We offer specialized accounting and book-keeping services to ensure the accuracy and precision of your financial records. Through meticulous financial documentation, we gain insights into your business situation:
Understanding Business Performance:
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Accurate financial records allow us to assess whether business income aligns with expectations and identify areas where expenses can be optimized.
Time and Energy Savings:
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By entrusting the cumbersome bookkeeping tasks to us, you can focus on your core business activities.
Is it compulsory for Hong Kong Limited Companies to perform annual audit?
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According to Hong Kong Companies Ordinance and tax regulations, all limited companies registered and established in Hong Kong are required to conduct annual audits of their financial statements. Even if a company’s total income does not exceed HKD 2,000,000, it is still necessary to appoint auditors to perform annual audits and prepare financial reports. Additionally, the auditor’s name and the audit report signing date must be specified in the tax return form.
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Contrary to popular belief, the exemption provision for companies with total income below HKD 2,000,000 (referred to as “small corporations”) was indeed in effect until 2022. However, it was officially abolished since 2023. As a result, all limited companies registered in Hong Kong, regardless of their income level, must now undergo annual audits for their financial reports.
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According to the Companies Ordinance in Hong Kong, all companies registered and conducting business in Hong Kong, including both limited and unlimited companies, are required to submit profit tax returns for each fiscal year. Limited companies must also submit audited financial statements.
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Here are the details regarding tax filing deadlines and procedures: ：
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Initial Tax Filing：
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Within 18 months after the company’s establishment, the Inland Revenue Department (IRD) will issue the first profit tax return.
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Typically, companies must submit the completed form to the IRD within 1 month of receiving the tax return.
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For the initial filing, the IRD grants an additional 2 months, allowing a total of 3 months to complete and submit the return. This extension is a one-time opportunity and cannot be requested again.
2. General Tax Filing for Limited Companies：
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On the first working day of April each year, the IRD sends out profit tax returns to all companies in Hong Kong.
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Companies are required to submit the returns within 1 month after receiving them.
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The submission deadlines vary based on the closing date of the accounting period:
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N Code: April 1 to November 30 (no extension).
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D Code: December 1 to December 31 (extended until August 15 of the same year).
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M Code (Profit): January 1 to March 31 (extended until November 15 of the same year).
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M Code (Loss): January 1 to March 31 (extended until January 31 of the following year).
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3. General Tax Filing for Unlimited Companies (Partnerships):
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For partnership businesses or cases where a partnership transitions to a sole proprietorship (or vice versa) within the relevant assessment year:
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Fill out the Profit Tax Return – Individuals Other Than Corporations (BIR52 form) for reporting profits or losses.
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Typically issued on the first working day of April, companies must complete and submit the form within 1 month.
4. Sole Proprietorships (Unlimited Companies) Owned Throughout the Year:
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Report profits or losses for all businesses owned as a sole proprietor throughout the year using the Individual Tax Return (BIR60 form), Part 5.
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Individual tax returns are usually issued on the first working day of May, and taxpayers must complete and submit them within 1 month after issuance.
In summary, whether you are a company owner, partner, or associated with a limited or unlimited company, timely completion of profit tax returns is essential to comply with relevant tax laws and regulations.
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According to the Hong Kong Inland Revenue Ordinance, taxpayers who disagree with their assessment results after receiving a tax assessment notice have the right to lodge an objection. The following outlines the procedure for objecting to a tax assessment:
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Within one month from the date of issuance of the tax assessment notice, submit a written statement clearly explaining the reasons for the objection.
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Complete the relevant section for objections on Form IR831, sign it, and return it to the Inland Revenue Department.
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Mailing address: Commissioner of Inland Revenue, P.O. Box 28777, General Post Office, Kowloon, Hong Kong.
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Alternatively, objections can be submitted through the “eTax” account.
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Late submissions:
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If an objection is not filed within the one-month deadline, taxpayers can still choose to submit a late application to the tax office using the methods mentioned above. However, the Inland Revenue Department will generally review each case individually to consider whether to accept the objection.
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The reasons for late submission should be clearly stated in the objection notice.
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The Commissioner of Inland Revenue may consider accepting late applications, such as in cases where the taxpayer was not in Hong Kong, was ill, or had other valid reasons for missing the deadline.
According to the Hong Kong Inland Revenue Ordinance, you can apply for deferred payment of part or all of your provisional tax based on specific reasons. Here is the process for applying for deferred payment of advance tax:
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Application Deadline:
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Your application for deferred provisional tax must be submitted to the Inland Revenue Department within the following periods:
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28 days before the provisional tax payment deadline; or
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Within 14 days after the issuance date of the provisional tax notice, whichever is later.
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If your provisional tax is payable in two installments and you have already paid the first installment before the deadline, you can still apply for deferred payment of the entire or partial second installment. However, you must comply with the application deadlines and reasons specified in the tax ordinance.
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Reasons for Application：
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Your assessable profits for the relevant tax year are less than or likely to be less than 90% of the assessable profits for the preceding year or less than or likely to be less than 90% of the estimated profits for the provisional tax year.
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Relevant supporting documents (including audited financial statements covering at least 8 months) must be submitted along with the application.
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Any carried-forward loss amount for the relevant tax year has been omitted or is uncertain.
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You have ceased or will cease your trade, profession, or business before the end of the relevant tax year, and the assessable profits to be assessed for that year are less than or likely to be less than the assessable profits for the preceding year or less than or likely to be less than the estimated profits for the provisional year.
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You have opted for personal assessment of income tax for the provisional tax year, which may result in a lower tax payment.
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You have lodged an objection against the assessment of profits tax for the preceding year.
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If the IRD has any doubts about your tax reports, the most common way of communication is to send a written inquiry letter to the corporation or individual to ask for explanation from the taxpayer and request for relevant supporting documents.
When replying to the letter from the IRD, the most important thing is to be simple, answer the key points that the IRD wants to know, and cite tax rules and regulations where necessary, so that the Tax Officer / Assessor can understand your case and basis in their way.
If you fail to answer the main points of the IRD’s questions, the Tax Officer / Assessor will generally issue a follow-up question letter to ask for in-depth questions, which will become more and more difficult to deal with. In case the IRD is not satisfied with the reply to the follow-up questions, it may lead to penalty and fine (amounted to three times the amount of tax undercharged at maximum level).
Our Professional Team has Years of Experience in dealing with the IRD and understands the key points of the IRD’s questions very well. With Winna Tax’s assistance, more than 98% of our client is able to clear all concerning points of the IRD in the first round of enquiry, where the IRD does not send follow-up letters to the case. We can assist clients to resolve issues with the IRD quickly, efficiently and in a targeted manner.
The following are some common enquiries from the IRD:
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Individual Tax
(i) Profits from disposal of assets
Many taxpayers in Hong Kong purchase properties and car park spaces for investment purposes. However, profits from sale of these assets are not necessarily to be tax-free / tax-exempt. If the tax bureau considers that the taxpayer holds the property / car park space for short-term investment (i.e. speculation purpose) and then sells it for profit, then any profit generated from the sale is subject to individual tax in Hong Kong.
As for how to define whether the investment is of "long-term" or "short-term" investment, the IRD generally considers six factors. It is the burden of the taxpayers to explain their situation in accordance with various factors. All arguments have to be supported by appropriate documents.
Therefore, if the IRD sends a letter to inquire about your recent property sales or car park space transactions, you should be careful in handling the questions. If you have mistakenly provided information indicating that the sale transaction is a short-term investment, the IRD would tax on the profits you earned.
We can assist you with:
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Organize your background information and explain your situation to the IRD
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Explain the tax basis of the relevant "six factors" and prove that the assets you hold are long-term investments
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If there is a lack of documents supporting the facts, assist to explain the situation to the IRD
(ii) Rental income from properties / car park spaces held in personal name
It is very common for Hong Kong people to hold properties for investment purpose and earn passive rental income from renting out of the properties. However, it is not uncommon for people to think that holding properties in the name of individual does not have to pay tax even if they earn rental income (because the properties are not held in the name of a company). This is a misconception: holding a property or parking space in your own name, the rental income earned is subject to Property Tax.
If you have not fully declared all the rental income (that is omission or under-reporting certain months of rental income), the IRD will send you an enquiry letter requesting explanation for the situation. Failure to report or under-report rental income without reasonable reasons is likely to result in fines (up to three times the amount of tax undercharged).
We can assist you with:
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Organize your background information and documents related to rental income, prepare a checklist for the IRD’s reference
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Explain your situation to the Tax Officer and recalculate the property tax calculation form if necessary
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In case of insufficient documentation, explain the situation to the Tax Officer and ask for waiver of penalty, if any
(iii) Double Taxation Relief – Apply for Tax Credit
If you work partially in Hong Kong and outside Hong Kong during a tax year, all your income will be deemed to be subject to Salaries Tax in Hong Kong. However, if you have already paid personal income tax on the income earned from performing duties in a region outside Hong Kong, you are facing the problem of Double Taxation, which increases your tax liabilities. With Winna Tax’s assistance, you can apply for tax credits in Hong Kong in accordance with the "Inland Revenue Ordinance" and the "Comprehensive Double Taxation Agreement".
We can assist you with:
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Organize your background information and documents related to tax payment certificates, and prepare a list for the IRD’s reference
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Explain your situation to the IRD in detail and recalculate your salary tax after applying for tax credits
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In case of insufficient documentation, explain the situation to the IRD
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Profits Tax
(i) Deduction of operating expenses (Entertainment, Traveling expenses)
Companies can apply for deductions under profits tax operating expenses incurred, but certain conditions stipulated in the relevant law have to be fulfilled. Since Companies usually list the amount of expenses claimed for deduction in the profits tax computation and return (BIR51), the IRD does not know the exact breakdown of the expenditure and whether these expenses are qualified for deductible. Therefore, the tax officer may send enquiry letter to the Companies, requesting you for relevant documentary evidence to justify the deduction claim.
We can assist you to:
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Organize the expense documents (say invoices, credit card statement and bank statement) and prepare lists capturing what the IRD would like to know
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Explain the tax basis for the deduction of relevant expenses
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If there is insufficient documentary evidence, explain the situation to the IRD and request for deduction
(ii) Deduction on Salary and Wage
Wage and salary expenses are key expenses that Companies can claim for deduction under Profits Tax. However, Companies generally pay little attention to whether the amount of wage and salary expenses listed in their tax returns and tax computations (BIR 51) is consistent with the amount disclosed in the Employer's Return, and whether these wage and salary incurred by the Companies are qualified as deductible under the profits tax regulations.
Therefore, the tax officer may send enquiry letter to the Companies, requesting you for relevant documentary evidence to justify the deduction claim.
We can assist you with:
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Organize the expense documents (say salary statement issued to employees) and prepare lists capturing the key information
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Cross-Check the Employer’s Return submitted and highlight any discrepancies noted
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If there are discrepancies, explain the relevant situation to the IRD and assist the company to submit revised Employer’s Return in compliance with the regulations
(iii) Gross profits fluctuation
The fluctuation of the Company's gross profit or gross profit ratio may raise the attention of the IRD. During the annual accounting and annual auditing work, many Companies tend to adjust the scale of income or expenditure due to various reasons, resulting in unreasonable fluctuation in gross profits ratio over years. The IRD may send enquiry letters to these Companies to inquire about the reasons for the fluctuation.
We can assist you to:
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Explain the relevant reasons from reasonable / commercial perspective
(iv) Profits from disposal of assets
Many taxpayers in Hong Kong purchase properties and car park spaces for investment purposes. However, profits from sale of these assets are not necessarily to be tax-free / tax-exempt. If the tax bureau considers that the taxpayer holds the property / car park space for short-term investment (i.e. speculation purpose) and then sells it for profit, then any profit generated from the sale is subject to individual tax in Hong Kong.
As for how to define whether the investment is of "long-term" or "short-term" investment, the IRD generally considers six factors. It is the burden of the taxpayers to explain their situation in accordance with various factors. All arguments have to be supported by appropriate documents.
Therefore, if the IRD sends a letter to inquire about the Company’s recent property sales or car park space transactions, the Company should be careful in handling the questions. If you have mistakenly provided information indicating that the sale transaction is a short-term investment, the IRD would tax on the profits you earned.
We can assist you with:
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Organize the Company’s background information and explain the situation to the IRD
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Explain the tax basis of the relevant "six factors" and prove that the assets the Company hold are long-term investments
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If there is a lack of documents supporting the facts, assist to explain the situation to the IRD
(v) Offshore claim
Many foreign companies have established trading companies in Hong Kong and enjoy Hong Kong's offshore tax exemption policy. By enjoying such tax exmeption policy, their Company's profits are not subject to profits tax in Hong Kong. However, the IRD would regularly send letters to these companies to inquire about their operations and require the companies to explain their basis of applying the Hong Kong's offshore tax exemption policy.
We can assist you with:
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Summarize the company's background information and explain the company's operations to the tax bureau
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Assist in organizing documents required by the tax bureau, including operational documents required by the tax bureau; then organize and submit relevant documents in a manner acceptable by the tax officer
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Explain the relevant offshore tax exemption policy tax basis, and explain from a tax perspective that your company complies with the policy
