From 1 900 USD
From 1 200 USD
The fee depends on the number of employees
The calculator allows you to calculate the approximate cost of maintenance of accounting services to support and audit the company.
CalculateThe current corporate and tax legislation of the Hong Kong Special Administrative Region of the People’s Republic of China (“Hong Kong”) requires all companies registered in Hong Kong to annually file the following documents with the Hong Kong Inland Revenue Department:
The Companies Ordinance states that financial statements of all companies must be audited.
The auditor must be a member of the Hong Kong Institute of Certified Public Accountants and hold an audit licence.
Exemption from audit is only available to dormant companies. Preparing audited financial statements for a dormant company is not mandatory until the company has started doing business.
A dormant Hong Kong company is only required to file a tax return.
The main criterion for qualifying as dormant is the absence of any transactions that must be shown in the accounting records.
The below table allows to determine which category, dormant or active, a company falls into.
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Criteria
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Dormant
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Active
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Bank accounts (including a minimum number of transactions; the only exception is fees charged by the bank)
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no
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yes
|
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Cash settlements
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no
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yes
|
|
Contribution to the authorized capital of other entities
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no
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yes
|
|
Other investments
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no
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yes
|
|
Agreements made (for purchase and sale of goods/services, for acquisition of intellectual property, loan agreements, etc.)
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no
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yes
|
|
Invoices received or issued (except invoices for company administration, such as GSL invoices)
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no
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yes
|
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There are none of the above transaction. The company does not generate any profit. The company’s only expenses are invoices for its administration.
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yes
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no
|
The first financial period of a company starts on the incorporation date and can last from 12 to 18 months. The end of the first financial period is normally the last day of the month in which the company was registered, i.e. if the incorporation date is 5 December 2019, the first financial period ends on 31 December 2020. However, the company can choose to set a different end date of the first financial period. Subsequent financial periods will last 12 months.
The tax year (year of assessment) ends on 31 March.
The Hong Kong Inland Revenue Department (IRD) issues profits tax returns (PTR) in bulk on the first business day of April each year. The PTR must be filed with the IRD within 1 month of the date printed on the document (date of issue).
However, the deadline for filing a PTR can be extended in some cases. To do this, it is necessary to check the code specified on the tax return:
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Accounting date
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PTR code
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Filing date
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1 April – 30 November
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"N" Code
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No extension
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1 – 31 December
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"D" Code
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15 August
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1 January – 31 March
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"M" Code
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15 November
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For new companies, the first return arrives 12-18 months after the date of incorporation, the second and subsequent returns – on random dates after the filing of the first tax return, regardless of whether the company is dormant or not.
The deadline for submitting the first PTR is 4 months from the date specified on it.
A Hong Kong company does not incur a penalty for late filing of financial statements, however, audited financial statements data are required to file a tax return.
Late filing of a Hong Kong tax return is an offence and is subject to penalties.
If the tax return is not filed on time, the IRD issues a notice charging a fine of 1 200 HKD (~ 160 USD).
If the tax return is filed no more than six months late, the fine increases to ~ 360 USD (if converting from Hong Kong to USD).
If the tax return is filed more than six months late, the IRD sends a letter summoning a representative of the company to court to explain the reasons for not filing a tax return. As a result of the hearing, the court may charge a fine of up to 10 000 HKD (~ 1 300 USD) plus three times the amount of tax due in the reporting period.
If a company fails to file its tax return on time (with financial statements attached), and the previous period reports showed profit, the IRD has the right to demand an advance payment of profits tax, even if the company operates outside Hong Kong and, consequently, is exempt from tax on its profits. The current profits tax rate in Hong Kong is 16,5%.
Late filing of a Hong Kong employer’s return is an offence and is subject to penalties.
Late filing of the return carries a fine starting from 2 400 HKD (~ 310 USD). A filing delay in the next year will increase the fine.
The Companies Ordinance requires all Hong Kong companies that have subsidiaries to prepare and submit consolidated financial statements.
Subsidiaries are companies that are more than 50% owned by another entity. There are cases where a company owned 50% or less is considered to be a subsidiary if it is controlled by the parent company. A company controls a subsidiary if the following conditions are met:
A company is exempt from preparing consolidated financial statements if its parent company prepares consolidated financial statements.
In practice, many companies do not prepare consolidated financial statements. In this case, the auditor’s report is issued with the following reservation:
“The company has not prepared consolidated financial statements in accordance with section 9 of the Hong Kong Financial Reporting Standard for Private Entities issued by the Hong Kong Institute of Certified Public Accountants and in compliance with the Companies Ordinance. In our opinion, these financial statements do not contain enough information about the subsidiary to give a true and fair view of the state of affairs of the group as at … (end date of the reporting period).”
This is not an obstacle to filing the financial statements: the tax authorities accept them with such a reservation. However, if the financial statements are to be circulated to a bank or potential investors or other stakeholders, this reservation in the statements may not be acceptable.
To prepare consolidated financial statements, it is necessary to provide the audited financial statements of a subsidiary. If a subsidiary cannot provide audited financial statements, its financial statements will be checked by Hong Kong auditors.
