Section 14 of Inland Revenue Ordinance levies profits tax on a person carrying on a trade, a business or a profession in Hong Kong in respect of his profits derived from Hong Kong. Section 2 defines "person" to include a partnership. Section 22 empowers the Revenue to issue a profits tax assessment on a partnership.

Normally, the precedent partner is responsible to file a Profits Tax Return (BIR 52) for every year of assessment. According to Section 2, "precedent partner" is the one first named in the partnership agreement. If there is no such agreement, he will be the first named in the usual partnership name or in any statutory document such as Business Registration Certificate.

If the precedent partner fails to file the tax return or to do any acts required by the Ordinance (including payment of tax), every partner will be jointly and severally liable to do it (including payment of the outstanding tax of the precedent or other partners).

The tax return must be supported by the following:

1. a certified copy of audited Balance Sheet and Profit and Loss Account;

   
   

2. a tax computation showing how the Assessable Profits are computed from the accounting profits;

   
   

3. a schedule showing he allocation of Assessable Profits between partners, taking into account any salaries payable to partners, and balance apportioned in their profit and loss sharing ratio;

   
   

4. schedules of the following items (where applicable):

   
   

• mandatory contributions made under the Mandatory Provident Fund Schemes Ordinance in respect of each partners;

  
  

• capital expenditure incurred, capital assets sold, depreciation charged in the accounts and assets not in use at the end of the basis period;

  
  

• details of expenditure incurred on, and disposal proceeds of, scientific research;

  
  

• details of expenditure incurred on refurbishment of buildings --- the location and the usage of building during the year;

  
  

• details of the bad debts written off and provided for including the name of debtors and reasons therefor;

  
  

• details of any service / management fee received including name and address of each payer,

  
  

• details of interest paid or payable, including name and address of the lender, any security to the lender, and the usage of the loan;

  
  

• details of income claimed to be with a non-Hong Kong source;

  
  

• details showing the name and address of payments involving contractor / sub-contractor fees, management fees, commission, royalties, legal and other professional fees, and hiring charges for the use of a movable property in Hong Kong;

  
  

• details of bad debt provisions and write-offs;

  
  

• details of change in valuation of stock; and

  
  

• details of rent payments including name and address of the landlord, the property location, the total rent paid and the period covered.