's assessable profits, or of the estimate the provisional tax was charged on, with properly signed draft accounts covering a period of not less than 8 months[1];
• a loss brought forward for set off to the year has been omitted or is incorrect;
• the business has ceased, or will cease before the end of the year, and the year's profits are or are likely to be less than the previous year's or the estimate;
• you have elected Personal Assessment for the year and the election is likely to reduce your tax;
• you have objected to the profits tax assessment for the previous year.

Being chargeable at the two-tiered rates is not a ground for any year of assessment other than 2018/19[3].

A quick check of the 90% test

Suppose last year's assessable profits were HK$1,000,000. The test asks whether this year's are, or are likely to be, under 90% of that[1], which is HK$900,000. A business expecting HK$950,000 does not qualify on this ground; one expecting HK$850,000 does, and the draft accounts have to show why.

How to lodge it

1. Download Form IR1121 and complete the relevant parts[1].
2. Attach the evidence for your ground. For falling profits, that means signed draft accounts covering at least 8 months[1], with your estimate for the whole year.
3. Sign the form and send it to the Commissioner of Inland Revenue, P.O. Box 28487, Concorde Road Post Office, Kowloon, Hong Kong, or fax it to 2519 6896[1]. The IRD does not accept underpaid mail.
4. If you hold an eTAX Individual Tax Portal account and your income is from employment, property or a sole proprietorship, you can apply online instead and receive an instant acknowledgement[1].

Timing it well

For salaries the IRD suggests waiting until you know most of the year's actual figures before applying, rather than applying too early[2]. For profits tax the application needs draft accounts covering at least 8 months[1], so have management accounts ready in time for the deadline on your notice, which can be only weeks after the notice arrives.

If the application is refused or late

Tax that is not held over stays payable on the dates in the notice. If the first instalment is not paid on time, the second becomes due at once, and the IRD's recovery action includes a 5% surcharge on the unpaid balance[4]. If the problem is cash rather than an over-assessment, the separate route is an application to pay by instalments, which the IRD does not normally approve over long periods[5].

The holdover grounds and time limits are statutory, and the GovHK and IRD pages below govern if this summary ever differs from them.