Provisional tax in Hong Kong: how it works and when to hold it over

Hong Kong collects profits tax and salaries tax partly in advance. When the IRD assesses one year, it normally also charges provisional tax for the following year. The charge is based on the profits or income just assessed.

How the charge is calculated

Provisional tax is generally calculated on the same assessable profits or income as the final assessment for the year just ended. When the next year is assessed, the provisional tax already paid is credited against the final liability. Any excess is refunded or set off.

Instalments

The demand note usually splits payment into two instalments. The first combines the final tax for the year just ended with most of the provisional tax. The second, smaller instalment falls due a few months later. The exact dates are printed on the demand note.

Holdover applications

If you expect profits or income to fall materially, for example after a lost contract, reduced income or retirement, you can apply to hold over some or all of the provisional tax. The application must be lodged within the time limit on the notice and must set out the grounds with supporting figures.

A holdover is a cash-flow decision, not a tax saving. If the eventual assessment is higher than the estimate, the tax is still payable.

Related tools

The tax deadlines calendar shows the filing dates that drive each assessment. The salaries tax calculator gives a quick estimate for individuals.

Our profits tax team prepares the computation, reviews the demand note and decides with you whether a holdover application is justified.