"Important Notice! Starting from April 1st, 2023, Hong Kong companies are required to submit audit reports and are no longer allowed to file zero-declaration tax returns. The Inland Revenue Department has issued a notification stating that for the fiscal year 2022/23, when submitting profits tax returns, companies must attach audit reports or financial statements. Zero-declaration of tax returns will no longer be accepted. Hong Kong companies must complete the audit report before filing taxes; otherwise, they will face legal risks, including penalties, triple tax payments, imprisonment, and potential blacklisting of the board of directors, as well as the closure of company accounts.
For companies that have been consistently filing zero-declaration tax returns, it is crucial to take extra caution upon receiving tax returns after April 1st, 2023. Any pending audits that were not conducted previously need to be completed as soon as possible. Audits cannot be started from the middle or at the current stage; they must begin from the beginning. If assistance is needed, our company can provide professional Hong Kong certified accountants who can design cost-effective solutions for audit remediation and ensure swift completion of audit reports. Simply provide us with monthly statements or bank statements to receive a quotation. Additionally, if you find the audit and tax filing process for Hong Kong companies burdensome and costly, we recommend consulting with us to establish an offshore company that does not require tax filing.
Furthermore, starting from April 1st, 2023, small corporations and businesses with total income not exceeding HKD 2,000,000 will no longer be exempted from submitting audit reports when filing profits tax returns. This means that companies with an annual turnover below HKD 2 million, unless they are non-operational companies, must submit audit reports along with their tax returns.
Let's now examine the requirements for qualifying as a non-operational company, as follows:
1.No bank commercial accounts or funds flowing through any accounts.
2.No accounting or transaction records or any business transactions.
3.No relevant records of operations within government agencies.
According to the tax regulations, if a limited company is involved in any of the following activities, it will be deemed as "commencing business operations" and will not qualify for zero-declaration:
1.Stock investments.
2.Investment holding.
3.Group fund allocations.
4.Entrusted sales in Hong Kong.
5.Permission or authorization to use patents, trademarks, or designs in Hong Kong.
6.Employment of staff.
7.Leasing of office premises.
8.Involvement in any banking transactions.
Once a Hong Kong company meets the aforementioned conditions, a special resolution is also required, authorizing its directors to make a statutory declaration and declaring the company's inactive status to the Companies Registry. Only when a company is in an inactive state (i.e., non-operational) is it exempt from the annual review.
The materials required for conducting an audit report for a Hong Kong company include
1.bank statements for company accounts
2.the company's registration certificate
3.the latest annual review documents
4.the company's articles of association
5.sales and purchase invoice
6. other supporting documents.
If the audit has already been completed, the latest audit report should also be provided.
In conclusion, starting from April 1st, 2023, the Hong Kong Inland Revenue Department will no longer accept zero-declaration tax returns and requires the simultaneous submission of audit reports. For companies that have no substantial operations, we offer two solutions: conducting non-operational audit reports or applying for dormant company status. The tax department will dispatch profits tax return forms for the fiscal year 2022/23 in batches on April 3rd.
During this peak period of bookkeeping, auditing, and tax filing, we recommend appointing a professional.
