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Hong Kong Tax Controversy Insight 2023 Issue No. 2 - Issuance of protective assessment under tax audit by the Inland Revenue Department (IRD)
Tax investigation and tax audits can be highly complex and complicated. The time required to agree a settlement basis with the IRD could be prolonged due to a number of factors such as complexity and extensiveness of the subject issues, cooperativeness of the taxpayer in providing the requested information and the time required to gather and review the historical documents.
Due to the statutory time limit in Hong Kong for issuing tax assessments, as a revenue protection measure, it is common for the IRD to issue estimated assessments for the impending time-barred assessment year (generally called “protective assessments”) in a tax or investigation situation.
In this insight, we will give an account of protective assessments and the actions that should be taken by taxpayers upon receipt of protective assessments.