Individual Tax Evasion Cases in Hong Kong

In this article, we are going to share six cases of individuals evading taxes in Hong Kong.

I. Unreported Rental Income and Incorrect Interest Deductions

A 66-year-old licensed real estate agent operated a real estate agency. The Hong Kong Inland Revenue Department (“IRD”) discovered through an investigation that she owned 12 properties, of which she personally or through other agents rented out 10 (including 4 well-known subdivided flats in Hong Kong). The related income was deposited into her, her family’s, or her company’s bank accounts. From the 2008/09 to 2015/16 tax years, she underreported rental income totaling HKD 4,605,711, resulting in unpaid taxes of HKD 534,840.

Additionally, during the 2014/15 tax year, the defendant claimed deductions for home loan interest twice, even though the property was rented out for the entire year and not used as her residence, failing to meet the deduction requirements. She deducted home loan interest of HKD 10,534, evading taxes amounting to HKD 1,790.

More seriously, when the IRD requested information about her rental properties for the 2009/10 and 2011/12 tax years, she falsely claimed that she had no rental properties and provided a misleading written response. Furthermore, she falsely stated that she lived in the property for the entire year when claiming the home loan interest deduction for the 2014/15 tax year.

She was charged with 12 offenses (including 11 counts of willful tax evasion and 1 count of submitting incorrect tax returns without reasonable excuse), violating Sections 82(1)(a), (e), (c), and 80(2)(a) of the Inland Revenue Ordinance (“IRO”).

She pleaded guilty to all charges and was convicted of tax evasion on 15 March 2024, in the District Court. On 19 April, she was sentenced to 7 months in prison and fined HKD 240,000 (HKD 20,000 for each charge).

The IRD issued a press release to remind taxpayers that tax evasion is a criminal offence under the IRO, with a maximum penalty of three years in prison and a fine of HKD 50,000 for each charge upon conviction, plus an additional fine equal to three times the amount of tax evaded. Moreover, anyone who submits an incorrect tax return without reasonable excuse is committing an offense, with a maximum fine of HKD 10,000 for each charge, plus an additional fine equal to three times the amount of tax evaded.

Tax evasion in Hong Kong can be a criminal offense, and providing false documents and statements can lead to more severe penalties. If you can afford to buy property, don’t skimp on taxes, especially since Hong Kong’s property tax rate is only 15%, with legal planning opportunities widely available.