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Tax Return for HK Company

Hong Kong taxes are among the lowest in the world, and our tax regime is simple and predictable. Hong Kong sourced income can be taxed in three ways, Profits Tax, Salaries Tax and Property Tax.

1 Different Tax Return between limited & unlimited company
1) Audit: the audit by CPA is not required for the unlimited company;
Limited company should first prepare for the account bills and carry out audit before tax return.

2) Profit Tax Rate: for the year of assessment 2008/09
Limited company: 16.5%
Unlimited company: 15%

2 How to judge whether company can carry out zero tax return
In HK the company which doesn’t carry out business can declare zero tax directly. Therefore it is extremely important to judge whether the company has operation in Hong Kong.
In principle, if the company accords with one of the following aspects, it is considered to carry out business.

1) Bank account has the record of operation;
2) Custom and logistic company has the record of export and import;
3) Having business with HK merchant;
4) Employing staff in HK;
5) Allowance and authorization of using trademark, patent design in HK;
6) Allowance and authorization of collecting chattel rent fee in HK;
7) Entrust to sell products in HK;
8) Other profits arising in or derived from HK.

3 The mode for tax return
If the company have not business actually, they can carry out zero tax return; if the unlimited company have some operations, they should first work up account and then carry out tax return; if the limited company has normal business operation ,they should work up account, audit by the certified public accountant (CPA) and then tax return

4 Zero Tax Return
If the company doesn’t carry out business in the financial year, this company can directly carry out zero tax return. The new established company will received the profit tax return from the HK Inland Revenue Department after 18th months. And zero tax return must carry out in the following one month after receiving the profit tax return. The standard fee is 800 HKD.
The procedures are as follows:
Receive the profit tax return→shareholders to confirm & sign→pay the money→apply for tax return from Inland Revenue Department→finish and inform the customer.

5 Financial year & Tax return schedule
Financial year is usually 12 months, but a new established company is 18 months. The time of tax annual return is in the first month after the financial year. If the company can’t carry out tax return on time, the application of postpone in the available period is necessary.

6 Documents required
1) Preparation for the account return
The company should prepare for the account Tannet once it carries out business and divide all the bills into sale, cost and expenditure. The Hong Kong government acknowledges all the invoice (which can be made by you), receipt and note signed and sealed by the company.

2) Documents required
① bank statement & bank details;
② Sales bill: invoice and contract;
③ Cost bill: invoice and contract;
④ Expenditure bill: salary, freight and rent(The lease or agreement is required) etc.;
⑤ The other relevant document: two copies of Article of Association, annual return form, all the alteration documents(if have), fixed assets bill and investment document.

7 Procedures
Sign the agreement→pay the earnest money→classify the bill→finish the account return→pay the spare money→audit by the auditor→return the audit report to shareholders to sign→CPA submit the audit report to government for tax return→return the relevant document to customer.

8. Price &Payment Terms
Account and Audit fee: if the turnover of company is below 5 million, the total fee is 9000 RMB, if the turnover exceeds 5 million, 0.1% of the surpassed 5 million parts will be charged as the additional fee. The customers should pay 50% deposit of total payment and pay the spare money when finish. The payment term includes cash, T/T, check and transfer account.

9 Keeping business records
All company registered in Hong Kong are required to keep sufficient records of their income and expenditure to enable their assessable profits to be readily ascertained. There are statutory requirements to retain the account book for at least 7 years after the date of the transaction to which they relate.

Source:ATAHK Group Author:cindy Time:2009-2-1
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