Compliance Requirements for Hong Kong Companies
Being the freest economy and situated in the heart of the Asian market, Hong Kong is renowned for being a convenient place for doing business. The motive behind this trend is to facilitate entry into an international market and to benefit from tax-friendly jurisdictions.
As a matter of fact, Hong Kong does not impose any capital gains tax, withholding taxes on shares, interest and on the collection of the social security benefits. So, are you ready to start a new business in Hong Kong, but confused on how do go about it? Then you have come to the right place! This article will provide you a description about the compliance requirements for Hong Kong companies and doing business in Hong Kong.
Necessary Compliance Requirements for Hong Kong Companies
It is always important to understand all the compliance requirements for Hong Kong Companies in order to steer away from any legal problems. Below are some facts that Hong Kong private limited companies are required to follow.
- Manage a local secretary for your company(body corporate or an individual).
- All the private limited companies need to sustain the required permits and licenses for the company.
- Sustain a local registered address for the company other than a P.O. Box.
- Keep at least one director for your company. They can be a foreigner or a local person, but they should be above 18 years old.
- Need to maintain an audit for the proper accounting transactions of the company. Otherwise, the business may be deemed as in “dormant” status under the Companies Ordinance in Hong Kong.
- Maintain at least one shareholder for your company, whether they are a foreigner or local person, but should be older than 18 years old.
- All the private limited companies of Hong Kong need to sustain the detailed records of the accounting transactions in order to determine the assessable profits of the business.
- The records or documents are required to be maintained for at least seven years from the date of the transactions period. Hong Kong has also ratified the framework of (FRS) Financial Reporting Standards since January 1st, 2005 that was issued by the (IASB) International Accounting Standards Board.
- Required to maintain all the documents and records for the private limited company which includes-company sealing, identification documents, incorporation certificates, share registers, members register, updated financial records, directors register, minutes of all the meetings for the members and directors, share certificates for the business entity.
- All the business owners are required to renew their registration documents one month before the expiry date on an annual basis or once every three years.
- All the business people have to follow all the annual filing requirements and deadlines of Hong Kong’s Tax Authority and Companies Registry.
Some notifications For the Company Registry
Company owners are requested to inform the Companies Registry for any changes in the business entity’s particulars including the registered address of the company secretary, directors, shareholders,and changes in the shares capital, etc. Below are some important areas which you need to notify the Companies Registry if you are changing something in your business entity.
1. Notify The Company Registry within the one month of the issue or allotment of new shares.
2. Notify The Company Registry for the change of directors and shareholders (Cessation/Appointment)–within 15 days from the date of appointment or ceasing to act.
3. Notification for the replacement of the registered office address within 15 days after the date or time of the change.
4. Companies are required to notify The Companies Registry for the passing of a special resolution within 15 days of passing of the decision or resolution.
5. Notification for the change of particulars for the directors and secretary within 15 days from the date of change of details.
6. Information about the change of the business statutory or lawful books from the company’s registered office– within 15 days after the change.
7. Information of the Company name for the filing of the NNC2 statutory within 15 days after the change of the company’s name.
Annual Compliance Requirements
It is a requirement of the Hong Kong company law that both foreign and local companies are subjected to file annual filing requirements with the Companies Registry (CR) and Inland Revenue Department (IRD). In addition to this, the records of the accounting transactions of the companies must be retained in case of periodic inspection by government officers.
Tax Filing with Inland Revenue Department
It is a requirement of Hong Kong Company law that both local and foreign companies should maintain audits and also prepare an annual filing for the profits tax return in accordance with the Inland Revenue Department of Hong Kong.
As a matter of fact, the Profits Tax Return (PTR) are generally issued by the IRD on 1st of April every calendar year for the filing of tax returns to the registered companies. For newly incorporated registered companies, the PTR is sent on the 18th month of the incorporation date.
All the companies need to file the tax return within one month of notification sent by the IRD. The business entities can also request for an extension, if somehow the businesses fail to submit the annual tax return by the due date or are granted an extension. Otherwise, startups have to face the penalty or even prosecution charges. Before filing the tax return for your company, you need to attach the following documents:
1. The amount of the assessable of profits with the help of tax computation.
2. Auditor’s report, Loss & profit account relating to the basis period and the company’s balance sheet.
Annual Return with Companies Registry
For a private limited company incorporated in Hong Kong in both active and dormant status, are required to deliver the completed annual return signed by the authorized representatives or managers, directors, company secretary with the Companies Registry. The annual return must be filed within 42 days of the date of incorporation, even though the information contained in the last return has not updated.
An Annual Return is a return, containing the particulars of the business entity such as the incorporation papers of the company, identification documents of all the shareholders and directors, business certificate and the address proof of the registered office, company secretary, shareholders/stockholders and directors. In fact, there is no requirement to file the financial accounts of the business entity with the Company Registry.
The annual return for your business must be filed once every year before the anniversary of the company’s incorporation date. The late submission of the annual tax return for your company attracts the hefty penalty plus the prosecution charges.
It is the requirement of the Hong Kong company law that every company needs to file an annual return with the companies registry and also required to notify the Companies Registry for any changes in the business entity. Hence, the company’s directors must meet all the compliance requirements to ensure that the initial and ongoing conditions have complied under the companies Ordinance. In addition to it, it is essential to engage a professional firm like- Startupr in order to retain all the registered address for office and to comply with the statutory records in accordance with the Hong Kong Companies Ordinance.