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Annual Taxation of HK Company

Annual Taxation of Hong Company



Annual Profits Tax Application
Every Hong Kong Company has to file its profits tax return on its profit arising in or derived from Hong Kong. The profit will be taxed with 16.5%. Each year the company will receive a letter from the Inland Revenue Department (IRD) with the application form. The filled-in and signed documents will be sent back to the IRD together with the audit report and tax computation. This form together with other supporting documents needs to be handed in to the IRD no later than one month after the letter from the IRD was issued otherwise penalties up to three times the tax payable may be charged.



Annual Tax Exemption Application
If a Hong Kong Company is only conducting business outside of Hong Kong (known as an offshore business), the company is able to apply for a tax exemption. In general in order to be able to justify offshore business your company should:

  • not have any employees in Hong Kong
  • do not issue or receive any invoices to and from other Hong Kong companies
  • not ship goods through Hong Kong

Once the company receives the request of the IRD to pay its profits taxes, it can file a formal letter to the IRD applying for a tax exemption. The IRD will then send a letter back with extensive questions in order to asses whether the company's demand can be justified or they may request that the company provide full documentation of several or all business transactions running through the Hong Kong Company. Depending on the profit the company generated and the complexity of the business, the offshore claim can take up to several months or even a year.



Statutory requirements for a Hong Kong Company
Every Hong Kong Company must have at least one director and one shareholder which can be the same person or company and Hong Kong residency is not required. In order for the government to have a contact person in Hong Kong each Hong Kong Company needs a Company or Corporate Secretary. This person can either be an individual who ordinarily resides in Hong Kong, or a corporate body, which has its registered office or a place of business in Hong Kong. A registered office address in Hong Kong is a must as well. Hong Kong companies must keep its normal statutory books such as the register of members and transfers together with "minute books" of the meetings of its directors and shareholders. It is important to note that proper accounting is an essential aspect to fulfilling all annual mandatory requirements in an efficient and easy manner. Without proper accounts the company could risk incurring penalties for late filing or no filing at all which in the worst case scenario could result in the company being forced to close down.



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