Hong Kong Accounting, Auditing and Taxation

The accounting requirements in Hong Kong can be quite similar to that you may have already been familiar with when doing business overseas, but slight differences still exist. Professional accountants can provide analysis and assistance to improve corporate management level and overall profitability while meeting local government regulations.

In addition to monthly financial recording, annual financial statements need to be audited by a CPA, following the “Hong Kong Accounting Standards and Auditing Standards”, as required by the Companies Ordinance in Hong Kong to verify the financial status of your company.

With strict regulation on taxation, carefully planned tax service is crucial regarding running your company and doing business in Hong Kong.

In conclusion, an integrated solution package covering accounting, auditing and taxation services will greatly benefit your operation in Hong Kong. That’s why Hongda offers Hong Kong company annual package to take care of financial challenges you may face. 

Company Accounting in Hong Kong

There is no compulsory requirement for the frequency of Hong Kong company financial accounting: the financial statements can be published on a quarterly or even annual basis. The frequency of publishing financial history is depended on the actual operation situation and the necessity of issuing timely updated financial statements to reflect business progress.

Taxation in Hong Kong

Hong Kong is considered as one of the most tax-friendly areas globally, and only three types of direct taxes are imposed:

• Corporate profits tax: limited liability companies can enjoy a preferential rate of 8.25% for the first 2 million HKD of corporate income, followed by a 16.5% corporate profit tax ratio for subsequent assessable incomes. You will only need to report profits tax once annually;

• Personal salaries tax: charged based on your individual income obtained from employment, offices or duty performing in Hong Kong when your income exceeds the non-chargeable allowance;

• Property tax: tax obligations of a property owner who derived rental income from letting properties situate in Hong Kong;

If your profits are obtained from business outside Hong Kong, which is also known as specified foreign-sourced income, you can also declare offshore income and enjoy profits tax exemption. For more information about offshore income tax exemption, please read our article: how to declare offshore income tax exemption in Hong Kong.

Annual Auditing in Hong Kong

Based on the regulations of the Companies Ordinance (CO) and Inland Revenue Ordinance of the Hong Kong Company Registry, limited liability companies need to take auditing each year. According to Article 122 of the Companies Ordinance, annual financial statements of all limited liability companies registered in Hong Kong need to be inspected and audited by CPAs. Inland Revenue Ordinance also requires an audited financial report and statement for the annual tax declaration. 

Inland Revenue Department will deliver profit tax returns to all limited liability companies in Hong Kong, and tax declaration forms together with auditing reports issued by a Hong Kong certified practicing accountant (CPA) need to be submitted within a given period. In general cases, a company will receive its first profit tax return 18 months after establishment and needs to submit forms in 3 months. A notice of payment of profits tax from the Inland Revenue Department will be delivered if a profitable situation is presented. 

By performing Hong Kong company auditing, you can also:

• Support Hong Kong bank account maintenance: as the requirement of anti-money laundering around the globe, it’s becoming more difficult to register and get approval of opening a bank account. As a corporate bank account is a must-have condition for the company to operate, you must demonstrate that you are fully compliant and free of risks by providing auditing reports when applying for a Hong Kong bank account.
  
• At the same time, an auditing report from the bank account owner for confirmation is required should the bank expresses any doubt about the account during the annual account examination and maintenance;
  
• Present to shareholders meeting: a well-organized auditing report is an evidence of your company’s financial status to be presented to shareholders so that they will form a clear concept of the actual operation condition;
  
• Enhance public credibility: passing annual financial auditing is a convincing proof to demonstrate that your company is continuously operating in a legal way and can enhance credibility and reputation to the public and governments, which is crucial for listed companies;
  Benefit your Hong Kong permanent residence application and bank loan taking;