Our firm has prepared some articles for any interested parties to enhance their knowledge in this sector. The series will cover topics as follows :

1. Why does a “tiger” bump into a tax payer’s life?
   – The most common and serious trigger: being reported by someone else.
   – Inaccurate tax returns or accounting records filed over the years, with major discrepancies.
   – Transfer pricing issues between Mainland China and Hong Kong operations.
   – Recent purchases of high-value real estate in Hong Kong.
   – Operating cash business.

2. How to tackle the intruding ‘power’?
   – The Inland Revenue Department (IRD) has broad powers to investigate any individual’s tax liabilities.
   – Those under investigation must avoid:
     • Being dismissive
     • Giving unreasonable explanations
     • Having a hostile attitude
   – Appoint a qualified tax accountant as your official tax representative.

3. Investigation Tactics – Counter Moves
   Common investigation actions by the IRD:
   – On-site inspection
   – Covert surveillance
   – Bank data collection
   – Profit margin comparisons with industry peers
   – Requests for transaction explanations
   Response strategies from tax representatives:
   – Know your enemy – preparation is key
   – Deep understanding in-depth of the company’s operations
   – Full awareness of shareholders’/directors’ financial status
   – Detailed financial analysis
   – Construct a comprehensive settlement strategy
   
   
4. “36 Strategies” for a quick resolution
   When under investigation, act decisively and appoint a tax accountant experienced in handling investigation.
   Examples of practical strategies:
   – “Hide a dagger behind a smile” – be polite, friendly, responsible, and quick to respond
   – “Throw a brick to attract jade” – proactively offer solutions
   – “Wait at ease while the enemy works” – present proposals, resume normal operations, and wait for IRD’s feedback
   
   
5. Clues to reduce pains of the inevitable
   Avoid common traps:
   – Maintain good relations hip with others, avoid unnecessary commercial conflicts
   – Keep proper records and supporting documents
   – Leverage cross-border transaction mechanism wisely
   – Submit tax returns on time
   If under investigation, steps to follow:
   – Stay calm and composed
   – Hire a tax representative – do not deal with officials alone
   – Cooperate fully with your representative
   – Conduct a mock interview before meeting IRD officials
   – Adjust your mindset – a tax investigation is just a business issue
   – Replace any unsuitable representative immediately

We shall in the future release more articles on tax investigation cases on our website. We earnestly look forward to sharing and discussing this critical area of taxation with you.