Every Hong Kong limited company must be audited every year. The financial statements must be prepared by a certified public accountant (CPA). The audited financial report should be submitted to the Inland Revenue Department (IRD) in accordance with the financial reporting framework applicable to the company.
In general, the Inland Revenue Department (IRD) issues profits tax return to a limited company within 18 months of its incorporation.
Once a limited company receives a profits tax return, it needs to return to IRD before the deadline with a financial report and a tax computation for assessment.
We suggest you should start a few months after your company start running. Please keep all the bank statements, commercial invoices, contracts, etc in a safe place.
Make sure you remember each transaction’s nature before your memory goes away.
According to your company’s fiscal year-end, be aware of the deadline for your company to submit tax returns.
Contact our experts to get advice on when and how to start the audit.
If your company records a profit, you must pay profits tax.
There are three major types of taxes in Hong Kong: Profit Tax, Salaries Tax, and Property Tax.
Hong Kong does not have a Value-Added Tax (VAT).
If a company has stopped doing business and has no transaction, the company's member can pass a resolution to designate the company as "dormant".
A company in a "dormant state" can retain its identity as a limited company, but is exempt from the submission of annual returns and audited report.
Yes, all limited companies established in Hong Kong, including those operating overseas, need to go through an audit process each year. This is a legal requirement for all limited companies in Hong Kong under the "Hong Kong Companies Ordinance" and the "Inland Revenue Ordinance", so companies must submit statutory audits in accordance with Hong Kong's financial reporting standards.
The auditor will first understand the company's business to start the audit. Subsequently, documents are collected as audit evidence, such as invoices, goods receipts and dispatch notes, sales and purchase contracts, purchase orders, sales orders, lease agreements, bank deposit slips, bank statements, bank loan agreements, financial statements, etc. to support the data disclosed in the financial statements. In addition, bank balances, accounts receivable, and accounts payable will be confirmed via audit confirmation letters to verify year-end balances. Of course, some other audit tests and procedures are also carried out. During the audit, auditors will raise queries to the management. Auditors will express an audit opinion in the audit report on whether the financial statements are fairly presented in accordance with accounting standards, and whether there are any material misstatements or other misreporting.
Upon completion of the audit, the auditor will prepare an audit report, along with tax computations and the completed profits tax return for the company directors to review and confirm. After the audit report is signed by the company directors, it will be submitted to the Hong Kong Inland Revenue Department for record along with the profits tax return.
An auditor is an independent practicing accountant registered with the Hong Kong Institute of Certified Public Accountants (HKICPA) and is qualified to provide audit services for Hong Kong companies. Auditors write audit reports and express opinions based on the results of the audit after it is completed.
Hong Kong adopts a territorial concept in levying profits tax, only profits arising in or derived from Hong Kong are taxable in Hong Kong. Whether trade profits come from Hong Kong depends on a variety of factors, such as:
Therefore, local companies that negotiate contract terms with customers outside of Hong Kong and conduct related business outside of Hong Kong can claim that the trade profits generated from this are not taxable in Hong Kong.
If the company successfully applies for offshore profits tax and proves that its profits come from outside Hong Kong, then those offshore profits will be tax-free in Hong Kong. To apply for offshore tax filing, very detailed information and reasons need to be submitted to the Inland Revenue Department. Once the company obtains approval from the Inland Revenue Department for offshore tax status, it can enjoy a "0" tax rate automatically each year, unless the business model changes.
We can assist you in reviewing your current business to determine the possibility of making an offshore claim, assist you in collecting documentary evidence to support the claim, and handle inquiries from the Inland Revenue Department regarding the claim.
How does a Hong Kong company apply for a Hong Kong tax residency certificate?
A tax residency certificate is a document issued by the Inland Revenue Department to Hong Kong residents as proof of their Hong Kong residency, so they can apply to enjoy the benefits under comprehensive agreements/arrangements to avoid double taxation. The Hong Kong competent authority will issue a tax residency certificate only after the comprehensive agreement/arrangement to avoid double taxation signed with the relevant tax jurisdiction comes into effect. For each comprehensive agreement/arrangement to avoid double taxation, a company will only be issued one tax residency certificate per year. Therefore, the company must plan one year in advance.
We provide a one-stop service for the application of the Hong Kong tax residency certificate for Hong Kong companies.
Basic requirements:
CWC CPA is a full-service accounting firm established in 2011 and operates in both Hong Kong and China. We provide comprehensive and quality accounting, auditing and consulting services to clients.
E-commerce
enterprises usually have
their inventories kept in a third-party warehouse,
therefore, it may not be necessary/possible to
conduct an on-site stock-take.
Nowadays, many e-commerce businesses use different payment platforms to pay or receive money, which is different from traditional banking.
The income of an e-commerce enterprise may not necessarily be determined by a “black and white” contract between the buyer and the seller.
In traditional trade, the goods must be delivered to the buyer, and the buyer needs to sign a receipt to confirm.
Nowadays, the buyer may buy the goods from a third-party e-platform. There is no more written confirmation signed by the buyer.