Before starting a business or a corporation in Hong Kong, there are certain important facts you must know about like the Hong Kong profit tax returns. This piece has all you need to know about profit tax returns as well as a comprehensive guide on filing for profit tax returns in Hong Kong.
What is Hong Kong profits tax return?
A Hong Kong profits tax return is a form or a set of forms that are filled with the right tax authorities, which is the Hong Kong Inland Revenue Department (IRD). A profits tax return is used to report important tax information including expenses and income. Filing for profits tax returns allows taxpayers to calculate their payable tax, make scheduled payments, and even apply for refunds in the case of overpayment.
Types of Hong Kong profits tax return
There are three main types of profits tax returns in Hong Kong and they include:
- Hong Kong profits tax return – Corporation (BIR51)
- Hong Kong profits tax return – Persons other than corporations (BIR52)
- Hong Kong profits tax return – In respect of non-resident persons (BIR54)
Hong Kong profits tax return - Corporation (BIR51)
The features of the BIR51 profits tax return include:
- This profits tax return applies to corporations that are based in or carry out their operations in Hong Kong.
- Small and dormant businesses or corporations also have to ensure that their audited financial statements and tax computations are up to date even before the completion and submission of the BIR51 filing.
Hong Kong profits tax return - Persons other than corporations (BIR52)
The features of the BIR52 profits tax return include:
- These profits tax returns apply to persons other than corporations that are operate in Hong Kong.
- If businesses change from a sole proprietorship to a partnership or vice versa, their financial information should be reported in BIR52 for the full year of change instead of the BIR60, which applies to individual taxpayers.
- If a company is creating financial accounts in foreign currency, the yearly average rate at the closing date of the account should be used.
Hong Kong profits tax return - In respect of non-resident persons (BIR54)
The features of the BIR54 profits tax returns include:
- This profits tax return applies to individuals who do not reside in Hong Kong but have income arising in or derived from Hong Kong.
- According to the IRD, a non-resident individual is any individual that doesn’t have a business or corporation that operates permanently in Hong Kong.
- For example, a company that has directors that reside in Hong Kong or has its main base of operation in Hong Kong, it cannot be referred to as a non-resident.
What do I need to file my profit tax return?
The following requirements must be made available when filing a profit tax return:
- Newly registered businesses must file their profit tax returns 18 months from their launch date. For corporations, the profits tax return must be filled from BIR51 alongside with audited financial statement.
- If a business changes from a sole proprietorship to a partner, the profits and losses of the business should be recorded in the BIR52 form for the entire year of the change.
How do I start filing for my profit tax return?
An application for a profits tax return must be completed and submitted alongside other required documents within a month of the date contained in the profits tax returns. However, you can apply for an extension if the tax return for the business cannot be submitted within one month of the date stated.
To file for profits tax returns in Hong Kong, you can visit Hong Kong e-Tax website to file both the tax returns and supplementary forms.
Supplementary forms are forms that are used to indicate the details of tax incentives and more suitable policies.
What are NIL profits tax return?
A nil profits tax return is a type of profit tax return that should be filed by a business that has not conducted any transactions during the period of tax assessment.
Is there any consequence if I fail to comply?
Failure to comply with the tax obligations like recording accurate and timely financial reports on income, expenditure, and tax paid, filing for incorrect tax returns without a consequential error in tax payment, or not complying with the due date notice may subject a Hong Kong company or business to several fines.
The fines vary based on the offense or severity of the offense but the maximum fine for noncompliance includes three years imprisonment, a cash penalty of HKD 50,000, as well as a sum of three times the undercharged amount.
How Can We Help - Our Taxation Services
SJH Global is a company that specializes in providing professional services to corporations and businesses which include secretarial services, company formation, as well as accounting and taxation services. We have an accounting team that is well versed in the laws and can complete and submit profit tax return files with the Inland Revenue Department on behalf of our clients.
Our accounting and taxation services include but are not limited to:
- Preparing financial records including statement of income, ledgers, bank book, cash book, and balance sheet
- Sorting and filing the necessary supporting documents for filing profits tax returns
- Completing and filing profit tax returns
- Acting as a tax representative.
Hong Kong profits tax returns– Frequently Asked Questions
When filing for profit tax returns, a limited company must submit their Profits Tax computation reports and audited financial statements.
The first profits tax returns for a business or corporation should be filed 18 months from the date of incorporation.