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.