Hong Kong Company Tax Returns

Hong Kong companyThe basic process of doing accounts and filing taxes

The basic process of Hong Kong company bookkeeping and tax filing includes bookkeeping, auditing (auditing) and tax filing.

1. Bookkeeping and organization of documents

The company needs to organize original documents and prepare journal vouchers, ledgers and general ledgers to reflect the company's operations.

① Voucher entry: this is the basis for making accounts, you need to classify and enter the supporting documents (vouchers) of the company's economic operations into the accounting books in accordance with the accounting subjects to ensure the accuracy and completeness of the vouchers.

② Accounting Entry Accounting: Classify and make entries for the amounts in the vouchers according to the accounting entries, and account for them to ensure the correctness and reasonableness of the accounting entries.

③ Accounts processing: a series of tasks such as summarizing, classifying, accounting for and adjusting accounting entries to ensure the accuracy and completeness of accounts.

④ Statement Preparation: Prepare various financial statements, such as balance sheet, income statement, cash flow statement, etc., based on the results of account processing to ensure the accuracy and completeness of the statements.

2. Audit (auditing) of Hong Kong companies

A licensed accountant in Hong Kong conducts a full audit of the company's accounts and assets and issues an audit report.

The Hong Kong Institute of Certified Public Accountants (HKICPA) requires Hong Kong auditors (known as auditors in Hong Kong) to obtain a special license and a practicing certificate. The time usually required for a Hong Kong company audit depends on the complexity of the company's financial position and the completeness of the documentation, typically about 2 months for a simple legal audit. All limited companies registered in Hong Kong must report financial statements on a statutory audit basis once a year in accordance with the Companies Ordinance.

3. Filing of tax forms and tax returns

After the company director confirms the audit report and signs it, together with the company statement and completed tax forms, etc., submit it to the Inland Revenue Department of Hong Kong for tax filing.

4. Tax assessment of Hong Kong companies

The Hong Kong Inland Revenue Department (IRD) will assess the tax based on the tax return and audit report submitted by the company to determine the amount of tax payable. Upon completion of the tax assessment, the IRD will issue a tax assessment letter and the company is required to pay the tax according to the amount stated in the letter. If the audit report shows that the company is not required to pay tax for the previous year, the IRD will not levy any tax. Therefore, filing a tax return is not the same as having to pay tax.

Hong Kong company to do accounts and tax returns required information

When conducting an audit of a Hong Kong company's accounts, you will need to provide a range of information, including

Basic company information (e.g. Certificate of Incorporation, Business Registration Certificate, Articles of Incorporation, etc.), bank statements and water bills, purchase and sales contracts or purchase and sales invoices, expense bills (e.g. salaries, rent, office expenses, etc.), audit report for the previous year (not the first tax return), and audit reports of affiliated companies (if any). This information is essential to ensure the accuracy and completeness of the audit.

1. Completed tax forms

2. Audit report of the Hong Kong company for the previous year, and the audit report of the associated company (if any)

3. Financial statements and bank statements of Hong Kong companies

4. Accounts receivable at year-end, accounts payable at year-end

5. Hong Kong Certificate of Incorporation, Business Registration Certificate, NNC1 form, Annual Return (over one year), Articles of Association, etc.

6. All the company's purchase and sales invoices, delivery notes, packing lists, bills of lading and sea waybills.

7. Wages, rent (lease contract or agreement must be provided), records of tax returns filed by the employer on behalf of the employee, freight charges, etc.

Tax types and timing of Hong Kong company tax returns

1. Profits Tax Table

Hong Kong company profits tax forms must be filed within one month of the date of issue, e.g.: tax forms issued in April 2023 need to be filed by May 2023 to the IRD. Hong Kong has implemented a two-tier profits tax system: the profits tax rate for the first HK$2,000,000 is 8.25% (for corporations) and 7.5% (for unincorporated companies), and the exceeding portion is taxed at the standard rate of 16.5% (for corporations) and 15% (for unincorporated companies).

Profit tax filing time:

A newly registered Hong Kong company will receive the tax form issued by the Inland Revenue Department in the 18th month of the company's incorporation, at which time the company will need to make the 1st tax declaration, and will need to complete the audit and tax related work within 3 months, as well as determine a financial year end date for the company.

A non-newly incorporated Hong Kong company files its tax return every year on the company's year-end date, which must be completed within 1 month.

Among them, those with year-end dates in March and December can apply to the Inland Revenue Department of Hong Kong for a maximum of 8 months' extension.

2. Salaries tax table

If you or your employees receive salary from a Hong Kong company, they are required to file a salaries tax return. The standard rate of salaries tax is 15% and the Inland Revenue Department may grant exemptions of up to 75% per year. Salaries tax forms also have the year, company file number, company name and address. Salaries tax forms need to be replied within one month from the date of issue by the Inland Revenue Department, and a fine of HK$3,000 will be imposed if the time limit is exceeded.

Time for filing salaries tax returns: The time for filing salaries tax returns in Hong Kong is usually from April 1 to May 31 each year, and the filing period is 60 days.

Hong Kong Company Accounting and Taxation Fees

Bookkeeping fees cover the time and cost of an accountant's work in compiling and analyzing a business's financial data and preparing financial statements. The cost of bookkeeping and tax preparation varies by the following factors:

1. Company size and volume of business: Small enterprises have relatively low costs for bookkeeping due to their relatively small volume of business. Large enterprises, on the other hand, naturally incur higher costs due to the large volume of business and the complexity of transactions.

2. Bank flows and turnover: the volume of financial transactions directly affects the complexity and time required to perform the accounting work.

For companies with no operational activities, the cost of doing accounts and tax returns may be low, typically a few thousand RMB.

Hong Kong companies to do the audit and tax return considerations

The following points need to be taken into account when doing the audit of accounts and tax returns for Hong Kong companies:

Complete tax returns on time:Hong Kong companies need to complete the Hong Kong company accounts and tax returns on time according to the year-end date, and also need to take the initiative to complete the tax declaration work if they have not received the tax form, and will face penalties for late payment;

Submission of audit reports:All Hong Kong companies are required to submit an audit report when filing tax returns to ensure compliance of tax returns.

Choose a professional accounting firm:Auditors qualified as Certified Public Accountants (CPA) in Hong Kong are engaged to carry out the audit work to ensure the authority and accuracy of the audit report.

Cooperate with the audit process:Actively provide all information and documentation required by the auditor during the audit process to ensure the smooth running of the audit.

Accurate recording of transactions:Ensure that all company business transactions are accurately and completely recorded, including all aspects of income, expenses, assets, and liabilities.

Take care to retain original documents:Properly keep all original documents related to the transaction, such as invoices, receipts, contracts, etc., for review by the IRS.

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