Relief measure on conditional waiver of surcharges for instalment settlement of demand notes for the Year of Assessment 2018/19

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Which Year of Assessment and what types of demand notes are covered by the relief measure announced on 4 December 2019, 18 June 2021 and 22 June 2022 in respect of conditional waiver of surcharge on payments of overdue tax by instalment? Does the measure apply to both individuals and companies?

What are the conditions for waiving the surcharge under the relief measure announced on 4 December 2019, 18 June 2021 and 22 June 2022?

A taxpayer applying for instalment payments and waiver of surcharge under the relief measure has to provide reasons for his/her/its difficulties in settling the demand note on time. To support the application, the taxpayer is required to provide the following information and documents:

Applicant	Individual / Sole Proprietorship	Partnership	Corporation
Application form	IR1360 (Y/A 2018/19)	IR1360A (Y/A 2018/19)	IR1360B (Y/A 2018/19)
Information / documents required:
Concrete payment proposal	√	√	√
Copies of bank statements / passbooks for the latest 3 months	√	√	√
Details of income and expenditure for the latest 3 months	√	√	-
Debts repayment details	√	√	√
Management accounts for the latest 3 months (including profit and loss account and balance sheet)	-	√	√
Cash flow position and forecast	-	-	√
Daytime contact telephone number	√	√	√

The IRD will grant instalment plans of different duration taking into account individual taxpayer's financial position. Instalment plans are generally granted for a duration of 6-month or less. Only in special circumstances will the instalment plans be granted for a longer duration but they are generally not longer than 12 months. Provided that all the instalments are duly settled in accordance with the approved instalment plan, no surcharge will be imposed for a maximum period of one year counting from the due date of the demand note.

When should the instalment application be made? How tax payments can be made if no reply is received from the IRD before the due date of the relevant demand note?

Taxpayers who encounter financial difficulties in settling their Salaries Tax, Profits Tax and Personal Assessment demand notes for the Year of Assessment 2018/19 on time should apply to the IRD for payment of tax by instalments well before the due dates of the relevant demand notes. The IRD will, within 21 working days after receipt of the taxpayers' applications, approve or adjust the instalment proposals in light of the taxpayers' individual financial positions. Pending the reply from the IRD, taxpayers can make payments in accordance with their respective payment proposals. For cases with no proven financial difficulties, the instalment applications will be rejected. IRD will inform the taxpayers of the rejection in writing and the taxpayers will be asked to settle the tax on or before the due dates specified on their respective demand notes or within 14 days from the respective dates of issue of the rejection letters, whichever is later, to avoid imposition of 5% surcharge. On the other hand, if provisional tax for the Year of Assessment 2019/20 is charged on the demand note and a drop of chargeable income or assessable profits for the Year of Assessment 2019/20 by more than 10% as compared with those for the Year of Assessment 2018/19 is anticipated, taxpayers may apply for holding over of payment of the provisional tax in part or in full not later than 28 days before the due dates of the respective demand notes. If payment of provisional tax is fully or partially held over, taxpayers may be able to settle the balance of tax payable and need not apply for instalment payments.

Further information about application for holding over of provisional tax.

Will surcharge be imposed on the outstanding tax if the approved instalment plan cannot be duly followed? How will the relevant surcharge be calculated?

If the taxpayer fails to pay the tax according to the instalment plan granted, the instalment arrangement and the conditional waiver of surcharge will be cancelled immediately. A 5% surcharge will be imposed on the tax then remaining unpaid and the IRD will take immediate action in recovery of the outstanding amount. A further surcharge of 10% may also be imposed on the amount of tax and 5% surcharge remaining unpaid 6 months after the date of imposition of the 5% surcharge.

I received a Salaries Tax demand note dated 6 January 2020 for the Year of Assessment 2018/19 requiring me to pay the first instalment of $45,000 on or before 17 February 2020 and the second instalment of $15,000 on or before 11 May 2020, totalling $60,000. Because of an unexpected incident in my family which necessitates a significant cash payment, I have financial difficulties in settling the tax demanded on time and would like to pay the tax by 6 instalments. How should I apply for instalment payments?

To apply for instalment payments, you should complete and submit the instalment application form to the IRD with all the required supporting documents before the due date of the demand note (i.e. 17 February 2020). After verifying that you have financial difficulties in settling the tax on time, the IRD will approve your application in writing. Assuming that you submitted your application on 10 January 2020 for the payment of tax by 6 instalments on the 17th of each month, you would receive an instalment payment approval letter enclosed with 6 payment vouchers requiring you to pay the tax according to the plan as follows:

Date of Instalment Payment	Amount （$）
17 February 2020	10,000
17 March 2020	10,000
17 April 2020	10,000
17 May 2020	10,000
17 June 2020	10,000
17 July 2020	10,000
	60,000

Failure to make payments according to the instalment plan granted will lead to the immediate cancellation of the instalment arrangement and the conditional waiver of surcharge. A 5% surcharge will be imposed on the tax then remaining unpaid. Assuming that you duly met the first 4 instalments in the above instalment plan but failed to pay the 5th instalment on time, a 5% surcharge would be imposed on the total amount payable under the 5th and 6th instalments.

Will the IRD accept application for deferral of tax payment for the Salaries Tax, Profits Tax and Personal Assessment demand notes for the Year of Assessment 2018/19 issued between December 2019 and May 2023 and waive the surcharge during the deferral period?

The IRD will not accept application for deferral of tax payment. But taxpayers who encounter financial difficulties in settling the tax on time should apply to the IRD for payment of tax by instalments. The IRD will consider each of the applications in light of the financial position of the applicants. For instalment plans approved by the IRD allowing taxpayers in financial difficulties for settlement of Salaries Tax, Profits Tax and Personal Assessment demand notes issued between December 2019 and May 2023 for the Year of Assessment 2018/19, provided that the instalment plans are duly adhered to, no surcharge will be imposed for a maximum period of one year counting from the due dates of the demand notes.

For taxpayers who are in financial difficulties and unable to settle the Salaries Tax, Profits Tax and Personal Assessment demand notes for the Year of Assessment 2018/19 on time, if the instalment applications cannot be made before the payment due dates on their respective demand notes, what should they do?

The taxpayers should complete and submit the instalment application forms to the IRD with the required supporting information and documents as soon as possible and provide reasons for the failure to make the applications on or before the due dates on their respective demand notes for the Department's consideration.

Under the relief measure, will the surcharge be waived so long as the Salaries Tax, Profits Tax and Personal Assessment demand notes for the Year of Assessment 2018/19 can be settled within one year from their respective due dates?

The conditional waiver of surcharge on overdue tax is only applicable to instalment plans granted to taxpayers for the instalment settlement of the tax payable under Salaries Tax, Profits Tax and Personal Assessment demand notes for the Year of Assessment 2018/19 issued between December 2019 and May 2023. Provided that the instalment plans are duly adhered to, no surcharge will be imposed for a maximum period of one year counting from the due dates of the respective demand notes. For taxpayers who do not apply for instalment payments or their instalment applications are not approved by the IRD, the tax payable must be settled on or before the due dates specified on the tax demand notes. Default in tax payment will lead to the imposition of surcharges and other recovery actions.

I received a Salaries Tax demand note for the Year of Assessment 2018/19 issued in January 2021 and an instalment plan had been granted for settlement by 6 instalments starting from the due date of the demand note. As the demand note was not issued between December 2019 and December 2020, the conditional waiver of surcharge was not applicable to the demand note. Thus, I had to pay the relevant 5% surcharge. The IRD then on 18 June 2021 announced that the conditional waiver of surcharge had been extended to cover Salaries Tax, Profits Tax and Personal Assessment demand notes for the Year of Assessment 2018/19 with issue date up to May 2022. In this regard, do I need to file an application for waiver of the relevant surcharge?

According to the announcement on 18 June 2021, the relief measure on conditional waiver of surcharges for instalment settlement of demand notes for the Year of Assessment 2018/19 is applicable to your Salaries Tax demand note. As your application for the payment of tax by instalment has been approved, the relevant 5% surcharge will be waived automatically and you are not required to file any application. The IRD will issue to you a revised instalment payment approval letter to exclude the relevant surcharge. You may contact the IRD to follow up if you do not receive the revised instalment payment approval letter by the end of September 2021.