January, 2021

Author: Lily Chow

A limited company incorporated in Hong Kong must comply with several duties annually, namely accounting, auditing, tax filing, annual return and renewal of employer’s return and business registration certificate to maintain the legality of the company. Failure to do so will trigger compliance issues and the Hong Kong government has the right to impose penalties of non-compliance.

We have noticed recently that the Hong Kong Inland Revenue Department (HKIRD) has been taking an aggressive approach in revenue collection and appears to be promoting compliance through rigorous law enforcement. With a view to reducing the noncompliance risk with the HKIRD, we recommend taxpayers conduct an annual health check in the following areas:

Record Keeping

Section 51C of the Inland Revenue Ordinance (IRO) requires that “every person carrying on a trade, profession of business in Hong Kong to keep sufficient records in the English or Chinese language of his income and expenditure to enable assessable profits to be readily ascertained”. Failure to comply with these requirements without reasonable excuse may be liable to a maximum fine of HK$100K.

Auditor’s Report and Profits Tax Filing

Preparing an audit report and filing a profits tax return every year are two of the most important tasks a limited company in Hong Kong must carry out as this will determine the amount of profit tax the Company is required to pay. Any delay in submitting the audit report, profits tax return and/or profits tax computation with the HKIRD; or late payment of tax shall be subject to financial penalty and/or actions.

In Hong Kong, the audit report must be produced by a HK Certified Public Accountant (CPA) pursuant to Hong Kong’s accounting practice. Even if the Company is loss making according to its accounting records, it is still required to have an audit report to support the calculations of the loss. In some cases it may be that a different outcome is reached.

The HKIRD generally gives one month to file the profits tax return, data of which must come from the audit report. The profits tax return can be complicated and could take considerable time to complete.

What can we do?

Zetland Tax Team can provide following:

• Accounting/book keeping services on an annual, quarterly or monthly basis
• Auditor’s liaison services
• HK Profits Tax Compliance and Advisory services

We advise you to contact us via email at tax@zetland.biz or contact Lily Chow via phone at 3552 9097 to start the process right away.