Hong Kong accountant

Bookkeeping/Auditing Procedures:

Assessment, quotation, signing of accounting and tax declaration agreement → Sorting out documents and accounting processing → Completion of accounting management and issuance of financial statements → Submission of audit to Hong Kong auditors → Completion of the audit, issuance of the first draft of the audit for verification by the client → Issuance of the final audit draft for signature by the directors → Submission of audit report to the Hong Kong Inland Revenue Bureau → Return of the audit report and tax return receipt to the client

Information required for Hong Kong bookkeeping:

1 Bank statement and bank statement: Note: The monthly statement and bank statement on online banking are generally only automatically kept for nearly three months, please download them regularly.

2. Invoices: purchase and sale invoices, service invoices (if any), the first 3~5 purchase and sale invoices of the next year and the corresponding receipts and payments documents, etc.

3. Expense invoices: salary, rent (subject to lease contract or agreement), freight, etc.;

4. Government information: company formation documents, change documents, annual examination documents, etc. (the search center displays all the government documents of your company).

Which companies need to do an audit?

In Hong Kong, companies that do not operate can directly file zero tax returns, and companies that do operate must do accounts and audit before they can file tax returns.

Those who meet one of the following requirements are in business, must make accounts, and file tax returns after auditing:

1. The company has business records in its bank account

2. The company has import and export records with government customs and logistics companies

3. The company has a purchase and sale relationship with Hong Kong merchants

4. The company employs employees in Hong Kong

5. The company is allowed or authorized to use patents, trademarks, designs, etc. in Hong Kong

6. The company is permitted or authorized to use movable property in Hong Kong for rent, lease fees, etc

7. The company entrusts the consignment in Hong Kong

8. Other profits derived from or arising in Hong Kong

 The impact of non-filing of tax returns by Hong Kong companies

1. Violation of tax regulations: According to Hong Kong's Inland Revenue Ordinance, companies are required to file tax returns with the Inland Revenue Department on time. If a company does not file a tax return, it will violate the law and may face fines or other legal consequences.

2. Bank accounts are frozen: Hong Kong banks usually require companies to provide complete tax records and statements. If a company fails to file a tax return, the bank may freeze its account, resulting in an inability to carry out business activities normally.

3. Company deregistration: The company's long-term failure to file tax returns may be recognized by the tax bureau as a violation of tax laws and regulations, and thus be forcibly deregistered. After the company is deregistered, it will not be able to continue to operate and may face other legal consequences.

4. Entry and exit blacklist of directors: If the company is forcibly deregistered by the tax department, the directors may be placed on the immigration blacklist, restricting their future activities and travel in Hong Kong or elsewhere.

The impact of overdue tax returns for Hong Kong companies

After 18 months of registration, you will receive the first Profits Tax Return issued by the Inland Revenue Department with only 3 months

1. Penalty for the first overdue period: the penalty HKD1200

2. Second Overdue Fine: Penalty HKD3000

3. Generate estimated tax and receive estimated tax penalties multiple times: HKD10000

4. Maximum imprisonment of 6 months

5. Receive a court summons

Information required for accounting audit of Hong Kong companies

1. Bank statement and corresponding bank receipt and payment advice;

2. Receipts for all expenditures (including receipts issued by our company and those issued by the other party);

3. All invoices (including purchase and sales invoices, etc.);

4. All agreements, contracts, customs declarations, bills of lading;

5. If there is a salary, you need to provide a copy of the labor contract, salary list, and ID card;

6. A full set of documents for the establishment of the company (articles of association, annual return, business registration certificate, etc.);

7. If there is a rental house, a copy of the lease contract and the lessor's ID card needs to be provided;

8. If there is a letter of credit business, it is necessary to provide the letter of credit message issued, and if there is a discounted forfaiting business, it is also necessary to provide the bank's discount water bill in order to calculate the interest;

9. If there are fixed assets, the list of fixed assets needs to be provided, which should include the name, purchase date, original value, depreciation period and depreciation rate of the fixed assets;

Accounting audit process

1. Sign the contract

2. Data docking

3. Reconciliation of accounts

4. Auditing and accounting

5. Make a final draft

6. Complete the audit

How to tell if your company can file zero taxes

1. Hong Kong companies that do not operate can enjoy zero tax filing treatment, but companies that do operate must keep accounting records and audits, and file tax returns as required.

2. As long as you carry out business transactions or activities in the name of the company, you have started to run a business. If we look at the written records, we can judge from the following aspects, and those that meet one of them are business operations: bank accounts have left business records, government customs, and logistics companies have left import and export records, purchase and sale relationships with Hong Kong merchants, employees have been hired in Hong Kong, patents, trademarks, designs, and other materials are allowed or authorized to be used in Hong Kong, movable property is allowed or authorized to be used in Hong Kong to collect rent, lease fees, etc., entrusted to be sold in Hong Kong, and other profits obtained or generated in Hong Kong.

How to circumvent the impact of Hong Kong bank investigations and CRS tax information?

1. Advantages of choosing to file tax returns in Hong Kong

Hong Kong has few types of taxes and low tax rates. The corporate income tax rate is 16.5%. There is no value-added tax (VAT) or sales tax in Hong Kong, and there is no concept of invoicing. Therefore, a pro forma receipt can be used to make accounts, adjust the company's accounts to loss or flat, so as to achieve the purpose of paying less tax or even not paying tax. Hong Kong has signed tax treaties with a number of countries and regions for the avoidance of double taxation, which is conducive to avoiding double taxation when conducting international business.

2. Choose a formal Hong Kong accounting firm to do the auditing

Choosing a formal accounting firm in Hong Kong can integrate the actual operation of the Hong Kong company, formulate the company's accounting audit plan, reasonably divide the accounting year, issue a formal accountant audit report, and submit it to the Hong Kong Inland Revenue Department to complete the tax declaration work.

3. Issue a formal audit report so that the tax bureau has nowhere to find fault

The accounts of a Hong Kong company must be conducted by a certified public accountant in Hong Kong who is accredited by the Hong Kong Institute of Certified Public Accountants and must issue an audit report in compliance with the Hong Kong Inland Revenue Ordinance. The Hong Kong Inland Revenue Department (IRD) will normally issue an acknowledgement of acceptance within one week upon receipt of the report.

The process of accounting, auditing and tax declaration of Hong Kong companies

1. Sign the quotation and negotiate and sign the accounting audit agreement

2. Organize documents and account disposal

3. The company makes accounts and issues financial statements

4. Audited by a Hong Kong auditor

5. The audit report shall be submitted to the directors for signature

6. The accountant goes to the government to file a tax return with the signed audit report

7. Return the associated documents to the customer

Required information

1. Bank e-Statement for Corporate Account      

2. Annual review documents and articles of association of the company since its establishment

3. Proforma invoices, business contracts, and orders provided by suppliers

4. Orders, proforma invoices or bills of lading issued by the sales business.

5. Receipts for employees' salaries, house rent, utilities, etc.

6. Other bills related to the company's business.

Hong Kong Company Tax Filing Schedule

First filing tax schedule

A Hong Kong company will receive its first Profits Tax Return after 18 months of incorporation, and the tax filing period will be within 3 months.

For example, if your Hong Kong company was established in February 2017, you will receive the first profits tax return in August 2018, and the tax return will be filed within 3 months after receiving the tax return, and the declaration will be completed before December 2018.

Second and subsequent tax filing schedules

When you file your first tax return, your certified public accountant will confirm the fiscal year for you, and all subsequent tax filing periods will be reported according to the fiscal year of the first confirmation.

For example, for a fiscal year ending December 31, you must start filing your accounts in January of the following year, and you must complete the tax declaration by August 15 of the following year.

For fiscal years ending March 31, you must start filing your accounts in April of the current year, and you must complete the tax return by November 15 of the current year.

For fiscal years ending in any month, the declaration will be completed by April 30 of the following year

Frequently Asked Questions about Accounting Audit of Hong Kong Companies

The bank account of the Hong Kong company has been closed, does the Hong Kong company audit still need to be done?

As long as it continues to be registered as a valid Hong Kong company, it needs to follow the regulations, even if it is not operating, it can have an audit report of whether it is operating or not.

Does a Hong Kong company have to do an audit every year?

Yes, a limited company registered in Hong Kong will receive the first Profits Tax Return issued by the Hong Kong Inland Revenue Department (IRD) in the 18th month after the date of incorporation, and the tax return for Hong Kong companies is on an annual basis.

A Hong Kong company that is required to conduct an accounting audit

1. Have a bank account in Hong Kong and have capital exchanges

2. Have normal business contracts with other Hong Kong companies

3. Use patents, trademarks, designs, etc. in Hong Kong

4. Use assets in Hong Kong to collect rent, etc

5. There are other profits from Hong Kong

6. The company has employees in Hong Kong, who meet any of the above conditions, must be audited

What are the consequences of a Hong Kong company not doing an audit?

The Hong Kong Inland Revenue Department's new regulations: from 1 April 2023, Hong Kong companies are required to submit their tax returns together with the audit report, regardless of the amount of turnover, otherwise they will be refunded by the IRD or deemed to have failed to perform their tax filing obligations. At the same time, the "CRS Global Automatic Exchange of Tax Information" has been fully implemented, and Hong Kong financial institutions are required to provide the Hong Kong Inland Revenue Bureau with the financial account information of Chinese residents in Hong Kong.

The importance of the audit report

1. Better respond to global tax exchanges and tax spot checks

2. A high-quality audit report can provide protection for the bank account

3. To facilitate the implementation of cross-border structure of enterprises to implement the well report

4. Prepare for the company's equity transfer, mergers and acquisitions, financing and listing