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Tax – Accounting & Auditing - FAQs

+ Hong Kong

1. What types of tax return I need to file in HK?

There are mainly 3 types af tax returns, you need to file to the IRD: Employer’s Return, Profit Tax Return and Individual Tax return. 

Each entrepreneur is obligated to file these 3 tax returns each year since the first return is received.

2. When do I submit my first audit report to IRD?
If you have formed a HK company, you’ll receive your first Profit Tax Return (PTR) in 18 months after the date of incorporation. Thus you’ll need to well prepare your accounting records and submit your first audit report together with the completed tax return to the IRD.
3. What expenses could be deductible from Assessible Profits?
Generally, all outgoings and expenses, to the extent to which they have been incurred by the taxpayer in the production of chargeable profits, are allowed as deductions.
4. Do I need to file tax return to the HK Govt for my offshore business?

For those companies registered in offshore jurisdictions but having profit derived from HK, they are still liable to HK Profit Tax. It means these businesses need to file the Profit Tax Return to the IRD

Read more: Hong Kong offshore tax exemption

5. Do I need to audit the accounts if my Hong Kong company is inactive or the turnover is small?
The requirement to audit the accounts of the company is set down by the Companies Ordinance. The Ordinance does not provide any conditions under which no audit is required.
6. Which Types of Tax Returns I Need to File for Hong Kong company?
Generally, the Inland Revenue Department (IRD) will issue 3 types of tax returns to each entrepreneur every year since the very first return issued: Employer’s Return, Profits Tax Return and Individual Tax Return.

The IRD will issue Employer’s Return and Profits Tax Return on the first working day of April every year, and issue Individual Tax Return on the first working day of May every year. It is required for you to complete your tax filing within 1 month from the date of issue; otherwise, you may face penalties or even prosecution. 

Read more: 

7. What is the tax rate of profits tax?
8.25% on assessable profits up to $2,000,000; and 16.5% on any part of assessable profits over $2,000,000 from 2018/19 onward.
8. How to manage the Profit Tax Return if it is received in the taxing period before the business of the limited company commence?
The Profit Tax Return shall also be submitted to the IRD even if the limited company has not commenced its business.
9. Do I need to do accounting for my offshore company in Hong Kong?

The Government of Hong Kong requires all companies incorporated in Hong Kong must keep financial records of all transactions including profits, revenues, expenses should be documented.

18 months from the date of incorporation, all companies in Hong Kong are required to file their first tax report which consists of accounting and auditing reports. Furthermore, all Hong Kong companies, including Limited Liability, the annual financial statements must be audited by external independent auditors who hold the Certified Public Accountants (CPA) license.

One IBC offers our Accounting & Auditing services to all of our clients who are operating their companies in Hong Kong. Our offered services include:

  1. Coordination and advice for setting up bespoke accounting systems.
  2. Bookkeeping and annual accounts preparation.
  3. Periodic management accounts and reports.
  4. Budget and cash flow preparation and forecasts.
  5. Compliance with Hong Kong Inland Revenue Department (IRD), Securities and Futures Commission (SFC) reporting requirements if any.

For more information, please send us an inquiry via email: [email protected]

Read more:

10. Why Does My Offshore Business Need to File Tax Returns to the HK Government?

The reason is that if your business has profits derived from HK, even if your company is registered in offshore jurisdictions, your profits are still liable to HK Profits Tax and you need to file the Profits Tax Return compulsorily.

However, if your company (whether it is registered in HK or offshore jurisdictions) does not involve a trade, profession or business in HK that has profits arising in or derived from HK, i.e. your company is operating and generating all profits wholly outside HK, it is possible that your company can be claimed as an ‘offshore business’ for tax exemption. To prove your profits are not liable to HK Profits Tax, it is suggested to select righ experienced agent at the initial stage

Read more: 

11. How to submit the Profit Tax Return for a limited company in Hong Kong?

The accounts of a limited company shall be audited by a Certified Public Accountant before submitting to the Inland Revenue Department (IRD) together with an auditor's report and Profit Tax Return.

12. What are tax exemptions for offshore companies in Hong Kong?

Generally, offshore companies are free from tax liabilities, all foreign-sourced incomes are tax exempted for companies incorporated in Hong Kong. To be qualified for Hong Kong offshore tax exemption, companies need to be assessed by the Inland Revenue Department (IRD) of Hong Kong.

According to IRD, the following are excluded from the assessable profits:

  • dividends received from a corporation which is subject to Hong Kong Profits Tax;
  • amounts already included in the assessable profits of other persons chargeable to Profits Tax;
  • interest on Tax Reserve Certificates;
  • interest on, and any profit made in respect of a bond issued under the Loans Ordinance or the Government Bonds, or an Exchange Fund debt instrument or a Hong Kong dollar-denominated multilateral agency debt instrument;
  • interest income and trading profits derived from long term debt instruments;
  • interest, profits or gains from qualifying debt instruments (issued on or after 1 April 2018) exempted from payment of Profits Tax; and
  • amounts received or accrued of a specified investment scheme by or to one person

If you still want to know more information about tax exemptions for Hong Kong offshore companies, you can contact our consulting team via email: [email protected]

Read more: 

13. What happens if I fail to file my tax return or provide false information to the Inland Revenue Department of Hong Kong?

Any person who fails to file tax returns for Profits Tax or provide false information to the Inland Revenue Department is guilty of an offence and liable to prosecution result in penalties or even imprisonment. In addition, section 61 of the Inland Revenue Ordinance addresses any transaction which reduces or would reduce the amount of tax payable by any person where the Assessor is of the opinion that the transaction is artificial or fictitious or that any disposition is not actually in effect. When it applies the Assessor may disregard any such transaction or disposition and the person concerned shall be assessed accordingly.

Read more

14. In which case will Hong Kong company be exempt from Profits Tax?
If the corporate profits do not derived from Hong Kong, and the company has not set up an office in Hong Kong nor hired any Hong Kong employees, its earned profits will be exempt from Profits Tax. But the Company should apply for the offshore claim exemption position from IRD.
15. What will be the consequence of not submitting a Profit Tax Return Hong Kong?

A beginning penalty of few thousand dollars or above may be applied if a Profit Tax Return hong Kong is not submitted before the due date.

A further fine may also be applied by a district court from the Inland Revenue Department.

+ United Kingdom

1. What if you don’t receive a ‘Notice to deliver a Company Tax Return’ from HMRC?
You still must tell HMRC your company is liable for Corporation Tax. You must do this within 12 months of the end of your Corporation Tax accounting period. If you don’t, your company or organisation may be charged a penalty. HMRC calls this a ‘failure to notify’ penalty.
2. When is the deadline for filing the first account?

The first account must be filed in 21 months after registration with Companies House.

3. How many types of primary business Tax in UK ?
  • Income Tax
  • National Insurance
  • Corporation Tax
  • Capital Gains Tax
  • VAT

Read more: 

4. What are the penalties for keeping inadequate business records?

HMRC may charge a penalty of up to £3,000 per tax year for a failure to keep records or for keeping inadequate records.

5. When you must register for VAT?

You must register for VAT with HM Revenue and Customs (HMRC) if your business’ VAT taxable turnover is more than £85,000.

Read more: 

6. What is a dormant company?

A company or association may be ‘dormant’ if it’s not doing business (‘trading’) and doesn’t have any other income, for example, investments.

7. Does the dormant company need to file account to Companies House?

Yes. You must file your confirmation statement (previously annual return) and annual accounts with Companies House even if your limited company.

8. What is my unique tax reference (UTR) number in UK?

Your unique taxpayer reference , is a unique code that identifies either an individual taxpayer or an individual company. UK UTR numbers are ten digits long, and may include the letter ‘K’ at the end.

Unique taxpayer reference numbers are used by HMRC to keep track of taxpayers, and is the ‘key’ that the taxman uses to identify all of the different moving parts related to your UK tax affairs.

Read more:

9. The dormant company need to file account to Companies House?
Yes. You must file your confirmation statement (previously annual return) and annual accounts with Companies House even if your limited company
10. Do overseas companies need to send accounting documents to Companies House in UK after registration?

In most cases, overseas companies are required to send accounting documents to Companies House in UK. The accounting documents an overseas company delivers will depend on the following circumstances,

  • The company is required to prepare and disclose accounting documents under parent law (the law of the country in which the company is incorporated)
  • If it is required to prepare and disclose accounting documents under parent law is it an EEA company. An EEA company is an overseas company governed by the law of a country or territory in the European Economic Area (EEA)

Read more:

+ Singapore

1. What is Annual General Meeting (AG?).

An AGM is a mandatory annual meeting of shareholders. At the AGM, your company will present its financial statements (also known as "accounts") before the shareholders (also known as "members") so that they can raise any queries regarding the financial position of the company.

2. Do I need to apply for the waiver of Form C-S/ C Submission on a yearly basis, if the company is dormant?

Once a company has been granted a waiver from a specific date, the company will not be issued with Form C-S/ C from that date onwards.

As such, a company whose waiver application had been approved will not need to submit the application form on a yearly basis to IRAS.

3. What is Annual General Meeting (AGM)?

An AGM is a mandatory annual meeting of shareholders. At the AGM, your company will present its financial statements (also known as "accounts") before the shareholders (also known as "members") so that they can raise any queries regarding the financial position of the company.

4. What if I e-Filed the ECI beyond three months after the company’s financial year end?
You can still e-File the ECI if no assessment for the YA has been issued to your company. However, you cannot pay by instalment. Instalments are only granted by IRAS when a company files its ECI within three months after its financial year end and is on GIRO.
5. Is it necessary to file financial reports in Singapore with full XBRL format?

All companies incorporated in Singapore which are either limited or unlimited by shares (except exempted companies) are required to file their full set of financial statements in XBRL format according to the recent guidelines released by ACRA (Accounting and Corporate Regulatory Authority) Singapore June 2013.

 

 

 
6. Do I need to file an ECI for my company if it is nil?

You do not need to file an ECI for your company if it is nil and if your company meets the following annual revenue threshold for the Waiver to File ECI:

Annual revenue not exceeding $5 million for companies with financial years ending in or after Jul 2017.

7. How is XBRL filing useful?

XBRL is an acronym for eXtensible Business Reporting Language. Financial information is converted to XBRL format then, sent to and fro between business entities. Singapore government has mandated it for each Singapore company to file its financial statements only in XBRL format. The analysis of the data, thus, accumulated gives accurate information about the trends in finance.

8. Is income received in the form of virtual currencies such as Bitcoins taxable?
Remuneration or revenue received in the form of virtual currencies (such as Bitcoins) is subject to normal income tax rules. The receipt will be taxable if it is revenue in nature, and non-taxable if it is capital in nature
9. What is the Financial Year End (FYE) of Singapore?

The financial year end (FYE) of Singapore is the end of the fiscal accounting period of a company which is up to 12 months.

10. When AGM is held since the date of incorporation?

Generally, a private limited company is required under the Companies Act (“CA”) to hold its AGM once in every calendar year and not more than 15 months (18 months for a new company from the date of its incorporation).

11. How long Financial statement reports are laid at AGM?

Financial statements no more than 6 months old must be laid at the AGM (section 201 CA) for Private limited companies.

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