Filing Hong Kong Tax Return

Many investors or businessmen are interested in investing in Hong Kong or have already set up limited liability companies in Hong Kong. Most have one question on their mind: ‘How do I pay less tax?’ Do I need to pay tax immediately after filing my tax return? This article will explain the procedures of tax filing in Hong Kong.
In general, profits tax returns for corporations are issued on 1 April every year (individual income tax returns will be issued on 1 of May) of each year. Taxpayers are required to complete and send the tax return back to the Inland Revenue Department (“IRD”) within 1 month from the date of issue of the return (the submission deadline will be different if block extension is applied). To support the tax filing, the following supporting documents and schedules also need to be submitted:
  • Audit accounts prepared by an independent auditor; and
  • Tax computation which is prepared on the basis of the audit accounts.
When the Tax Return is filed, the information provided will assist the Assessor in preparing the correct assessment and any claims for deductions for related expenses and tax allowances will be duly taken into account. Please note that the tax assessment will normally be issued 8 to 12 weeks after the tax return is submitted.
Taxpayers who have earned no income or at an amount below their allowance entitlements, do not need to pay tax. Nonetheless, should they receive a tax return from the IRD, they are still required to complete and send it back to the IRD in time.
If the company has trading transactions being negotiated and concluded outside Hong Kong, or are providing services which are rendered outside Hong Kong, the profits from its trading and servicing activities may claim offshore activity and is therefore not subject to profits tax. However, the taxpayer will need to file their tax return to lodge the offshore claim first and the IRD will examine all documents and evidence to confirm its offshore claim, the IRD will then issue a letter confirming the tax status.
If you do not file your tax return on time, you may be required to pay a penalty, or even face prosecution. A further possible consequence is that you may be required to pay more tax.
For more details on the above, please contact Kenneth Au at 852 35529093 or Kevin Lei at 852 5588 5035 at Zetland Tax Advisors.

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