FAQs

Starting A Company In Hong Kong

  • Hong Kong has one of the most stable ecosystems and government support programs for businesses.
  • The tax system is very straightforward and the tax rate is very competitive compared to most countries.
  • Hong Kong poses as a gateway to China which has vast opportunities for businesses who are looking to enter into the market.
Yes, although there are registration categories with different requirements.
  • Sole proprietorship businesses are easier to set-up compared to limited companies. 
  • The most important factors to consider is ensuring to have all the important information and professional guidance before proceeding to set-up a company in Hong Kong.
The decision on the type of company to set-up in Hong Kong depends on a couple of factors. For this purpose, we can narrow down to 3 main factors:
  • the level of personal liability you are willing to shoulder, 
  • ongoing cost of company maintenance and 
  • annual reporting requirement of the business.
These factors including others not stated above should influence the choice of business type to set-up in Hong Kong. 
  • Decide on the best company structure based on your business nature and long term plan. The most popular types of company to set-up in Hong Kong include a Sole proprietorship, a Partnership and a Limited Company. Limited companies are most popular in Hong Kong because of the easy nature of setting up, favorable tax benefit, and nature of liability which is limited to the amount invested in the company only.
  • Secondly, you need to understand the tax system in Hong Kong, and decide on how your business will operate, which can affect how it will be taxed. Hong Kong follows a territorial tax system where only profit from trade, business and profession arising in or derived from Hong Kong is taxed. 
  • Lastly, be aware of the  renewals and compliance requirements that must be fulfilled annually with the Inland Revenue and Companies registries in Hong Kong. Non compliance to the government’s requirement can lead to penalties or dissolution of the company.
Yes, although there are mandatory requirements. Being a Hong Kong resident is an added advantage. 
  • Limited companies must have a company secretary who is a TCSP license holder. Limited companies in Hong Kong must renew their annual return forms (NAR1) which have the information of all the Directors and shareholders of the company. 
  • Any changes to the directors’/shareholders’ information must be updated during the annual return form renewal. 
  • Limited companies with active business operations need to prepare  and submit their audited financial statement and profit tax return form annually. This will be submitted to the Hong Kong Inland Revenue Department for tax computation and issuance of tax demand notes.

Tax Reporting in Hong Kong

Yes. All registered businesses in Hong Kong must submit their financial information to the authorities annually. The variability comes with the type of financial information that is required to be submitted to the Inland revenue department.
    • For sole proprietorships businesses, tax reporting should be made in Part 5 of your Individuals Tax Return form (BIR60). For small business (gross income less than HK$2,000,000), NO OTHER INFORMATION is required to be submitted along with the BIR60 form. For businesses other than small businesses, a certified financial statement including the balance sheet, income statement, and supporting schedules used to calculate the declared profit or loss are required to be submitted to the Inland Revenue department. 
    • For Partnership businesses, the financial information should NOT be reported in the Part5 of the salary tax form (BIR60). The financial information should be reported in the Profits Tax Return for  Persons Other Than Corporations (BIR52). This form can be requested from the Inland revenue if this has not already been issued to your company after 18 months of incorporation. An audited financial statement is NOT required but a certified financial statement should be prepared along with the tax computation for the period. All financial information used to prepare the financial statement must be kept properly as they may be requested by the department in certain circumstances 
    • For corporations, Profits Tax Return form – Corporations (BIR51) needs to be filled and submitted along with the audited report of the corporation and tax return form. The audit must be performed by a qualified auditor according to the Hong Kong Reporting Standards (HKFRS).
The period for tax demand by the Inland Revenue depends on the company’s basis period for financial reporting. The table below summarizes the basis period, tax reporting deadline and estimated time to receive a demand note from the Inland Revenue Department. taxed
Profits derived outside Hong Kong are not subject to Hong Kong tax. The government has 6 principles to guide business owners in determining  the source of profit. They include:
  • Matter of Fact: The nature of the profit generated and the circumstances around the transactions that brought about the profit are based on facts. Income derived from Hong Kong cannot be mistaken to be derived outside Hong Kong. 
  • Operational Test: What has the company done to generate profit? Where did the activities of the company take place in order to generate the profit? These questions provide guidance to ascertain if profit is sourced in Hong Kong or Offshore.
  • Geographical Location of profit generating transactions.
  • The location of the central management of the company and where business decisions are made.
  • Location of Business Presence (Oversea or In Hong Kong)
For newly incorporated companies, the Inland Revenue issues the Profit Tax return form 18 months after the company’s incorporation. The Form has to be filled and submitted along with the audited report within 3 months of receiving the tax form. Non compliance may result in penalties.
Different business types are subject to different tax rates. The table below summarizes the tax rates in Hong Kong.
  • Personal tax rates (salary earners)  are on a progressive basis. The more you earn, the higher the tax rate.
If a business which has been newly incorporated has accessible profit after its fiscal year-end (say 31 March 2022), it must notify the Inland Revenue of its chargeability to profit tax within 4 months from its fiscal year end, if your company has not received the profit tax return form. The table below compares examples for fiscal year-end date and deadline to notify the Inland revenue of chargeable profit.  
Basis Period/Fiscal year-end Deadline to Notify the Hong Kong Inland Revenue of Chargeability
31 March 2022 31 July 2022
31 Dec 2022 30 April 2023
30 June 2022 31 Oct 2022
30 Nov 2022 31 March 2022
   For Hong Kong salaries and property tax,  the reporting period follows 1 April each year to 31 March of the following year. Thus, notification of chargeability should be made on or before the 31st of July if tax return form has not been received.

Hong Kong Accounting and Bookkeeping

The Hong Kong Inland Revenue Ordinance mandates companies to keep their financial information for at least 7 years from the transaction date of the financial information. The financial information includes, bank statements, sales invoices, company expenses, audited financial statements, inventory reports and supporting documents tied to the audited report. The best way to keep these documents is to save them to a cloud storage. For companies with a large number of transactions, it’s advisable to invest in an accounting system which will serve as the storage system for your company’s financial information.
  • There is no standard price range for audit service in Hong Kong. The consideration for fixing a fee for audit service includes:
    • Business size
    • Total revenue for the financial year
    • Size of the balance sheet.
    • Number of investments held by the company during the financial year.
    • The use of digital currencies and products like Crypto and Blockchain products .
You need an accounting system when your total monthly transactions exceed 100 transactions per month.It’s advisable to switch to using an accounting system to help organize financial information and keep track of the businesses’ process and growth.
It’s best to migrate to a new accounting system at the beginning of a new financial year (Say your financial year ends on the 31st of December annually, the best time to migrate to a new accounting system is 1 January of the following year.). The reason for this is to reduce the amount of data to be transferred  to the new accounting system, and save time in reconciliation redoing transactions already reconciled in the old system.

Annual Audit and Tax Filing

  • Yes, all  limited companies in Hong Kong are mandated to prepare and submit their audited financial statement to the Inland revenue department annually.
  • Exemptions are given to dormant companies only.
There is no standard price range for audit service in Hong Kong. The consideration for fixing a fee for audit service includes:
  • Business size
  • Total revenue for the financial year
  • Size of the balance sheet.
  • Number of investments held by the company during the financial year.
  • The use of digital currencies and products like Crypto and Blockchain products .
The larger the size of the above considerations, the higher the audit fee.
The timeline for completing bookkeeping and audit report preparation depends on couple of factors:
  • Tax Deadline: If your tax deadline is close, say less than 2 months, the bookkeeping and audit needs to be fast tracked to ensure the tax deadline is met.
  • Volume of transactions: Larger transaction volume will require more time for accounting and audit report preparation.
  • Pre-agreed timeline: If there is any internal deadline in your company, this information can be communicated to your service provider prior to the commencement of the task.
No. Hong Kong companies are not tied to a standard date when choosing a fiscal year-end date. The company is free to choose any date as its fiscal year-end date.
 A number of factors can be considered when choosing a fiscal year for your Hong Kong company:
  • Fiscal year-end date for related companies: It is common for companies in a group to choose a similar year-end date to ensure uniform reporting period and ease of preparing a consolidated report..
  • Income tax reporting for U.S. Citizens: Citizen’s from US and Eritrea are subject to Personal income tax regardless of their country of residence. In this case, it’s advisable to follow the tax reporting fiscal year of your country of citizenship to help streamline income reporting if information is needed for your incorporated company in Hong Kong.
  • Tax perspective: The deadline for filing the profit tax return form for Hong Kong companies is tied to the company’s fiscal year-end date. Some companies have longer tax return deadlines while others have shorter deadlines. The table below summarizes this:
Basis period Annual Tax reporting deadline (Companies without tax representatives) Annual Tax reporting deadline (Companies with tax representatives)
1 April  – 30 November  (Accounting Date Code “N) 2nd May Annually 2nd May Annually except there is a block extension during the assessment year
1 December – 31 December  (Accounting Date Code “D”) 15 August Annually  except there is a block extension during the assessment year
1 January – 31 March (Accounting Date Code “M”) 15 November Annually except there is a block extension during the assessment year
The best way to ensure a smooth audit process is to work with a Hong Kong accountant with vast knowledge of the Hong Kong accounting standards and audit process to ensure that prospective audit loopholes are spotted and resolved before the audit process. Other factors that can help with a smooth audit process includes:
  • Preparing the financial statements on time and ensuring that all the supporting documents related to each are available.
  • Ensuring that transactions with significant monetary values are categorized properly in the correct accounting classification. 
  • Give ample time for the audit process to avoid peak period rush, close to the tax reporting deadline. It is advisable to give the auditor at least 8 weeks from the tax deadline to have the draft audit report ready.
  • Ensure you choose an auditor that can communicate effectively in case there are disputes in reclassification of certain transactions or audit opinion.

Offshore Accounting Staffing

The process for hiring an offshore accounting staff is as follows:
    • Provide us with the level of accounting staff required and number of days needed in a month (for part-time staff).
    • We will provide a quotation along with the information of a qualified staff in our pool.
    • Upon confirmation of the above, a pre-engagement Zoom call will be organized. 
    • After this, a contract will be prepared, signed and an onboarding call will be scheduled with the accounting staff.
  • Yes, the Offshore accounting staff have been trained by our Hong Kong team members and will receive support from the Hong Kong team manager from time to time. 
  • Also, the accounts prepared by the offshore accountant will be reviewed before they are sent to the client.
We are very Critical about the privacy of our client’s financial information and we employ the following steps to ensure data security and privacy:
  • We encourage our clients to use cloud storage and cloud accounting softwares to ensure that they have ownership and control of the information shared with our team members.
  • Each outsourced accounting staff has a disabled USB and Hard drive access in the work computer being provided. The work computers are secured to prevent unauthorized software installations.
  • The work computers provided to our Staff have pre-installed firewalls and antivirus software to mitigate against cyber security breach.
  • We use MFA or 2-factor authentication when logging into all online applications that facilitates communication with clients and access to client’s financial data, including our emails
  • In terms of Network security, our internet routers provide  limited access to authorized devices only. They are protected with strong password security 
  • Our Offshore accounting office is under 24/7 CCTV surveillance with a dedicated surveillance officer to monitor team members.