Hong Kong is ranked third amongst 190 economies in 2019 under the ease of doing business index, developing itself to become the financial hub of Asia for investments and trades. The country was able to earn its “world’s freest economy” given the low corporate tax rates, multiple free trade agreements and support schemes for Small and Medium Enterprises (SMEs), coupled with its seamless incorporation process that allowed both local and foreign investors to register business in Hong Kong with ease. Given its strategic location, the country is also known to be a gateway to mainland China, attracting many western corporations and investor’s attention to incorporate in Hong Kong. The country also hosts a wonderful business operating environment, with support schemes, competitive talents and access to natural resources ready to be tapped on by investors.
With compelling reasons for investors to register company in Hong Kong, many hope to be part of this free open market. Before you incorporate in Hong Kong, allow Tetra Consultants to share with you x accounting and tax obligations to know about private limited company Hong Kong.
1. Scope of Tax:
The first thing to know about accounting and tax obligations about private limited company Hong Kong is the scope of tax. The general rule of thumb for profit taxes in Hong Kong is that, as long as your core income generating activity lies within the country and jurisdiction, you are liable to pay for the taxes. Therefore, there is no distinction to be made between residents or non-residents in this regard as they both subject to the general rule. But a thing to note is that, there will not be taxes levied on profits arising abroad, even if they are remitted to Hong Kong.
In Hong Kong, investors can expect up to only 3 direct taxes that will be imposed upon them. The 3 main taxes are:
1) Profit Taxes: For incorporated companies, including private limited company Hong Kong, the first HK$2 million of profits is subject to 8.25%. Additionally profits above the HK$2 million benchmark will be subjected to a tax rate of 16.5%. For unincorporated firms, sole proprietorships and partnerships, the tax rate follows the same two-tiered system but is at a rate of 7.5% and 15% for both benchmarks respectively.
2) Salaries tax is capped at 15%.
3) Property tax is also capped at 15%
2. Tax Deductions:
The second thing to know about accounting and tax obligations for private limited company Hong Kong is that there are avenues for tax deductions. Some of the tax deductions available includes:
1) For expenditures on building refurbishment, incurring capital expenditure on renovation and refurbishment of your business premises will entitle you to deduct that expenditure across a period of 5 years in yearly equal instalments, starting from the year in which the specific expenditure was incurred.
2) For expenditures on plant and machinery for manufacturing computer hardware and software, full deductions are allowed during the basis period in which the expenditure was incurred.
3) For expenditure on environmental protection facilities, machineries, vehicles and environmental protection installations are subject to full tax deduction.
3. Tax Returns Filing:
The third thing to know about accounting and tax obligations for private limited company Hong Kong is about tax returns filing. For most businesses, supplementary tax forms on specific tax incentives and preferential regimes have to be filed together with the main tax return document during filing. The supplementary forms range from “S1 to S14”, specifying different tax deductions in the different sectors of businesses. The profit tax returns and supplementary forms should be filed within 1 month from their date of issue.
4. Annual Filing Requirements:
The fourth thing to know about accounting and tax obligations for private limited company Hong Kong is that companies incorporated in the country under the Companies Ordinance are required by law to file annual returns. The annual returns filing has to be signed off by the director of the company, the secretary, manager or any authorised representative register with the Companies Registry of Hong Kong. If your company has no relevant accounting transactions for the fiscal year, there is the option of applying for a dormant status. Companies under dormant status will be exempted from filing annual returns.
Annual returns have to be filed once a year, within 42 days of the start date of the company’s incorporation. Late filing will apply a higher registration fee for the company and subject the officers of the company to be liable to prosecution and fines.
Engage Tetra Consultants as we make your registration of business in Hong Kong a smooth and hassle-free process. The team provides a comprehensive service package that includes planning and strategizing with our clients to select a suitable business entity, completing the registration and documentation processes, obtaining required licenses, opening a corporate bank account, and ensuring your compliance with the government regulations.
Contact us to find out more about company registration in Hong Kong and our dedicated and experienced team will revert within the next 24 hours.