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1. How long from its incorporation does a limited company have to file profit tax return?All companies will receive their first Profit Tax Return from the Inland Revenue Department 18 months from their incorporation date, then in every April in the subsequent years.
2. Does BBC’s Accounting and Auditing service include the completion and filing of the Profit Tax Return?Yes. BBC’s Accounting and Auditing service has included the completion and filing of the Profit Tax Return for you.
3. Is it mandatory for a business to prepare audited financial statements and reports every year?The new Companies Ordinance (Cap. 622 Part 9 Accounts and Audit) makes it a requirement for all companies, except dormant companies (session 447), to prepare and file audited financial statements and reports for each financial year. Details can be referred to in the following link:
4. Do you have to file the Profit Tax Return even when the company has not commenced business?Yes. You have to complete and file the Profit Tax Return with the Inland Revenue Department after receiving it, even when your company might still have not commenced business.
5. After filing the Profit Tax Return for the first time, does it mean we do not have to keep our accounting books and prepare audited financial statements if we receive a notice from the Inland Revenue Department that forthcoming tax return form will not be issued every year in the short term?Even so it is every company’s responsibility to maintain their accounting books. In case there is any profit generating within an assessment year, the company has to request the Inland Revenue Department to issue the profit tax return form and complete the filing accordingly.
6. What is the tax rate for Profit Tax? How to compute Profit Tax?A flat rate of 16.5% for corporations and 15% for unincorporated businesses for assessment years 2008/09 onwards (Note)
Two-tiered rates (suitable for year of assessment of 2018/2019 onwards) For corporations, 8.25% on assessable profits up to $2,000,000; and 16.5% on any part of assessable profits over $2,000,000 For unincorporated business: 7.5% on assessable profits up to $2,000,000; and 15% on any part of assessable profits over $2,000,000
7. Is it a must to pay Profit Tax?There is not necessarily tax payable every year, but it is the responsibility of every limited company to file profit tax return. The amount of tax payable is then computed.
8. What is Provisional Tax for individuals?Provisional tax is an advance payment of next year’s income tax which is estimated on an individual’s taxable income of the current tax year.
9. How do I apply for extension for lodgment of tax returns?Clients can get representation by an authorized representative to apply for an extension to file your 2019/20 profits tax return under the Block Extension Scheme, the due date is normally extended as follows:
Accounting Date Extended Due Date For N Code Returns (Accounting Date between 1 April to 30 November) One month from issue date of tax demand note For D Code Returns (Accounting Date between 1 to 31 December) Mid August For M Code Returns (Accounting Date between 1 January to 31 March) Mid November
10. What should I do when I receive a penalty imposed by the Inland Revenue Department?If it is regarding the late filing of a tax return form, client should complete the filing and pay the fine within the specified date to avoid being prosecuted by the Inland Revenue Department. Fail to do so is an offence and is subject to a fine of $10,000 and a further fine of treable the amount of the tax undercharged.
11. What should I do when I receive a court summons?Individuals receiving a court summons is recommended to attend the hearing at the court mentioned on the specified date for defend and follow the proceedings accordingly.
You may contact BBC for consultation or representation. For details please check with our customer service.
You may also contact BBC for accounting and auditing service as to file the required tax return. For details please check with our customer service.
12. Our company only has bank accounts with foreign banks in China and not in Hong Kong, does it mean we do not have to file tax returns to the Hong Kong government?No. According to the laws of Hong Kong, companies incorporated in Hong Kong must file tax returns with the Inland Revenue Department, regardless of the place the business is conducted. If the source of income is not Hong Kong, one can apply with the Inland Revenue Department for exemption of corporation tax for offshore income.
13. How do I apply for tax exemption on offshore income?Hong Kong adopts a territorial source principle of taxation. Only profits which have a source in Hong Kong are taxable here. Profits sourced elsewhere are not subject to Hong Kong Profits Tax. The principle itself is very clear but its application in particular cases can be, sometimes, contentious. Company trying to claim offshore income tax exemption should submit the claim with supporting documents when they file their Profit tax return and audit report to the Inland Revenue Department. You may refer to the IRD link below for more information