Hong Kong company law and tax law required all
the company registry in Hong Kong must keep proper business transaction records
and accounts for all businesses so as to ascertain the true figures of incomes,
losses or expenses.
Basically Hong Kong Inland Revenue
Department charges tax on any profits "arising in and derived from Hong
Kong". In other words, if the business activities are not occur in Hong
Kong, the profits are not chargeable to Hong Kong profits tax. The strong
leading cases such as Hang Seng Bank case and HK-TVB have ruled out that
offshore profits are tax free. Hong Kong only charges local profits tax, not
offshore profits tax.
Hong Kong Company law S.121 requires the
Hong Kong company to keep proper books of accounts and financial statement.
S.131 of Hong Kong Company law requires an auditor to be appointed annually to
audit the financial statements and issue an auditor report.
The audited account statements and audit reports
are required to prepare before the Annual General Meetings (AGM) for
sharehoders to discuss and get approval. An audited account is also required to
file to the Hong Kong Inland Revenue Department (IRD) for tax declaration.
For Hong Kong company whom profit not sourcing
from Hong Kong, there is should be reported to the IRD and request to claim
exemption of profits tax. Under the general procedure works, the IRD will issue
a notice for require an evidence that the profits are not subject to Hong Kong
profits tax. Government has your proven records that your huge money comes from
The consideration of offshore tax exempt or
not is on "totality of fact". No one single factor will dominate.
Therefore, planning in advance is very important. Otherwise, you may have
difficulty in getting enough proof to support the tax exempt claim. Those proof
1. the contract is not signed in Hong Kong;
2. the contract is not executed in Hong
3. goods is not supplied via Hong Kong;
4. business is conducted by staff outside of
Hong Kong; etc.
For prepare the account bookkeeping, annual
audit report, tax filling for your Hong Kong, please feel free to contract us.