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The offshore tax claim – Hong Kong company

Your Hong Kong company might be asked to pay the Profit Tax Return however if you would like to request the Inland Revenue Department (IRD) for the tax exemption status, you should follow up these steps: Více

Hong Kong DTA – Double Taxation Agreement

Double Taxation Agreements(DTAs) in Hong Kong prevent double taxation and fiscal evasion, and foster cooperation between Hong Kong and other international tax administrations by enforcing their respective tax laws.  Only residents of Hong Kong or the other DTA jurisdiction will be affected by a DTA. Více

Hong Kong Inland Revenue Department Submission

Hong Kong Inland Revenue Department: Profits Tax Return updates for Hong Kong Limited Company Více

Accounting and Auditing Hong Kong Limited Company – Case study – A I.

Read a case study regarding accounting/auditing of a Hong Kong Company. Company was set up on December, 2013.

Dear xxx,
As your company has incorporated on 17th September 2013 and determined 31st March as the company’s financial year ended date, the first Profits Tax Return (“PTR”) normally issue to the company by IRD (HK tax department) in March 2015 and need to complete and submit to IRD within 3 months since the issue date (i.e. on or before June 2015).
According to our discussion previous email, in order to avoid state the fact of over 18 months of first audit, the first financial year end date would be March 2014.
For the accounting and audit, please provide the following information:
– All sales invoices/ consulting service invoices;

– All purchases invoice/ subcontractor’s invoices;

– All service agreement;

– 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.

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

Your accountant J

 

Please not that Startupr is not a CPA firm and we don’t provide auditing services.

Hong Kong Limited Company – Accounting & auditing

Let us explain the requirement & procedure of accounting & audit issues and HK taxation as well. This is a case study for a company incorporated in September 2013.

Accounting & auditing

According to the statutory requirement under the Hong Kong law, the first set of financial statements should be prepared for period covering not more than 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? Your first audit will then cover a period from the 16th September 2013 (date of incorporation) to 31st March 2014 / 31st December 2014.

If your company commenced its business during the above period, you need to prepare the following documents (up to 31st March 2014 / 31st December 2014):

– 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, you may report a “Nil” profits tax return (“PTR”) to Inland Revenue Department (“IRD”), Hong Kong Tax Authority , with the declaration of not yet commence business by the director or company secretary of the company. But please note that you are still required to perform first audit in accordance with the Hong Kong Companies Ordinance which mentioned above.

Taxation

Normally, IRD will issue your first PTR to the company after 18 months from incorporation date. It should be submitted within THREE months from the date of issuance of PTR. Once reporting the financial year end date to IRD, the submission deadline of the annual PTR together with the audited financial statements are as follows:

 

 

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

If all your company’s income are sourced outside HK, your company will not be subjected to HK tax, you may apply offshore profits claim once you submitted your PTR and financial statements. IRD will then issue an offshore claim queries letter to you for the proof by providing the passport of the directors/ sales representatives and some samples of sales and purchase/service fee invoices, contracts/agreements and shipping documents e.g. bill of lading. We shall provide the professional service for answering this offshore tax queries to you.

We hope the above will give you a clear picture of HK audit and taxation system. If you choose our service, please let us know which financial year-end date you will use, your business nature, commencement date of your business and volume of transaction during the above mentioned period. We shall then send you a fee quotation for the accounting, audit & taxation services.

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

Hong Kong Limited Company – Offshore status

Here is an explanation how to gain the offshore status for Hong Kong Limited company. We demonstrate the offshore principles on Hong Kong Limited company which was registered on 11th of October 2013.

As the company has incorporated on 11th October 2013, the first Profits Tax Return (“PTR”) would issue to the company in around March to April 2015.
Company’s financial year ended date has determined as 31 March, the first financial year ended date could be March 2015.
If the company commenced its business during the period 11th October 2013 (date of incorporation) to 31st March 2015 (“the period”), you need to prepare the following documents (up to 31st March 2015 ):

 

          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, you may report a “Nil” profits tax return (“PTR”) to Inland Revenue Department (“IRD”), Hong Kong Tax Authority , with the declaration of not yet commence business by the director or company secretary of the company. But please note that you are still required to perform first audit in accordance with the Hong Kong Companies Ordinance.

 If all your company’s income are sourced outside HK, your company will not be subjected to HK tax, you may apply offshore profits claim once you submitted your PTR and financial statements.  IRD will then issue an offshore claim queries letter to you for the proof by providing the passport of the directors/ sales representatives and some samples of sales and purchase/service fee invoices, contracts/agreements and shipping documents e.g. bill of lading. We shall provide the professional service for answering this offshore tax queries to you.

We hope the above will give you a clear picture of HK audit and taxation system. 

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.

Penalty of late submission of Profit Tax Return

There is certain period you should submit the PTR (Profit Tax Return) to IRD (Hong Kong – Inland. Revenue Department). If you fail to do so, you may be required to pay a penalty. However, you can there is a way to waive the penalty.

Here is an example of an email sent from an accountant firm:

 

Enclosed please find the letter from IRD. The penalty of late submission of HK$1,200 be waived and IRD would not take further action on this occasion.
Please note that it would not be easy to wavie this type of penalty in future. In view of the company is active and may have profit for the year ended 31st December 2013, please provide the documents from 1st January 2013 to 31st December 2013 for our accounting/ audit / taxation purpose.
In order to avoid late submission penalty, please provide the documents on or before 1st June 2014.
Should you have any question, please feel free to contact us.

Accounting and auditing Hong Kong Limited Company

Accounting and auditing

According to the statutory requirement under the Hong Kong law, the first set of financial statements should be prepared for period covering not more than 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 the date of incorporation to 31st December / 31st March.

 

If your company will be commenced business, you need to prepare and provide the following documents (up to 31 December / 31st March ):

 

          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.

 

Taxation

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 (e.g. 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

 

 

FAQ: HK IRD requires signature & small corporation Audit

Startupr is working with a CPA firm to ensure all requirements of your Hong Kong company are fulfilled. Here is an example of Q&A of a client who asked whether it is necessary to get audited accounts if the overturn is less than 2,000,000 HKD and if signature of the director is required.

Q: Hi, do we need to sign the annual return (something like electronic signature) & proceed with the auditing if my company has over turn just a few hundreds of HKD?

A:

Sorry, no electronic signature/ copies is allowed by IRD, HK Company Ordinance & audit standard requirements.   As Startupr is your company secretary, we can sign and file the tax return on your behalf first. IRD accept filing of tax return without audited report since your company is a small corporation (gross income for the period not exceed HK$2,000,000), but IRD has the right to request for it anytime.  You may sign the audited report when you are available.

Should you have any further queries, please do not hesitate to contact us.

 

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.

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%