FastLane CPA Limited, an affiliate company of the FastLane Group, is a licensed Hong Kong CPA firm that has extensive experience in providing various audit and Hong Kong tax services (Reg. No: S0615).
In addition to audit services in Hong Kong, FastLane CPA can provide various tax planning and tax compliance services as a licensed Hong Kong CPA. Regardless of whether our clients require assistance addressing matters related to Income Tax, Salary Tax or Profits Tax Returns, FastLane CPA aims to provide the best services to our clients.
Hong Kong is renowned for its simple tax regime, making it one of the most business-friendly jurisdictions in the world. Hong Kong utilizes a territorial system of taxation whereby only income derived from, and incurred in Hong Kong is subject to Hong Kong Profits Tax. In addition, Hong Kong does not impose tax on capital gains, dividends, VAT or estate tax and it’s low Profits Tax Rate continues to attract global businesses of all sizes.
Audits are examinations of a company’s financial reports, conducted by an independent party for the purpose of complying with the disclosure requirements set out in the Hong Kong Company Ordinance and tax obligations outlined in the Inland Revenue Ordinance.
Pursuant to this Ordinance, all Hong Kong incorporated companies are statutorily required to audit their financial reports on a yearly basis. Financial reports will include a balance sheet, an income statement, a statement of changes in equity, and a cash flow statement.
The purpose of conducting an audit in Hong Kong is to obtain a true and accurate representation of the financial statements of a company, without any internal bias. In Hong Kong, the financial statements, profits, and taxes payable to the government are usually verified and audited by a third party.
As the financial statements and tax returns of a company must be compiled without bias, companies cannot conduct the audit themselves. Audits must be completed by a neutral third party.
However, accounting can be done internally. Typically, a company can use their internal staff or professional accounting firm to conduct bookkeeping activities. In the event that an audit is conducted, auditors will rely on the internal records kept by a company’s accounting staff.
To complete a successful audit, a company should complete / prepare the following documents to improve the audit process:-
The IRD will generally issue the first Profits Tax Return for newly incorporated businesses 18 months after the date of their commencement. However, the IRD may issue a Provisional Profits Tax Return at an earlier date where circumstances warrant.
Upon receipt of a Profits Tax Return, the taxpayer should submit the return along with any required supplementary forms within 1 month from the date of issue. The compliance date of submission for each Profits Tax Return will be specified on page 1 of the Profits Tax Return.
It is possible to obtain an extension to your profits tax returns. To promote electronic filing, small corporations and small partnership businesses can apply for a further extension of 2 weeks after the normal submission date, on the condition that they submit their Profits Tax Returns through the internet. Businesses may also apply for an extension under the Block Extension Scheme. It is recommended to consult the IRD’s official website in relation to the particular extended due dates of Profits Tax Returns.
To the extent that a taxpayer fails to submit their tax return on time, they may be required to pay a penalty or may even face prosecution. A further consequence is that the taxpayer in question may be liable to pay increased tax. The maximum penalty for non-compliance is HK$10,000 plus treble the amount of tax undercharged.
In situations where taxes have been underpaid, the IRD may impose an additional 5% of the taxable amount as penalty.
Professional service firms like FastLane CPA can greatly improve the audit and taxation process of a company. With our team of qualified professionals, we can assist clients in meeting their statutory obligations by reviewing and ensuring the validity and legality of your financial records, and by advising on how to be more tax efficient and compliant.
With the daily stress associated with running a business, thinking about accounting and auditing is often the last thing you want to do. If you’ve been thinking of outsourcing services for your accounting and bookkeeping, our staff is happy to assist.
Outsourcing your accounting and bookkeeping tasks will allow you to get back to the part of your company that you love. Rather than devoting your efforts to paperwork and administrative tasks, you’ll free up substantial time to focus on the core aspects of what your business does!
Our team at FastLane is well-versed in all facets of compliance, auditing, accounting and more. We will help you manage your compliance obligations to keep your risk-levels down. With FastLane, you can expect a personalized approach and top-level support for all your businesses accounting and taxation needs.
Hong Kong utilizes a two tiered profits tax regime for both corporations and unincorporated businesses. Corporations will be taxed at a rate of 8.25% on their first HK$2 million of assessable profits, unincorporated businesses will be taxed at a rate of 7.5%. All assessable profits of corporations and unincorporated businesses exceeding their initial HK$2m of assessable profits will be taxed at Hong Kong’s standard rate of 16.5% (15% for unincorporated businesses).
Although not employed by a corporation, individuals such as entrepreneurs who are self-employed will be subjectable to the Hong Kong Profits Tax rate in accordance to the scheme stated above.
Such an advantageous tax system provides extensive support for businesses, especially start-ups and SME’s. Given that such businesses are able to retain a larger share of their profits, Hong Kong’s environment is perfectly suited to entrepreneurs and their ventures.
Hong Kong Income Tax is of a similar rate to the Profits Tax rate. Salaries tax is applicable to individuals employed by corporations at a rate of 17%, however, the maximum effective income tax rate is 15%.
Hong Kong Property tax is levied on the owners of land and buildings situated in Hong Kong at a rate of 15%. The assessable income subjectable to Property Tax is levied on the rental income (net of any irrecoverable rent) received in the year of assessment. It should be noted that deductions and allowances are permitted for repairs and outgoings equal to 20% of the rental income received, after deducting rates paid by the owner. For corporations whose main source of revenue is rental income received from property, their assessable income will be subject to profits tax instead. Such companies will not be subject to property tax.