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Accounting & Auditing
According to the Hong Kong Companies Ordinance, annual financial statements of a company incorporated in Hong Kong are required to be audited by a Certified Public Accountant. Our partners are qualified and certified auditors who can help to prepare the audit reports according to Hong Kong Accounting Standards and Auditing Standards as required by the Hong Kong Institute of Certified Public Accountants.
18 months after registration a company receives the first Profit Tax Return (PTR). By this time, the company needs to arrange its all accounting records and within 3 months from receiving the first PTR to submit the first audit report and completed tax return to the Hong Kong Inland Revenue Department (IRD).
Thereafter the company will receive PTR once a year, and thus a company has to do accounting and auditing on an annual basis.
18 months after registration a company receives the first Profit Tax Return (PTR). By this time, the company needs to arrange its all accounting records and within 3 months from receiving the first PTR to submit the first audit report and completed tax return to the Hong Kong Inland Revenue Department (IRD).
Thereafter the company will receive PTR once a year, and thus a company has to do accounting and auditing on an annual basis.
Accounting and auditing procedure
Preparation of all financial documentation by the client
The company prepares and hands over to the accountant all the financial documentation they have, i.e. bank statements for all accounts held by the company, sales and supplier invoices, shipping bills and other outgoing and incoming payment documents with details of payments. All these documents are provided for the reporting period.
The company prepares and hands over to the accountant all the financial documentation they have, i.e. bank statements for all accounts held by the company, sales and supplier invoices, shipping bills and other outgoing and incoming payment documents with details of payments. All these documents are provided for the reporting period.
Drawing up an accounting report
An experienced accountant then prepares a profit and loss statement and a balance sheet based on the documentation provided by the client. These documents must be properly prepared in accordance with the established requirements, otherwise it won’t be accepted by the auditor.
An experienced accountant then prepares a profit and loss statement and a balance sheet based on the documentation provided by the client. These documents must be properly prepared in accordance with the established requirements, otherwise it won’t be accepted by the auditor.
Drawing up an audit report
Professional certified auditor from Hong Kong carefully checks all documents and draws up an audit report, then provides it to the client for review. The client checks the prepared report and signs it.
Professional certified auditor from Hong Kong carefully checks all documents and draws up an audit report, then provides it to the client for review. The client checks the prepared report and signs it.
Submission of audit report to the tax authority
The original auditor’s report with the client’s signature on it and the filled PTR are submitted to the tax authority by the auditor. From that moment on, the company’s obligation to provide a tax report is considered fulfilled. The company’s report and PTR will be checked by the tax authorities within a few months after submission.
The original auditor’s report with the client’s signature on it and the filled PTR are submitted to the tax authority by the auditor. From that moment on, the company’s obligation to provide a tax report is considered fulfilled. The company’s report and PTR will be checked by the tax authorities within a few months after submission.
Tax rates
There is a territorial principle of charging income tax in Hong Kong, which means that Hong Kong is not an offshore zone as many clients think. If a company is doing business in Hong Kong, it must pay income tax of 8.25% on the first 2 million HKD profits and 16.5% on any profit above that amount.
If the company has no activities at all in Hong Kong, it is exempt from paying income tax. Some other taxes include payments to the pension fund in the amount of 5% of the salaries of local employees. But if there are no such workers, a company doesn’t have to pay that tax.
If the company has no activities at all in Hong Kong, it is exempt from paying income tax. Some other taxes include payments to the pension fund in the amount of 5% of the salaries of local employees. But if there are no such workers, a company doesn’t have to pay that tax.
Offshore status of the company
If the company has no business activities in the territory of Hong Kong, it can request an exemption from payment of income tax after a special procedure.
The requirements for that include:
· Have no office or staff in Hong Kong,
· Director must be permanently located out of Hong Kong,
· Have no contracts with HK companies or signed in Hong Kong,
· Not to make any mutual settlements with residents of Hong Kong.
The requirements for that include:
· Have no office or staff in Hong Kong,
· Director must be permanently located out of Hong Kong,
· Have no contracts with HK companies or signed in Hong Kong,
· Not to make any mutual settlements with residents of Hong Kong.
Procedure
The tax-exempt process begins with an application to the IRD along with the audit report, in which the company, on the basis of its actual operations, requests an opportunity for tax-exempt status for a specified reporting period.
For successful obtaining offshore status it’s necessary to provide all invoices, contracts, shipping documents, confirming that the company has conducted activities outside of Hong Kong. In addition, the IRD may request confirmation that the company doesn’t have staff in Hong Kong, and the director was not in Hong Kong, or made only short visits (a report from the Immigration Department must be provided).
Unfortunately, obtaining tax-exempt status is not a one-time procedure. However, in case of successful obtaining the offshore status the next request for the preparation of profit tax return according to the usual practice will come from IRD not in a year after the first request (the first PTR), but in 3 years, and the company will need to report for three years at once, too.
The reasons for the absence of tax to be paid can be different: the company did not start operations, the company made a loss, the company requested a zero rate of income tax.
If the company, all its customers and suppliers operate outside of Hong Kong, and such a company has all the supporting documents, the chance of obtaining offshore status is very high. But in any case, the final decision always rests with IRD. The offshore status must be reconfirmed every seven years approximately. If a company has changed the type of activity, for example, from trade to services, then the IRD will send a request immediately upon such a change.
Sino Service is pleased to offer Account and Audit services. We provide the best service to our clients in a professional and accurate manner. The audit is provided by certified auditor in Hong Kong at attractive prices. Audit prices depend on the turnover for the period and the number of transactions.
For successful obtaining offshore status it’s necessary to provide all invoices, contracts, shipping documents, confirming that the company has conducted activities outside of Hong Kong. In addition, the IRD may request confirmation that the company doesn’t have staff in Hong Kong, and the director was not in Hong Kong, or made only short visits (a report from the Immigration Department must be provided).
Unfortunately, obtaining tax-exempt status is not a one-time procedure. However, in case of successful obtaining the offshore status the next request for the preparation of profit tax return according to the usual practice will come from IRD not in a year after the first request (the first PTR), but in 3 years, and the company will need to report for three years at once, too.
The reasons for the absence of tax to be paid can be different: the company did not start operations, the company made a loss, the company requested a zero rate of income tax.
If the company, all its customers and suppliers operate outside of Hong Kong, and such a company has all the supporting documents, the chance of obtaining offshore status is very high. But in any case, the final decision always rests with IRD. The offshore status must be reconfirmed every seven years approximately. If a company has changed the type of activity, for example, from trade to services, then the IRD will send a request immediately upon such a change.
Sino Service is pleased to offer Account and Audit services. We provide the best service to our clients in a professional and accurate manner. The audit is provided by certified auditor in Hong Kong at attractive prices. Audit prices depend on the turnover for the period and the number of transactions.
