Q
Can Mainland China residents incorporate a company in Hong Kong ?
A
Yes. There are no restrictions on the nationality of shareholders or directors when incorporating a company in Hong Kong.
Q
Does a Hong Kong company need to maintain accounts, undergo an audit, and file taxes if it only opens a bank account to collect and make payments for a Chinese company?
A
Yes, it is required. Since the company is established for profit-making purposes, even if Hong Kong is only acting as an intermediary for collecting and making payments, it still needs to maintain accounting records and prepare an audit report. The accounting will outline the entire process of collection and payment, and then determine the actual income of the Hong Kong company based on the circumstances.
Q
When is the financial year-end for companies in Hong Kong ?
A
In Hong Kong, the financial year-end for companies is typically determined by the company itself and can be set on any date. However, most companies choose to align their financial year-end with the calendar year (December 31) or the end of the fiscal year (March 31). Once established, the financial year-end remains consistent unless the company officially changes it.
Q
Who needs to pay profits tax?
A
According to the guidelines from the Inland Revenue Department, anyone engaging in a trade, profession, or business in Hong Kong, regardless of whether they are a Hong Kong resident, is required to pay profits tax on assessable profits derived from Hong Kong (excluding profits from the sale of capital assets).
Such individuals include:
Corporations: Refers to companies registered under the Companies Ordinance, such as limited companies.
Non-corporate individuals: Includes sole proprietors, partnerships, trustees, groups, and self-employed individuals.
Q
When do companies incorporated in Hong Kong need to prepare an audit report?
A
Newly incorporated companies in Hong Kong: After the company is incorporated, it will receive its first tax return from the Inland Revenue Department in the 18th month. The company must complete the audit report and related tax filing within three months of receiving the tax return.
Non-newly incorporated companies in Hong Kong: An audit is conducted annually on the company's financial year-end date, and the audit and tax filing must be completed within one month after the year-end date. If the year-end date is in March or December, the company can apply to the Inland Revenue Department for an extension of up to eight months.
Q
Does a company need to file taxes if it has no operations?
A
In Hong Kong, under the Companies Ordinance (Cap. 622), a company must comply with audit and tax filing requirements even if it has not engaged in any operational activities during a specific financial year.
This means that the company is still obligated to prepare financial statements and have them audited by an independent, qualified accountant. The audit ensures that the financial statements accurately reflect the company's financial position, even if they indicate no business activities or income.
