Provisional tax in Hong Kong: how it works

Provisional tax is the IRD's estimate of next year's tax based on the previous year's income; the Government's one-off reduction does not apply to provisional tax. If next year's income is expected to fall by more than 10%, or new allowances are not reflected in the bill, you can submit form IR1121 to apply for a holdover 28 days before the payment deadline.

Key takeaways

Provisional tax is the estimated tax for the following year that the IRD collects from taxpayers in advance, based on the previous year of assessment's income. It applies to salaries tax, profits tax and property tax.
How it is calculated: estimated on the basis of the previous year's tax payable, without first deducting the Government's one-off reduction.
The one-off reduction for the 2025/26 year of assessment (capped at HK$3,000) applies only to the final assessment, not to provisional tax. If next year's income falls by more than 10%, or other statutory conditions are met, you can apply to hold over all or part of the provisional tax.
Application deadline: 28 days before the payment deadline, or within 14 days after the tax bill is issued, whichever is later.

What is provisional tax?

Provisional tax is, under Hong Kong's Inland Revenue Ordinance, the tax for the following year that the IRD estimates and collects in advance based on a taxpayer's income for the previous year of assessment.

Provisional tax in Hong Kong is the IRD's estimate of the next year's tax based on the previous year's income, and works on a “collect first, settle later” basis: once the next year has been formally assessed, the provisional tax paid is set against the tax payable, and any surplus is carried forward to be offset at the next assessment. Salaries tax, profits tax and property tax all require provisional tax.

When the next year's formal assessment is completed, the provisional tax paid is first set against that year's tax payable; any balance is carried forward to be offset at the next assessment; if it is insufficient, the difference must be paid.

Provisional salaries tax is usually issued together with the final assessment tax bill and paid in two instalments: the first generally before mid-January and the second before early April. The exact payment dates are as shown in red on the tax bill.

Why is the provisional tax amount sometimes higher than the actual tax?

Many taxpayers find after receiving their tax bill that the provisional tax is higher than expected, because:

When calculating provisional tax, the IRD generally does not first deduct the Government's one-off tax reduction, which applies only once the Budget has been passed and legislated.

Taking 2025/26 as an example, although the Budget proposed a 100% reduction of salaries tax (capped at HK$3,000), this reduction applies only to the final assessment for the 2025/26 year of assessment and not to that year's provisional tax. Taxpayers must still pay provisional tax on time, and the reduction is applied at assessment.

💡 SetupHK tip: If the provisional tax on your bill looks high, do not worry. After the next year's assessment is completed, any overpaid amount is automatically carried forward or refunded; this is the normal mechanism.

How provisional tax is calculated

provisional salaries tax

Take the previous year of assessment's salary income, deduct the various deductions, and estimate next year's tax at the same rates.

Previous year's salary income − deductions = basis for estimating provisional tax

Provisional salaries tax is estimated from the previous year of assessment's salary income less deductions; provisional profits tax is calculated from the previous year's assessable profits less available loss offsets. Neither reflects the current year's one-off Government tax reduction in advance.

Provisional profits tax

Estimated from the previous year's assessable profits, less any loss available for offset.

Provisional property tax

Estimated from the previous year's assessable value of the property.

Consequences of not paying provisional tax on time

Situation	Consequence
Overdue and unpaid	A 5% surcharge on the total amount of tax unpaid
Still unpaid more than 6 months overdue (including the 5% surcharge)	A further 10% surcharge
Continued non-payment	The IRD may issue a notice to recover the tax to the employer, bank or debtor
Serious cases	The IRD may bring civil proceedings in the District Court to recover the amount owed and court costs
Intending to leave Hong Kong	The IRD may apply to the District Court to prevent the tax defaulter from leaving Hong Kong
Wilful tax evasion	A criminal offence; on conviction, imprisonment of up to three years, plus a fine

When can I apply to hold over provisional tax?

If you cannot pay on time because of financial difficulty or other statutory grounds, you can apply to the IRD to hold over part or all of the provisional tax. The statutory grounds for each tax are as follows:

Salaries tax holdover conditions (meet any one)

Next year's net chargeable income is, or may be, less than 90% of the previous year's
Entitled to an allowance not taken into account in the provisional tax notice (such as the newborn child allowance or a newly added Dependent parent allowance etc.)
In the next year you will pay self-education expenses, contributions to an approved retirement scheme, residential rent, home loan interest, voluntary health insurance scheme premiums, qualifying annuity premiums or tax-deductible MPF contributions, in an amount exceeding the specified amount for the previous year
Have ceased, or will cease before the end of the year of assessment for the provisional tax, to earn income chargeable to salaries tax
Have lodged an objection to the previous year's salaries tax assessment

Profits tax holdover conditions (meet any one)

Next year's assessable profits are, or may be, less than 90% of the previous year's (a draft set of accounts covering not less than 8 months, duly signed, must be attached)
The loss brought forward for offset in that year of assessment has been omitted or is uncertain
Have ceased, or will cease before the end of the year of assessment, to carry on business
Have elected Personal Assessment for the year of assessment of the provisional tax, and less tax may be payable under that method
Have lodged an objection to the previous year's profits tax assessment

Property tax holdover conditions (meet any one)

Next year's assessable value of the property is, or may be, less than 90% of the previous year's
No longer the owner of the property, or will cease to be before the end of the year of assessment
Have elected Personal Assessment for the year of assessment of the provisional tax, and less tax may be payable under that method
Have lodged an objection to the previous year's property tax assessment

The most common reasons for applying to hold over provisional salaries tax are that next year's income is expected to fall below 90% of the previous year's, or that you are entitled to an allowance not taken into account in the provisional tax notice (such as a newly added dependent parent allowance). Meeting the conditions does not guarantee a full holdover; the IRD will assess the amount that can be held over based on the actual circumstances.

How to apply for a holdover of provisional tax

Application deadline

Of the two dates below, the later one applies:

28 days before the provisional tax payment deadline
Within 14 days after the date of issue of the tax demand note

If provisional tax is payable in two instalments, you can still apply for a holdover of the second instalment even after paying the first, but you must meet the deadlines above.

Method 1: written application (Form IR1121)

On the Inland Revenue Department website Download form IR1121
Enter the tax demand note number, the payment date and the reason for your application
Submit by one of the following methods:

it	Details
you can post	Inland Revenue Centre, 5 Concorde Road, Kai Tak, Kowloon, Hong Kong. Attention: Commissioner of Inland Revenue
Fax	2519 6896

Method 2: online application through eTAX

If you have already set up an eTAX account, you can submit your application directly in the system and receive confirmation immediately, which is more convenient than a written application.

FAQ

How much can provisional tax be reduced after applying for a holdover?

The amount of holdover is calculated in proportion to the reduction in income. For example, if your income is expected to fall by 20%, your provisional tax can be reduced by about 20%. Meeting the conditions does not mean provisional tax will be waived in full; the IRD will assess the final amount that can be held over based on the information and reasons you provide.

Can provisional tax be refunded?

Provisional tax is generally not refunded directly. Instead, it is offset after the following year's final assessment. If the tax actually payable is lower than the provisional tax paid, the overpaid portion is carried forward and credited against the next assessment; if the taxpayer has stopped working or retired, a refund of the excess can also be applied for.

What are the consequences of giving false reasons to apply for a holdover?

Making a false application is tax evasion. Under the Inland Revenue Ordinance, on conviction each charge carries a maximum of three years' imprisonment and a fine of HK$50,000, and you must also pay a penalty equal to three times the amount of tax undercharged.

Will the 2025/26 one-off reduction be reflected in provisional tax?

No. The 100% salaries tax reduction for the 2025/26 year of assessment (capped at HK$3,000) applies only to the final assessment. It is not deducted from provisional tax, which taxpayers must pay on time.

How does salaries tax provisional tax relate to the final assessment tax bill?

They are usually issued together on the same tax demand note. The note sets out the final assessment amount (the difference after deducting provisional tax paid, or the refund) and the provisional tax for the following year, shown in separate columns.

Summary

Provisional tax is Hong Kong's pay-in-advance mechanism, and understanding how it is calculated helps you plan your cash flow ahead of time. If your income is expected to fall significantly next year, or you have new allowances not yet reflected in the provisional tax notice, assess early whether you qualify for a holdover and apply before the deadline.

If you need help assessing your eligibility for a holdover application, or want us to handle your tax filing, learn about our SetupHK tax filing services.