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Basic principles to determine whether the salaries received is subject to Hong Kong Salaries Tax

As you are foreigner and under foreign employment of XYZ Limited (Hong Kong Limited company under the Hong Kong companies ordinance), the basic principles to determine whether the salaries received is subject to Hong Kong Salaries Tax as below:

 1.      If you visit to Hong Kong no more than 60 days in a calendar year or no services rendered in Hong Kong, then the salaries is exempted from Hong Kong Salaries tax.

2.      If you visit to Hong Kong more than 60 days in a calendar year, you will subject to Hong Kong salaries tax based on the portion of number of day visit in Hong Kong.

3.      The personal allowance for the calendar year from 1st April 2012 to 31st March 2013 was HK$120,000 (if married person, the allowance was HK$240,000). Therfore, if your salaries during the said period was less than the mentioned allowance, no Hong Kong Salaries Tax would be payable.

4.      Simply, Hong Kong Salaries Tax payable is calculated at progressive rates on your net chargeable income or at standard rate on your net income, whichever is lower.

 

Progressive rate: 2% of first HK$40,000 received; 7% of second HK$40,0000; 12% of third HK$40,000 and 17% would be charged for the remaining portion).

 

Standard: 15%

Hong Kong Tax Return (“PTR”), a “Nil” PTR fillings

Here is another case study when your company was incorporated on 29th February 2012 – here is an manual what the Inland Revenue Department Requires (IRD) once you company is in due to file the Tax Return (“PTR”).

 

Your company was incorporated on 29th February 2012. According to the statutory requirement under the Hong Kong law, your company is required to perform the first audit after 18 months from the date of incorporation. Hence, may I suggest you choose (say 31st December 2012 or 31st March 2013) to be your financial year end date. The first audit will then cover a period from 29th February 2012 to 31st December 2012/ 31st March 2013.

 

If your company has been commenced business, you need to prepare the following documents (up to 31 December 2012/ 31st March 2013):

 

          All sales invoices/ consulting service invoices;

          All purchases invoice/ subcontractor’s invoices;

          All expense receipts;

          All bank statements;

          General ledger and management account (i.e. Trial Balance, Balance Sheet and Income Statement). If this one you cannot provided, we can provide bookkeeping service to handle it.

 

If not yet commenced business, when Profits Tax Return (“PTR”) received, a “Nil” PTR can be filed to IRD, Hong Kong Tax Authority, with the declaration of not yet commence business by the director or company secretary of the company. Even if the company is not yet commenced business, in according to the statutory requirement (Hong Kong Companies Ordinance), the company still need to prepare an annual audited financial statements..

 

Normally, Inland Revenue Department (IRD), the Hong Kong Tax Authority, will issue Profits Tax Return to the company which incorporated over 18 months.  The first Profits Tax Return should be submitted within THREE months from the date of issuance.

Startupr is not a CPA (Certified Public Accountant, registered HKICPA – Hong Kong Institute of Certified Public Accountants) firm. CPA services are provided by independent CPA firms.

Startupr is merely acting as an agent in connecting your company and the CPA who has agreed with us that they will provide auditing services. In no way is Startupr acting as a CPA firm or providing auditing service in any way and your solicitor-client relationship is with the CPA and not Startupr. CPA is independent of Startupr and is not an employee of Startupr.
Startupr is not a CPA firm. Startupr is an agent for connecting Hong Kong companies with CPA. Startupr is not a CPA firm, is not engaging in an auditing practice and Startupr does not act as a CPA firm. Startupr does not provide auditing advice.
Nothing on Startupr is audit or CPA advice and you cannot rely on it. You should always consult an audit expert to get certainty of your accounting issues and obligations.

If required by client, Startupr will refer client and coordinate with independent CPA for provision of audit services – Startupr not responsible for actions or omissions of such CPA.

Hong Kong profit tax return schedule

Hello, we would like to share with you a few thoughts on the tax return especially the timing and when your company is in due.
 

Hong Kong tax are charge on territory basis, i.e. HK Profits Tax is charged on every person carrying on a trade, profession or business in Hong Kong in respect of his profits arising in or derived from HK (excluding profits arising from the sale of capital assets).

 

If your HK registered company (United media system limited) not provided any service or trading any goods in HK, the profit derived in such business is not subject to HK Profits Tax (i.e. Offshore profits).

 

According to the statutory requirement under the Hong Kong law, your company is required to perform the first audit after 18 months from the date of incorporation. Hence, may I suggest you choose (say 31st December or 31st March) to be your financial year end date. The first audit will then cover a period from date of incorporation to 31st December/ 31st March.

 

Normally, Inland Revenue Department (IRD), the Hong Kong Tax Authority, will issue Profits Tax Return to the company which incorporated over 18 months.  The first Profits Tax Return should be submitted within THREE months from the date of issuance.  Once reporting the financial year end date to IRD, the submission deadline of the Profits Tax Return together with the audited financial statements (for 2013) are as follows:

 

Financial year end as at Tax filing date Documents ready for audit
1) 1st January to 31st March 2013 15th Nov 2013 Not later than 1st Sept 2013
2) 1st to 31st December 2012 15th August 2013 Not later than 1st June 2013
3) Other dates than (1) or (2) e.g. 30th June 2013 30th April 2014 Not later than mid of Feb 2014

 

 

Accounting Case Study

We are happy to share with you a case study on “how to keep accounting for HK Limited Company“. Here a Q&A from a CPA firm. This is a case where 2 HK Limited companies invoice each other and the business is rendered abroad.

Hi,
XXX told me your company also provides tax advice and accounting. I am also interested in such services. Right away I have a tax inquiry that I would really like to get answered:
I would like to claim offshore profit for XXX Limited. XXX Limited  is purely a services company (consulting services in IT) I read your blog entry about tax in Hong kong and have tried to answer as per the below:  For services/ agency/ commission income, it will be a bit simpler. There are 3 criteria:1.      Who is the customers?-> This is the problematic part I guess, the end customer is in Japan, but XXX’s direct customer is YYY Limited (sub-contracting), which is a Hong Kong registered company.  So the invoices are sent to YYY Limited.

2.      Where and how the contracts are negotiated and concluded?

-> This is done in Japan

3.      Where the services are being rendered?  

-> This is done in Japan

 

Could you offer services regarding accounting and tax advice about items as the above one? Cheers

 

OUR response:

Dear xxx,

 

Thank you for your information.

 

As XXX Limited (“XXX”) paid subcontracting fee to YYY Limited (“YYY”), even two companies are registered in HK, all the services are provided in Japan and no operating activity of the companies would perform in HK except for the admin activity (e.g. bank deposit and payment etc.), it is still valid for “XXX” to claimed profit as offshore.

 

In this situation, please be reminded to keep all the documents clearly. IRD, the tax authority in HK, may require you to provide the documents in future. Please at least keep clearly the following documents:

 

1.      Subcontracting agreement/ contract;

2.      Passport record of the person who provide the said services in Japan;

3.      Bank payment / receipt for the subcontracting transactions;

4.      Please note that IRD may request to disclose the relationship between “XXX” and “YYY”.

We are pleased to provide accounting, auditing and taxation services for the company.

Should you have any question, please feel free to contact us.

 

Best Regards

Startupr is not a CPA (Certified Public Accountant, registered HKICPA – Hong Kong Institute of Certified Public Accountants) firm. CPA services are provided by independent CPA firms.

Startupr is merely acting as an agent in connecting your company and the CPA who has agreed with us that they will provide auditing services. In no way is Startupr acting as a CPA firm or providing auditing service in any way and your solicitor-client relationship is with the CPA and not Startupr. CPA is independent of Startupr and is not an employee of Startupr.