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Relief measure on conditional waiver of surcharges for instalment settlement of demand notes for the Year of Assessment 2020/21

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1.

Q:

Which Year of Assessment and what types of demand notes are covered by the relief measure announced on 18 June 2021 in respect of waiver of surcharge on payments of tax by instalments? Does the measure apply to both individuals and companies?

 
 

A:

The waiver of surcharge on payment of tax by instalments is only applicable to Salaries Tax, Profits Tax and Personal Assessment demand notes for the Year of Assessment 2020/21 issued between May 2021 and May 2022. The waiver does not cover Property Tax demand notes. Both individuals and companies who encounter financial difficulties in settling their tax bills on time can apply.

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2.

Q:

What are the conditions for waiving the surcharge under the relief measure announced on 18 June 2021?

 
 

A:

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 Individuals /
Sole Proprietorships
Partnerships Corporations
Application form IR1360
(Y/A 2020/21)
IR1360A
(Y/A 2020/21)
IR1360B
(Y/A 2020/21)
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
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  • Debts repayment details
  • Management accounts for the latest 3 months (including profits and loss account and balance sheet)
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  • 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.

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3.

Q:

When should the instalments 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?

 
 

A:

Taxpayers who encounter financial difficulties in settling their Salaries Tax, Profits Tax and Personal Assessment demand notes for the Year of Assessment 2020/21 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 instalments 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 2021/22 is charged on the demand note and a drop of chargeable income or assessable profits of the Year of Assessment 2021/22 by more than 10% as compared with that of the Year of Assessment 2020/21 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.

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4.

Q:

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

 
 

A:

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.

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5.

Q:

I received a Salaries Tax demand note dated 7 June 2021 for the Year of Assessment 2020/21 requiring me to pay the first instalment of $45,000 on or before 11 January 2022 and the second instalment of $15,000 on or before 13 April 2022, 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 instalments payment?

 
 

A:

To apply for instalments payment, you should complete and submit the instalments application form to the IRD with all the required supporting documents before the due date of the demand note (i.e. 11 January 2022). After verifying that you have financial difficulties in settling the tax on time, the IRD will approve your application in writing. Assuming that your application for the payment of tax by 6 instalments on the 11th of each month is approved, you would receive an instalments 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 ($)
11 January 2022 10,000
11 February 2022 10,000
11 March 2022 10,000
11 April 2022 10,000
11 May 2022 10,000
11 June 2022 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.

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6.

Q:

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 2020/21 issued between May 2021 and May 2022 and waive the surcharge during the deferral period?

 
 

A:

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 May 2021 and May 2022 for the Year of Assessment 2020/21, 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.

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7.

Q:

For taxpayers in financial difficulties and need to apply for payment of the Salaries Tax, Profits Tax and Personal Assessment demand notes for the Year of Assessment 2020/21 by instalments, if the applications cannot be made before the payment due dates on their respective demand notes, what should they do?

 
 

A:

The taxpayers should complete and submit the instalments 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.

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8.

Q:

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 2020/21 can be settled within one year from their respective due dates?

 
 

A:

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 the Salaries Tax, Profits Tax and Personal Assessment demand notes for the Year of Assessment 2020/21 issued between May 2021 and May 2022. 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 instalments payment or their instalments 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.