Monthly Recap – March
Time flies fast and March has been a month for the fruit of hard work to ripe.
Today 31 March marks the end of a financial year end, which means it is time to file your Tax Returns to the Inland Revenue Department! Are you all ready yet? Have you found your accountants and auditors?
In March we covered 2 big topics: (1) Taxation, (2) Account & Audit. For those who will need a quick recap on the main points to get you prepared for the year end, this Monthly Recap is your finest aid.
Charges of Taxes are established under the Inland Revenue Ordinance. All Hong Kong companies would have to file a Tax Returns for the computation and official issue of notice of the payable tax amount. Hong Kong government adopted a two-tiered tax rates mechanism, meaning that there will be a cut-off with your revenue earned.
- For Limited Company: First $2 millions of profits of a limited company will be subject to a profit tax rate of 8.25%. Any profit above would be subject to a profit tax rate of 16.5%.
-For Unlimited Company (Partnerships/ Sole Proprietorships): First $2 millions of profits of an unlimited company will be subject to a profit tax rate of 7.5%. Any profit above would be subject to a profit tax rate of 15%.
If your company has not been making profit or been under business within the financial year subjecting to taxation, your company would not need to pay any profits tax. However, it was required that in your company’s tax return report, it should be stated clearly that the company “has not started to been conduct(ing) business”.
For sole proprietors, the company’s liabilities are solely on the sole proprietor. Therefore, the company’s taxation report would only be reported on the owner’s personal tax report. However, for a limited company and a partnership unlimited company, these companies would receive a separate tax report from the government.
There are transactions that could be exempted from the calculation of your assessable profits, as well as deductions, approved by the HKSAR Government under the Inland Revenue Ordinance. Check out the Inland Revenue Department’s website or phone-in to our professional consultants to know more!
Timely payment of the tax and provision of accurate financial records and tax returns are important. As in Section 71 (1) of the Ordinance, it is required that the taxes are to be paid in the manner directed in the notice of assessment on or before the specified date. Any payment of the tax after such specified date would be deemed as not paying tax on time and a violation of the ordinance.
Such violation would lead to prosecutions as a fine of $10,000 or more, or even a further fine of the undercharged tax; or a fine of $50,000, a further fine of the amount undercharged, and even a 3-year imprisonment.
If you have financial difficulties in settling the tax bills on time, the government have allowed application for paying tax by instalments. However, a surcharge would be imposed to the tax amount outstanding after the due date. You could choose to file an application with the Inland Revenue Department.
(2) Account & Audit
According to the Section 51C of the Inland Revenue Ordinance, every person carrying on a trade, profession or business in Hong Kong is required to keep a good and sufficient records of their income and expenditure. The records should be prepared in both English and Chinese to enable the assessable profits can be readily ascertained.
Receipts that mark your income and expenditures are the information source of accounting. A good accountant should be able to tell you the financial position of your company through the financial reports. You would be able to know if you are making a profit or not, what is your cash flow, and the current value of the company’s assets and liabilities.
Examples of responsibilities of an accountant includes: bookkeeping, filing the ledgers and computing financial statements. In an accounting cycle, there are steps that a Certified Public Accountant (CPA) has to follow. There are specific standards regulating the accounting process and the reporting statements. Finding a reliable and experienced accountant is, thus, important. Phone-in to our consultants, and see how OneStart Business Centre could help you!
OneStart Business Centre has been helping hundreds of companies to deal with their taxation. OneStart Certified Public Accountants (Practising) is a Certified Public Accountants (CPA) of The Hong Kong Institute of Certified Public Accountants based on the "Professional Accountants Ordinance" in Hong Kong. In addition, our Certified Public Accountants are the members of CPA Australia (CPAA).
Account and audit are closely related. The former produce financial records, and the latter inspect for its credibility. Accounting could be conducted by the accounting team and the CFO of your company, but auditing must require a third-party to conduct. This is regulated as a means to ensure the process of auditing the prepared financial records are fair and accurate.
Auditing like accounting is strictly regulated. The Hong Kong Institute of Certified Public Accountants Council has set out the Hong Kong Auditing and Assurance Standards. Such standards are known as the Hong Kong Standards on Quality Control, Auditing, Assurance, and Related Services. There are clear instructions and regulation on how to perform quality control and quality management over the abovementioned aspects. There is also specific regulation on audit documentation, and listed responsibilities of Auditors in their audit of financial statements to fraud.
A certified auditor should have adequate knowledge in accounting. Therefore, auditors are also Hong Kong Certified Public Accountants (CPA). Auditing is a professional process, and finding professional help is very important.
When choosing your auditors and accountants, you should first make sure they are practicing CPA. Then, you could evaluate the suitability based on the following criteria:
(1) understanding of your business
(2) rich experience in your industry
(3) familiarity with the chosen accounting software
It might be difficult to search for an accounting company that knows your industry. OneStart Business Centre’s clients come from different sectors and industry. Hence, OneStart Business Centre has years of rich industries experience, and would be able to understand the needs of your company, no matter which industry you are from.
OneStart Business Centre would encourage clients that used our company formation services to find us for auditing and accounting services. As we have been together from the setting up of the business, we understand what you need and your business way better than the other accounting firms.
In March, we touched on Taxation and Accounting and Auditing Services. Next Month – April, we will introduce you to some other important professional services offered by OneStart Business Centre, for example our Serviced Office and Company Deregistration Service.
Interested in OneStart Business Centre’s Taxation, and Accounting and Audit Services? Phone in to our hotline 3575 6888 or WhatsApp our helpful consultants!