April is fast approaching and with it the beginning of the tax season. The Inland Revenue Department (“IRD”) will issue the Profits Tax Returns (“PTR”) for the year of assessment 2020/21.
We would like to take the opportunity to recap some basic information on how the tax system and administration work in Hong Kong.
1. The IRD and your role as a taxpayer; What should you know?
The IRD is the government body responsible for the tax administration and collection.
As a taxpayer your main obligation is to submit a correct and complete PTR in a timely manner with supporting documents. This means you must keep proper accounting records and produce audited financial statements to submit together with your PTR.
2. Is your company taxable under the profits tax and what is the applicable tax rate?
Hong Kong has a territorial system of taxation; a company is generally considered as a resident in Hong Kong if it is incorporated in Hong Kong or centrally managed and controlled in Hong Kong.
Hong Kong has one main direct tax schedule for companies: the profits tax.
Profits tax is applied to any person who exercises a trade, profession, or business in Hong Kong with respect to his taxable profits that arise in Hong Kong or are derived from said trade, profession, or business.
Therefore, if you are a registered company in Hong Kong conducting business, you are taxable under section 14 of the Inland Revenue Ordinance.
The tax rate applicable is 8.25% on assessable profits up to HK$2 million; and 16.5% on the remaining balance.
3. What are the important dates for your company to be prepared and what is the submission deadline for the PTR?
Companies with year-end 31st December 2020 (“D-code”) must submit its PTR together with audited financial statements on or before the 13th of August 2021.
Companies with year-end 31st March 2021 (“M-code”) must submit its PTR together with audited financial statements on or before the 12th of November 2021.
In order to avoid being against the clock and skip the busy audit season, please find below a table with our recommended dates for your internal planning:
We hope this information is useful for this coming tax season.
If you have any questions regarding the above or need any advice on how to proceed with the accounting and audit of your company, contact us at email@example.com or at 2528-4999.
If you want to learn about the benefits of incorporating your company in Hong Kong, you may click here.
La Nao Consulting
Unit 19B, Golden Star Building,
20-24 Lockhart Road, Wanchai, Hong Kong