File tax for your company

The taxation system in Hong Kong is entirely supported by the territorial source principle and not on residency or management and control. This suggests that the HK companies need to pay the tax as long as the tax profits are sourced in Hong Kong, where the rate is currently 16.5% on the assessable profits. and people’s profits that are sourced out of Hong Kong aren't susceptible to the tax and aren't included within the filing of taxes in Hong Kong.

Additionally, there are not any property taxes, no taxes on capital gains, no withholding taxes on interest paid to foreign creditors, and no withholding taxes on dividends paid to foreign shareholders. Isn’t this just the simplest thing?

Hong Kong may be a significant location for international companies within the Asian Pacific Region. As mentioned above, the HK companies are often structured as a tax-free entity where the territorial origin definition of profits predominates. And thanks to this, the corporate can avoid assessable profits for taxes in Hong Kong albeit the corporate is running in Hong Kong. However, the corporate still has got to have tax filings, but declare that their profits were outside of Hong Kong.

The professional advice is vital to form sure that the stabilized financial relations don't trigger liabilities in Hong Kong . albeit the tax isn't applied to the foreign-sourced profits, it's vital to structure the business operations by the simplest practices. Thanks to the important trading economy of Hong Kong, the businesses here don't have a world or country image.

If you've got any questions on the Hong Kong tax regulations or Hong Kong’s territorial source principle, our company can advise you on the tax laws and implications for your company. we've years of experience in handling these cases and are dedicated to providing you with the simplest advice for your company.

Now moving back to the subject which lets us realize filing of taxes in Hong Kong, and why precisely the entrepreneurs and foreign investors are selecting Hong Kong as their favored jurisdiction for initiating and expanding their businesses. a number of the explanations why has been shared below:

• The ease of fixing and running a corporation in Hong Kong.
• Vicinity to the mainland Chinese market.
• Profoundly attractive tax regime – no interest or collection of Social Security benefits, no withholding on dividends, no nuisance tax or VAT , no capital gains tax, territorial tax scheme, and low corporate and private tax rates.

Since the most topic here is about the Hong Kong tax filing, we'd like to know who governs the taxation in Hong Kong. The IRD, that's also referred to as the Inland Revenue Department, is that the reigning government body and is permitted in obtaining funds during a cost-effective and efficient manner. Moreover, it even aims at promoting compliance via the meticulous implementation of publicity programs, education, and law.

The Inland Revenue Ordinance and its subsidiary legislation, which is the Inland Revenue Rules, is the regulatory ordinance considering individual and company taxation matters in Hong Kong. Lastly, The Inland Revenue’s Commissioner is liable for the management of the next Ordinances: Hotel Accommodation Tax Ordinance, Business Registration Ordinance, Tax Reserve Certificates Ordinance, stamp tax Ordinance, Estate Duty Ordinance, Inland Revenue Ordinance, and Betting Duty Ordinance. It also operates the statutory placements of the Estate Duty and Collector of Stamp Revenue Commissioner.

There are three main tax returns that are filed per annum by a business in Hong Kong. The three Hong Kong Tax filing is shared below in brief:

The IRD would issue the very first Profit income tax return (PTR) of the corporation approximately after 18 months of incorporation. the next Profit Tax Returns would be issued every 12 months then. the corporate is obligated to fill and submit the Profit Tax Return. This Hong Kong Tax filing is given with a group of audits to the IRD to work out the quantity of tax necessary to pay in respect of the ideal period.

Usually, the primary year auditing and accounting take an extended time to finish. And as per the Hong Kong Company Ordinance, the annual financial statements of the corporation need to be audited by a licensed Public Accountant (CPA) for the submission. it's advised to rearrange an accountant as soon as you initiate the business to possess all the records.

Furthermore, the primary Profit Tax Return has to be finished and submitted within three months from the difficulty date. So, it's important to let the accountant know that they have to think about whether an extension application is applicable as soon because the Profit Tax Return arrived. a bit like the opposite laws and deadlines, late or non-submission will attract an important fine.

The audit and the accountancy fee depends entirely on:

• the scale of the business (number of transactions, amount of turnovers, etc.)
• the nature of the business (service, trading, manufacturing, etc.)
• the other factors that include the extent of skills and responsibility, the estimated amount of your time spent, etc.

There are three profit income tax return forms, and that they are:

• Profit Tax Return – In Respect Of Non-Resident Persons (BIR54)
• Profit Tax Return – Persons aside from Corporations (BIR52)
• Profit Tax Return – Corporations (BIR51)-For Hong Kong Limited Companies

Depending on the category that your business falls under, you'll choose the shape you would like for the filing of taxes in Hong Kong .

This is the last return that has got to be filed per annum as per the obligations of the IRD and therefore the Companies Registry. During the primary week of April, the IRD would issue the Employer’s Return to the corporation. Moreover, it's the director’s obligation to finish and submit the Employer’s Return back to the IRD within one month after receiving it.

This is a compulsory task that has got to be completed albeit the corporate has not hired an employee. And if the corporation doesn’t suit this, they might attract fines and penalties, that's a neighborhood of the Hong Kong Tax filing.

Tax incentives, allowances, deductions and more
Now that you simply are conscious of the kinds of taxes involved during this, allow us to now understand all about the various allowances, incentives, and deductions that a corporation can obtain during the filing of taxes in Hong Kong.

In Hong Kong, there are not any specifically targeted incentive regimes for any overseas investors or foreign-owned firms. Nonetheless, its substantial available capital, freedom from government interference, good infrastructure, low tax rates, and duty-free status make it appealing for potential investors. Hence, it becomes a really competitive region as compared to the opposite countries within the area. The integrity of the procedures for establishing, expanding and investing during a local company may be a major attraction for any foreign investment in Hong Kong. Another major benefit is the double taxation relief.

Double taxation occurs when two or more tax authorities overlap. This suggests that an equivalent item of profit or income is subject to tax in each jurisdiction.

In Hong Kong, the territorial basis of taxation is adopted, where if the profits are coming to a business from Hong Kong, only then is that tax applied. Otherwise, the corporation can enjoy a tax-free income coming into the company from out of Hong Kong. Moreover, Hong Kong permits a deduction for any foreign tax that's paid on a turnover basis in respect of income that's also subjected to tax in Hong Kong.

Hong Kong also has double taxation treaties with other foreign countries. This suggests that Hong Kong companies can apply to waive any holding taxes when doing business in these countries. There could also be other requirements or documentation for the corporation to use for these. make certain to advise knowledgeable accountants when handling taxation in foreign jurisdictions and double taxation treaties.

Even though you'll easily enjoy no-profit tax placed on the income that comes from out of Hong Kong, this doesn’t mean that you simply can't be taxed for the profit therein country from where the income is coming in.

This is not all. There are a couple of tax facilities available while filing taxes in Hong Kong where the government grants stimulated depreciation allowances on plant and machinery and lots of other deductions that might be explained in detail below.

As mentioned above, there are many deductions that you simply can claim from the Hong Kong government while you're filing the taxes in Hong Kong. These deductions would be the mandatory contributions made to the recognized occupational retirement scheme or a compulsory provident fund scheme. Also, the contributions aside from the obligatory contributions are basically the voluntary contributions, and that they can't be taken as a deduction.

Moreover, the depreciation and other capital allowances are often considered as deductions on if they're essential to the assembly of your assessable income. Aside from this, you'll get deductions for the approved charitable donations while filing for taxes in Hong Kong. you'll normally claim deductions for donations made to an approved charitable organization only. the other deductions include the expenses for self-education and deductions for the house loan interest and therefore the elderly residential care expenses for those that live in Hong Kong.

Now that you simply realize the deductions that are needed, you'd not have to attach any documents for the proof. But just in case IRD wants to make sure things are as you say, it's good to keep documents able to provide it to them for getting the deducted amount when filing for taxes in Hong Kong.

If you're charged salaries tax or have elected personal assessment, you're given a basic allowance that you simply can claim alongside the opposite allowances which will reduce the entire assessable income. This is often as long as the commanded requirements as laid out in the Inland Revenue Ordinance are satisfied while filing your taxes in Hong Kong.

In every assessment year, you're offered a basic allowance. Although, you'll still claim the opposite allowances in respect of the dependent family members:

• Child allowance
• Dependent brother or dependent sister allowance
• Dependent parent and dependent grandparent allowance
• Disabled dependent allowance
• Single parent allowance
• Married person’s allowance

These allowances can only be claimed when filing for the private tax returns. Aside from this, there's no need for any allowance within the other tax returns thanks to the very friendly tax regime in Hong Kong. So, you'll easily open a corporation and have the Hong Kong tax filing completed without much stress for paying tons of taxes, thanks to the low tax rates and no-tax fee on most things.

Each and each company in Hong Kong are subjected to the Hong Kong tax filing requirements annually with the Companies Registry and therefore the IRD. the wants for the annual filing of taxes in Hong Kong of a personal Ltd. are mentioned below:

With the Inland Revenue Department, the corporation that has been formed in Hong Kong has got to suit the Hong Kong tax filing of the Profit Tax Return per annum. This is able to also include the audited accounts of the corporation that has got to be submitted also as an annual basis to the IRD of Hong Kong. Moreover, it's normal for the IRD to issue the income tax return filing notification for the corporate on the first of each year as a reminder for the filing of taxes in Hong Kong.

If a corporation has just been incorporated, they might receive the Profit Tax Return after 18 months of the establishment. The corporation would set it’s fiscal year-end when submitting its first PTR. The first fiscal year-end isn't fixed for the corporation, unlike other countries that follow the calendar year and fall on December 31st and depend entirely on the date of incorporation for the company. Thus the company can choose a fiscal year-end closer to the 18th-month mark. Though the financial year for the town of Hong Kong ends on March 31st, the PTR is going to be issued consistent with this financial year.

However if the corporation chooses a year-end 16 months after incorporation, on December 31st, 2018, then the corporation would file it’s first PTR as NIL, and its profits until December 31st, 2018 on subsequent PTR. After this, the company’s fiscal year-end would fall every 31st of December then, December 31st, 2019, December 31st, 2020, and so on.

As soon as the companies get the income tax return notification, they have to file it within one month of the date of the notification. The organizations also can request for the extension if required, but this still includes any penalty payment albeit the date has been extended. Also, if you fail to submit the return before maturity, you'll incur a penalty or prosecution.

While you're filing the income tax return with the IRD, it's important to connect the subsequent documents for the support in proving your claims:

• A tax calculation that shows how the quantity of the assessable profits (or the adjusted losses) has been received.
• The profit & loss statement, auditor’s report and record of the corporate concerning the idea period.

The standard filing time for the profit income tax return is within one month from the date of issue. to understand the compliance date of the submission, read the primary page of the notification from the IRD for the Profit Tax Return.

When you hire a CPA to audit the financial statements of your company, this service should also include the taxation computation schedule and tax filing for the corporation. they might look out of filling out the Profit Tax Return and also file this (hopefully during a timely fashion) to the IRD. make certain to ask the CPA for the stamped letter from the IRD, to form sure that the CPA has actually filed the return, and this was received by the IRD.

Since the IRD is promoting the electronic filing of taxes in Hong Kong, you'll easily enjoy requesting an extension of a fortnight after the regular maturity. However, this is often subjected to a condition that the tiny Partnership Businesses and the Small Corporations would file the profits tax returns.

At the beginning of each year, the IRD advertises a Circular Letter to the tax representatives on the IRD website. you'll find this under the menu of the “Tax Information – Individuals/Businesses” and within the “Tax Representatives’ Corner.” It basically sets out the small print of the block extension scheme lodgement arrangements (which is another maturity extension program) per annum and the way the block extensions are often applied for the Hong Kong tax filing therein year.

Yes, you read it right. there's an opportunity where you'll easily invite an extension to the extension that you simply already received for the Hong Kong tax filing. There's a general rule under the Block Extension Scheme, where the further extension of your time beyond the already extended due dates are often granted once and only within the most exceptional circumstances.

Moreover, if there's a case where you would possibly get to request for such an extension, you'd have to provide it in writing alongside evidence of why the lodgement can't be made within the extended time already. And with this written part, you'd even have to supply the IRD with solid proof, in terms of supporting documents and evidence. Though there are cases when the extension is granted, you ought to not assume that you simply are often granted an extra extension for the filing of taxes in Hong Kong.

In case you've omitted the filing of taxes in Hong Kong, there could also be consequences that you simply would need to face. The IRD would eventually take punitive actions for the failure of the Hong Kong tax filing by the maturity provided to you. The actions which will be taken are (keep them in mind and avoid filing late since it's often illegal in every nation of the world):

Upon the late tax filings for the corporation, the IRD may first issue a fine for the corporation and request the corporation to submit the accounts. If the accounts aren't submitted and any fines not addressed, the corporate may incur further penalties, as described further.

The IRD commission might prosecute the taxpayer if they fail to file taxes in Hong Kong by maturity with no reasonable excuse for it. Moreover, the court can also impose a penalty fine of up to HKD 10,000 alongside a fine of 3 times the tax that has been undercharged.

The Commissioner of the IRD, also referred to as the CIR might compound the offense and place of prosecution or assess a further tax as a penalty that's not exceeding 3-times the quantity of the tax that has been undercharged. Also, the CIR won't elect to prosecute the taxpayer only under the circumstances where the taxpayer readily submits the finished income tax return and even agrees to the compound offer, within a specific deadline.

In case the taxpayer has failed the Hong Kong tax filing by maturity, the CIR has the facility to require a penal action for the late filing of taxes in Hong Kong. The taxpayer would be imposed with a penalty by the CIR within the sort of a further tax. The maximum amount of the penalty for extra tax is 3 times the entire amount of the tax that has been undercharged. This is often also applicable only if the CIR finds and considers that the taxpayer has not filed the taxes within the maturity and doesn't have any reasonable excuse.

And if this has been issued to the taxpayer, as per the principles, the taxpayer has the rights to form a written representation within the time specified by the IRD during which the person has got to explain the explanations for the late filing of taxes in Hong Kong. This is able to urge the CIR to think about the excuse and choose if the extra assessment imposition should be removed or not.

In this case, the CIR might estimate the assessable profits and lift the fees as per it. just in case the taxpayer wishes to object to anything, it's to be lodged within one month after the date of issue for the estimated charges. alongside this, it also has got to be followed by a completed Profit Tax Return.

Otherwise, the estimated charges would be taken because the final and the definitive one, and therefore the tax imposed for the late filing of taxes will become payable. which isn't all; the more severe comes when the CIR may additionally find yourself raising the extra assessed charge if there hasn’t been any valid objection that was filed for the estimated assessment by the taxpayer.

Hence, it's advised that each one of the taxes must be paid right once you get the notification. This is often in order that you're not susceptible to any extra charges or penalties that might come after it.

Do not get frightened of all the penalties. they're a bit like a security system for those that take the legal system lightly during a country. But this doesn't mean that you simply shouldn't bother in completing the Hong Kong tax filing on time.

All-in-all, Hong Kong features a well-regulated yet simple legal system that's very straightforward, as you've got read above. Aside from this, you'll easily enjoy the low tax rates also. It's thanks to these benefits that the competitiveness of Hong Kong has increased therein region, and it remains a beautiful relocation target for several of the professionals around the world.

So if you're getting to incorporate a corporation here in Hong Kong, you've got tons of advantages. These benefits, as mentioned above and within the previous guides, are available also because of the Hong Kong tax filing that a lot of other countries don't offer when it involves foreign investment. Our advice – take this opportunity and make the simplest out of it in Hong Kong.

And if you would like an excellent agency to assist you with all the filing of taxes in Hong Kong to be completed on time and perfectly well, our company is the right choice for you. The services at our company aren’t just limited to the incorporation of the corporate. We also provide great business handling and consultation services including Hong Kong tax filing. If you would like to make certain that your tax is completed properly, take the recommendation and hire us.