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Accounting – Case study

Read an explanation of how to gain offshore status for Hong Kong Limited company. We demonstrate the offshore principles on a Hong Kong Limited company which was registered on the 11th of October 2013.

The Company has been incorporated on the 11th of October 2014, the first Profits Tax Return (“PTR”) would issue to the company in around March to April 2016.
 
Company’s financial year end date has been determined the 31st of March, the first financial year end date will be March 2016.
 
If the company commenced its business during the period starting 11th of October 2014 (date of incorporation) to 31st of March 2015 (“the period”), you need to prepare the following documents (end date is 31st March 2016 ):

–          All sales invoices/ consulting service invoices;

–          All purchases invoice/ subcontractor’s invoices;

–          All expense receipts;

–          All bank statements;

–          General ledger and management account (i.e. Trial Balance, Balance Sheet and Income Statement). If for any reason you cannot provide the general ledger and management account, you may find useful to use our bookkeeping services to handle it for you.

If the business has not been commenced, you may report a “Nil” profit tax return (“PTR”) to Inland Revenue Department (“IRD”), Hong Kong Tax Authority, with a declaration that the business has not been commenced yet signed by the company director or company secretary of the company. However, please note that you are still required to perform first audit in accordance to the Hong Kong Companies Ordinance.

 If all your company income is sourced outside Hong Kong, your company will not be subjected to HK tax, you may apply offshore profits claim once you submit your PTR and financial statements.  IRD will issue an offshore claim queries letter to you as a proof by providing the passports of all directors/ sales representatives and some samples of sales and purchase/service fee invoices, contracts/agreements and shipping documents e.g. bill of lading. 

We hope the explanation above gives you a clear picture of HK audit and taxation system.