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Hong Kong companies will receive the first profits tax return issued by the Inland Revenue Department (IRD) within 18 months of their establishment. The first tax return has to be filed together with the audited accounts within 3 months from its issuance date. Thereafter, year by year within 1 month from the return issuance date. It is a legal requirement for the director to prepare audited accounts regardless of whether the company has profits or not.
In order to prepare the financial statements for auditing, the following information is needed:
1. Government documents: articles of association (only needed for the new company in the first year), business registration certificate, documents filed to the Companies Registry and documents stamped by Stamp Duty office. 2. Last year's audit report and tax computation 3. Company's assets and expense documents: 4. All purchase and sales contracts and invoices 5. Bank documents: monthly statement 6. Any other documents related to expenses of the company
There are three types of profits tax declaration:
1. No operation declaration The company does not incur any commercial transactions, including any banking transactions during the assessable year. The company can then complete the return without submitting an audited accounts.
2. Business commence Tax return must be submitted together with the audit reports within the deadline. If there is profit, you will receive a tax payment notice from the IRD.
3. Offshore Exemption (Offshore Claim) Offshore claim refers to the profits of a company does not arise nor derive from Hong Kong and that the company applies to IRD for tax exemption ie to pay zero taxes.
Application procedure Submit tax return together with audited accounts and apply for offshore claim→ IRD issues a reply requesting aupporting documents to substantiate the claim → the applicant response with the requested supportings → communication between IRD and the company until all issues are clarified → IRD informs result as to approve or reject.
Key aspect Tax compliance is an important aspect of a company. There are key issues you should attend to:
1. It is a taxpayer (the company)'s responsibility to file its tax return. Non receipt of tax return doesn’t mean that the company does not need to comply with tax reporting. 2. If a Hong Kong company fails to file tax returns within the specified time limit, a fine will be issued. It is recommended to start preparation of financial statements and arrange audit well before tax return overdue. 3. Hong Kong companies need to submit corresponding bills and invoices for tax declaration as and when required. It is advised to group all the supporting invoices into respective categories to facilitate book keeping.
If you want to know more, please do not hesitate to contact us:
Whatsapp : (852) 6499 4686 Phone : (852) 2186 6936 Email : info@intershores.hk
Disclaimer: Whilst reasonable care has been taken in provision of information above, it does not constitute legal or other professional advice. INTERSHORES does not accept any responsibility, legal or otherwise, for any error omission and accepts no responsibility for any financial or other loss or damage that may result from its use. In particular, readers are advised to take appropriate professional advice before committing themselves to any involvement in jurisdictions, vehicles or practice. |
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