The process for filing taxes for a limited company is relatively more complex compared to that of an unlimited company. According to Hong Kong’s tax laws, a limited company’s financial statements must be audited by a practicing accountant in Hong Kong before filing taxes. After receiving the Profits Tax Return (BIR51) form, the company must submit it on time along with the audit report and profit tax calculation sheet. Generally, the Inland Revenue Department will issue the profits tax return form on the first working day of April each year, and late submission of the tax return form may result in penalties.
What is the tax filing process?
Preparing accounting records – Prepare complete accounting records in accordance with Hong Kong accounting regulations and standards, including income statements, balance sheets, trial balances, and detailed accounts, etc.
Auditing by an auditor – A limited company must appoint an auditor for auditing, during which the auditor will collect evidence, and issue an audit report after completion.
Submitting tax returns – Based on the audited financial data, prepare a profit tax calculation sheet and file the tax return form with the Inland Revenue Department before the deadline.
When do you need to file taxes?
The Inland Revenue Department usually issues profits tax return forms to all companies in Hong Kong on the first working day of April each year. After receiving the tax form from the Inland Revenue Department, generally, the profits tax return form should be submitted to the Inland Revenue Department within one month from the date of issue.
Common Questions About Limited Company Tax Filing:
Q: Is it necessary to audit the financial statements of a limited company?
A: According to tax regulations, the financial statements of a limited company must be audited by a practicing accountant before filing taxes. However, if the company has not operated during the fiscal year, it may apply for exemption from auditing, but it still needs to file tax returns (with zero amounts).
Q: When is the first Profits Tax Return issued for a limited company?
A: The first tax return must be submitted within 3 months from the date of issue, 18 months after the company is established.
Q: What are the consequences of late tax filing?
A: The Inland Revenue Department will issue a penalty notice, and there is a chance that an estimated assessment will be made for the limited company. If a penalty notice is received but ignored, the Inland Revenue Department may prosecute for the violation.
Q: What expenses can be tax deductible?
A: According to tax regulations, generally, if the expense is incurred to generate assessable income, it is tax-deductible. The Inland Revenue Department has special arrangements for certain expenses, and details can be obtained from YISI Accounting.
Q: What is the profits tax rate for a limited company?
A: The Inland Revenue Department implemented a two-tier profits tax rate in the 2018 fiscal year. If the assessable profit of a limited company does not exceed $2,000,000, the profits tax rate is 8.25%. For the portion exceeding $2,000,000, the tax rate is 16.5%.