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SCMP Reporter

HONG KONG taxpayers will fill in new-style returns over the next few weeks as the territory's revamped tax system gets into full swing.

  Taxpayers have until the first week of June to submit the new forms, which the Inland Revenue Department (IRD) began issuing earlier this month.

 The Composite Tax Return (CTR) unifies the previous salaries, profits, property and personal assessment tax returns into one form.

  The new system means that taxpayers will now make one return at the same time, instead of several at various times over the financial year.

  While teething problems are expected, the streamlined system, introduced in the Budget last March, is expected to increase efficiency at the IRD.

  The composite returns were only issued to taxpayers who have been registered with the IRD by their employers.

  The bulk issue of composite returns this month does not include taxpayers who are new to Hong Kong and those who have not yet applied for an identity card.

  Taxpayers in these categories will receive composite return notices during the year.

  Although the assessment information needed by the department remains the same, for some taxpayers the new format has caused problems.

  As in the previous system, the new returns include notes and instructions.

  However, Deloitte Touche Tohmatsu tax partner Yvonne Law said taxpayers confused by the new format should get professional help to complete all or part of their return.

  ''These new forms have been talked about for many years and essentially what the IRD has done is consolidate all returns on one form,'' she said.

  ''Everything the IRD needs to know is now compiled on the one return and some information that was considered irrelevant has been eliminated.''   For example, in the past, owners of more than one property were required to file one return for each property.

  But with the new system, this information is compiled on one form.

  ''Obviously, filing details for more than one property on one return is more efficient,'' Mrs Law said.

  The major benefit to the department is that it now has to process only one form instead of two or more for every taxpayer.

  With less paperwork, cross-checking information becomes easier, as do checks against duplicated information.

  According to the department, administration savings generated by the more efficient returns will be invested and used to combat tax evasion.

  Mrs Law said it was especially important for taxpayers wishing to claim mortgage interest expenses against rental income to obtain their bank interest records early so that returns could be completed on time.

  Rental income and mortgage interest expenses must be recorded on the composite forms whereas, in the past, they were filed in different returns.

  Another major difference is that under the old system, taxpayers who applied for personal assessment had to request a personal assessment return which was issued by the department a few months later.

  Under the new system, taxpayers who opt for personal assessment will receive their tax demand notes much earlier.

  The time frame for salaries tax returns has also changed. Previously, they were issued well ahead of profits tax and personal assessment returns.

  ''The salaries tax demand note usually carried a provisional salaries tax assessment and even if a taxpayer had a business tax loss to be carried forward and had elected for personal assessment, the IRD would not allow the hold-over of provisional salaries tax,'' said Mrs Law.

  However, with composite returns, since the election of personal assessment is known in the beginning, it is doubtful provisional salaries tax will be charged, as only one demand note under personal assessment would be issued.

  Composite return forms must be handed in to the department by June 2. Mrs Law said the department had already indicated it would take a hard line when considering extension applications lodged by sole proprietors.

  ''The IRD estimates that sole proprietors will need less time to file a CTR than [under] the previous return system,'' she said.



New forms expected to increase efficiency