FAQ > Hong Kong Companies

> Annual Maintenance - Accounting

• Why accounting work is required.
• When accounting work is to be done.
• What you need to prepare for accounting work.
• What material you can have after accounting work.
• Offshore income claiming tax exemption
• Service fee.

Legally required

• Accounting record keeping is compulsory according to HK laws;
• [ Please click for detail ] ( pdf format )

Practically required

Accounting work is required for several major reasons:

• required by tax department;
• required by management;
• required by fund provider, such as shareholder and banker.

Only the requirement from tax department is mandatory in Hong Kong.

Hong Kong individual and company are not required to file tax return on monthly basis. It is required on annual basis. Therefore, many SMEs prefer to have formal accounting work be done once a year.

In Hong Kong, individual and corporate need to file tax return only once a year, the deadline is as follow:

Profits Tax - Corporate & Partnership - Due date for tax return filing of represented cases:

Salaries Tax & Profits Tax for Sole Proprietorship - Due date for tax return filing of represented cases:

Bulk issue on 3/5/2004

Not involving sole proprietorship - extension due on 3/7/2004.

Involoving sole proprietorship - extension due on 4/10/2004.

Financial statement of a company needs to cover all transaction undertaken by a company disregarding where those transaction is carried out. This means even non-taxable offshore income needs to be reported in the financial statement.

Therefore, offshore income needs to be stated in "Tax Computation' in order to claim for non-taxability. Sufficient evidence needs to be submitted in order to support the claim. Those evidence include:

• Company structure and office location.
• Document example of a deal showing how an offshore income business is handled.

Hong Kong adopts a territorial source principle of taxation. Only profits which have a source in Hong Kong are taxable here. Profits sourced elsewhere are not subject to Hong Kong Profits Tax. The principle itself is very clear but its application in particular cases can be, at times, contentious. To clarify the operation of the principle, Inland Revenue Department prepared a [ simple guide on the territorial source principle of taxation ]. It gives a brief explanation of how the principle operates and provides simple examples for illustrative purposes of the tests applied to different types of businesses. If you wish to explore the subject in greater depth, consultation with professional advisers is recommended.

Service fee (accounting, auditing, tax filing and offshore claim) depends very much on the trasaction volume and business nature of the company. Please contact us and give detail of your situation for a quotation.