Hong Kong is Asia’s financial center, ranking third in ease of doing business in 2019. Hong Kong’s low corporate tax rates, multiple free trade agreements, and SME support programs helped it become the “world’s freest economy.” As a gateway to mainland China, Hong Kong attracts western firms and investors. Investors can also take use of assistance programs, competitive talent, and natural resources of the country.
Many investors want to join this free market in Hong Kong. Let’s learn about Hong Kong private limited company accounting and tax requirements before you start company incorporation in Hong Kong.
- Tax Scope
Private limited company Hong Kong accounting and tax requirements begin with tax scope. If your main source of revenue is in Hong Kong, you must pay profit taxes. Thus, residents and non-residents are subject to the general norm. However, foreign profits transferred to Hong Kong will not be taxed.
Hong Kong investors face up to three direct taxes. 3 main taxes:
- Profit Taxes: Hong Kong private limited companies and other types of incorporated businesses must pay 8.25% tax on any income in excess of HK$2 million. Profits over HK$2 million are taxed 16.5%. Unincorporated enterprises, sole proprietorships, and partnerships pay 7.5% and 15% for both benchmarks under the same two-tiered structure.
- 15% salary tax cap.
- 15% property tax cap
- Tax Deductions: Private limited company Hong Kong accounting and tax duties include tax deductions. Tax deductions include:
- Capital expenditure on business premises renovation and refurbishment can be deducted over five years in equal annual instalments, starting from the year the expenditure was incurred.
- Computer hardware and software plant and machinery expenditures are fully deductible in the basis period.
- Environmental protection equipment, vehicles, and installations are tax-deductible.
- Tax Returns Filing
You need to know about submitting tax returns, which is part of your accounting and tax responsibilities as a private limited business in Hong Kong.
When paying taxes, most companies are also required to submit supplemental tax papers detailing their participation in various tax incentive and preferential regime programs.
Supplemental forms “S1 through S14” detail various tax write-offs applicable to various industries.
Within a month after their issuance, both the profit tax returns and the supplemental forms must be submitted to the appropriate authorities
- Annual Filing Requirements
The ordinance are obliged by law to submit yearly reports, which is a part of the company’s accounting and tax requirements.
Any director, secretary, manager, or authorized representative listed with the Companies Registry of Hong Kong is required to sign the annual reports filing.
You may file for dormant status if your business has no significant accounting transactions throughout the fiscal year.
Annual reports are not required of companies in inactive status.
Within 42 days after the anniversary of the company’s formation, a yearly report must be submitted.
If the company’s paperwork is submitted late, it will incur a higher registration charge and the company’s executives will be open to criminal prosecution and financial penalties.
Conclusion
Fintech Harbor Consulting streamlines Hong Kong business registration. The team plans and strategizes with clients to choose a business entity, completes registration and documentation, obtains licenses, opens a corporate bank account, and ensures compliance with government regulations.
Contact Fintech Harbor Consulting to learn more about Hong Kong company registration.
