Company audit in Hong Kong
All companies incorporated in Hong Kong are required to file an annual tax return with the Hong Kong Revenue Authority, accompanied by audited financial statements for the relevant period.
Deadlines for filing tax returns
1
The first financial period of the company starts from the moment of its incorporation and can last from 12 to 18 months. The company can independently set the end date of the first financial period. Subsequent fiscal periods last 12 months. The tax year ends on March 31.
2
Generally, on April 1, the Hong Kong Inland Revenue Department sends a Profits Tax Return (PTR) which must be filed with the IRD within 1 month from the date shown on the document (the date of issue). However, in some cases, the deadline for filing the PTR can be extended. To do so, you need to pay attention to the code indicated on the tax return (see table below).
For new companies, the first return comes 12-18 months after the date of incorporation. The deadline for filing the first PTR is 4 months from the date indicated on the document itself.
For new companies, the first return comes 12-18 months after the date of incorporation. The deadline for filing the first PTR is 4 months from the date indicated on the document itself.
Reporting dates and submission deadlines
!
In addition to audited financial statements and tax returns, an annual filing must be made with the IRS:
- Employee Report (Employer's Return);
- Resolution of the Annual General Meeting of Shareholders (Annual General Meeting).
Questions about taxes in Hong Kong
If a tax return is not filed on time, the tax office issues a penalty of 1200 HKD (approximately 160 USD).
If the tax return is overdue for up to six months, the penalty increases to approximately 360 USD. If the delay in filing the tax return is more than six months, the company will be required to appear in court. The court may result in a fine of up to HKD 10,000 (this is approximately USD 1,300).
Liability for failure to timely file a salaried employee report:
If the report is not filed on time, a fine of HKD 2,400 (approximately USD 310) or more is levied.
If the tax return is overdue for up to six months, the penalty increases to approximately 360 USD. If the delay in filing the tax return is more than six months, the company will be required to appear in court. The court may result in a fine of up to HKD 10,000 (this is approximately USD 1,300).
Liability for failure to timely file a salaried employee report:
If the report is not filed on time, a fine of HKD 2,400 (approximately USD 310) or more is levied.
It is worth noting that from January 1, 2023, the new foreign source income exemption (FSIE) regime applies only to international business companies (MSEs) engaged in a trade, profession or business in Hong Kong. Thus, dividends and capital gains of a Hong Kong unit of an MSE arising from the disposal of interests will be taxable, as will interest and royalties. The new regime does not apply to dividends and capital gains from foreign sources if the receiving MSE complies with the "economic presence" requirement in Hong Kong.
The new regime does not apply to companies that have no income from sources outside Hong Kong, nor to companies that operate only in Hong Kong. Pure-Equity Holding companies are subject to simplified "economic presence" requirements.
Trusts that own a private investment holding company carrying on a trade or business in Hong Kong are also subject to the requirement of the new regime and, if the trust and the investment holding company are established in different jurisdictions, such structure will be treated as an MSE. In such a case, income of the investment holding company derived outside Hong Kong and received in Hong Kong will be subject to income tax under the new regime.
The Hong Kong Inland Revenue Department issues, free of charge, legally binding MSE opinions on whether the economic presence requirement is met on a case-by-case basis.
The new regime does not apply to companies that have no income from sources outside Hong Kong, nor to companies that operate only in Hong Kong. Pure-Equity Holding companies are subject to simplified "economic presence" requirements.
Trusts that own a private investment holding company carrying on a trade or business in Hong Kong are also subject to the requirement of the new regime and, if the trust and the investment holding company are established in different jurisdictions, such structure will be treated as an MSE. In such a case, income of the investment holding company derived outside Hong Kong and received in Hong Kong will be subject to income tax under the new regime.
The Hong Kong Inland Revenue Department issues, free of charge, legally binding MSE opinions on whether the economic presence requirement is met on a case-by-case basis.
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