Hong Kong accounting and tax considerations

Tetra Consultants provides Hong Kong accounting and tax service. To ensure your business is compliant with Hong Kong regulations, our accounting team will assist with your business’ annual returns, financial statements, tax compliance, audits and bookkeeping.

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    Hong Kong accounting and tax service

    Many clients engage Tetra Consultants to provide Hong Kong accounting and tax services after Hong Kong company registration. Despite having one of the lowest corporate tax rates in the world, the jurisdiction is not deemed as an offshore tax haven due to its strict compliance with the international standards of reporting. Tetra Consultants will timely complete your firm’s financial statements, and annual returns and manage auditors on your behalf and without the need to travel. 

    Contact us to find out more about your tax obligations. Our team of experts will revert within the next 24 hours.

    Who is the Hong Kong Tax Governing Authority?

    The Inland Revenue Ordinance and its subsidiary legislation the Inland Revenue Rules is the governing statute regarding corporate and individual taxation matters in Hong Kong.

    Furthermore, stamp duty and estate duty are imposed under the Stamp Duty Ordinance and Estate Duty Ordinance respectively.

    The Inland Revenue Department is committed to collecting revenue in an efficient and cost-effective manner and aims at promoting compliance through rigorous enforcement of law, education, and publicity programs.

    The Commissioner of Inland Revenue, who also holds the statutory appointments of Collector of Stamp Revenue and Estate Duty Commissioner, is responsible for the administration of the following Ordinances: Betting Duty Ordinance, Inland Revenue Ordinance, Estate Duty Ordinance, Stamp Duty Ordinance, Tax Reserve Certificates Ordinance, Business Registration Ordinance, and Hotel Accommodation Tax Ordinance.

    • For onshore companies, income generated by doing business locally will be subjected to a corporate tax rate of 16.5%. This rate is one of the lowest in the world.
    • For offshore companies, income generated by doing business outside of Hong Kong will be subjected to no corporate tax. In order to qualify for this, your business needs to be properly structured.
    • According to the Inland Revenue Department, Hong Kong follows a two-tiered profit tax regime. If you require any clarifications, contact us and our tax expert will be in touch with you shortly.
    • All businesses are required to file annual audited financial statements, regardless of onshore or offshore.
    • Annual corporate income tax must be filed before 1st April annually. If delayed, penalties will be imposed by the Inland Revenue Department.
    • Each company is free to choose any month-end as its accounting year-end date however the first accounting period can cover a period no longer than 18 months from the date of incorporation. Once the accounting year end date is chosen then the company must produce its accounts every 12 months using the same accounting year-end date.
    • The tax year-end in Hong Kong is 31 March and we, therefore, suggest to clients that they select 31 March for their accounting year-end date to coincide with the date when tax returns will be issued by the Hong Kong tax authorities.
    • The Hong Kong Companies Act states that every active company must get its financial statements and accounting records audited by an auditor on an annual basis.
    • Unless your company has applied for a dormant status, you are required by law to file an annual return (Form NAR1) with the Companies Registry on the anniversary of its incorporation. The annual return (Form NAR1) details the corporate structure of the company including details of the shareholders, directors, and company secretary. Failure to comply with this will result in late penalties and the company directors and shareholders are liable to prosecution and fines. Tetra Consultants will timely and accurately prepare and file the annual return on behalf of our clients.
    • Your Hong Kong company is required to file an annual tax return with the Inland Revenue Department within one month from the date of notification. In order to accurately file an annual tax return, Tetra Consultants will assist you to prepare and submit balance sheets, auditor’s reports, profit and loss accounts, and tax computations.
    • Your Hong Kong company is required to submit a return to the Hong Kong tax authorities before 30 April each year detailing the remuneration paid to your employees during the year to 31 March. If you have paid no remuneration, you are still required to file and inform the government of the same.
    • All Hong Kong Companies are required to keep proper records and accounts of business transactions. Your company must maintain proper records of its financial transactions and retain the source documents, accounting records and schedules, bank statements, and any other records of transactions connected with your business.

    Double Taxation Relief

    Hong Kong has a quickly expanding double tax agreements (DTA) network, and also several tax information exchange agreements (TIEA) which have been concluded and are effective.  The Hong Kong government aims to expand Hong Kong’s DTA network, especially with respect to countries along with the so-called ‘Belt and Road’ business initiative, with a view to bringing the total number of DTAs to at least 50 over the next few years.

    Hong Kong does not incorporate limitation of benefits (LOB) clauses in the DTAs that have been concluded so far.  Nonetheless, most of the existing DTAs concluded by Hong Kong already contain specific provisions to prevent treaty abuse under specific articles (e.g. those on dividends, interest, and royalties), based on whether one of the main purposes of the arrangement or transaction is to obtain treaty benefits. Accordingly, Hong Kong has opted to adopt a principal purpose test only in respect of the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting’ (MLI), as discussed in more detail below.

    In practice, both Hong Kong incorporated entities and foreign-incorporated entities must have an appropriate level of a business substance in Hong Kong in order to obtain a Certificate of Resident Status from the Inland Revenue Department. The Certificate of Resident Status should be obtained from the Inland Revenue Department in order to claim benefits as a Hong Kong tax resident under applicable double taxation agreements / DTAs.

    Contact us now for a free consultation. Our team of experts will revert within the next 24 hours.

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