Jail sentence for two taxpayers convicted of falsely claiming deductions of home loan interest and expenses of self-education
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The first defendant, aged 50, is a former human resources director. She pleaded guilty to six counts of evading tax, wilfully with intent, by making false statements in connection with claims for deduction of home loan interest (HLI) and expenses of self-education (SEE) in her tax returns for the years of assessment 2005-06 to 2010-11, contrary to section 82(1)(c) of the Inland Revenue Ordinance (Cap. 112) (IRO).
The court heard that the first defendant claimed in her tax returns HLI deductions of $83,826 and $76,439 in respect of a jointly owned property with her spouse (the second defendant) (Property 1) for the years of assessment 2005-06 and 2006-07, and HLI ranging from $105,426 to $143,286 in respect of her solely owned property (Property 2) for 2007-08 to 2010-11. She also claimed SEE of $40,000 for the year of assessment 2006-07 and $60,000 for each of the years of assessment 2007-08 to 2010-11. An investigation by the Inland Revenue Department (IRD) revealed that the first defendant failed to produce sufficient details or evidence in support of her deduction claims for HLI and SEE. The IRD subsequently found that the mortgage of Property 1 was released in February 2005 and the first defendant had not paid any mortgage interest for the years of assessment 2005-06 and 2006-07. For Property 2, only about 15 per cent of the HLI claimed, that is $78,612, was paid for the years of assessment 2007-08 to 2010-11. In respect of SEE, the IRD also found that the first defendant had only paid $3,077 for the years of assessment 2006-07 to 2010-11. The total amount of the false deduction claims for the six years was $875,181 and the total tax evaded was $116,941.
The second defendant, aged 50, is a senior leasing manager. He pleaded guilty to six counts of evading tax, wilfully with intent, by making false statements in connection with claims for deduction of HLI and SEE in his tax returns for the years of assessment 2005-06 to 2010-11, contrary to section 82(1)(c) of the IRO.
The court heard that the second defendant claimed in his tax returns HLI deductions of $83,826 and $76,439 in respect of Property 1 for the years of assessment 2005-06 and 2006-07, and SEE ranging from $40,000 to $52,100 for 2005-06 to 2010-11. An investigation by the IRD revealed that the second defendant failed to produce sufficient details or evidence in support of his deduction claims for HLI (2005-06 and 2006-07) and SEE (2005-06, 2007-08 to 2010-11). As stated above, the mortgage of Property 1 was released in February 2005 and the second defendant had in fact incurred no mortgage interest for the years of assessment 2005-06 and 2006-07. For SEE, the second defendant had paid course fees of $41,250 for the years of assessment 2005-06 and 2008-09. The total amount of the false deduction claims for the six years was $351,115 and the total tax evaded was $41,384.
The IRO provides that interest paid in respect of a loan obtained for the purpose of acquiring a property in Hong Kong, which was used by the taxpayer as his or her place of residence, is tax deductible, provided that the loan was secured by a mortgage or charge and the lending institution providing the loan in question was an approved one. Expenses of self-education paid for prescribed courses or examination fees paid to specified education providers or associations are also tax deductible. Documentary evidence in support of deduction claims should be retained for seven years (i.e. six years after the expiration of the relevant year of assessment). The IRD will conduct random checks on deduction claims. Taxpayers will be asked to produce supporting documents when their cases are selected for audit.
A spokesman for the IRD reminded taxpayers that tax evasion is a criminal offence under the IRO. Upon conviction, the maximum penalty for each charge is three years' imprisonment and a fine of $50,000 plus a further fine of three times the amount of tax evaded.
Ends/Monday, September 26, 2016
Issued at HKT 15:30
Issued at HKT 15:30
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