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Confirmation of the company's non-tax status in Hong Kong

2018-11-23

Hong Kong is a special administrative region of the PRC. It is popular for the opening of companies, many businessmen decide to develop business in Hong Kong. This is due to the developed infrastructure in the area, convenient location. Hong Kong is one of the leading financial centers in the world.

Features of taxation

In the area there are two types of accrual of corporate income tax. The first type is relevant in the case when the case itself is associated with the area, then the company needs to pay a fee each year at a 2-level tax rate.

Tax rates:
• The first company’s net profit of 2 million HKD is taxed at a rate of 8.25%;
• Other income that exceeds this amount will be taxed at a higher rate - 16.5%.

The second type of taxation is relevant if the company's business has no connection with the area. Then the profit is taxed at a zero rate, the company receives the status of offshore and tax exemption.

Preparation of financial statements

The reporting of companies must be submitted annually within a certain period established on the basis of the completion date of the reporting period. So, if the company selected the period from 1.01 to 31.12. current year, reporting is submitted no later than August 15 of the next year.

It is recommended that you familiarize yourself with the list of necessary documents that will be required for the preparation of financial statements. For example, if a trading company buys products in China and delivers them to a territory that does not have a connection with Hong Kong, the following papers will be required for auditing and reporting:
• Bank statements for the period;
• Details of payment orders;
• Contracts signed with suppliers, invoices, contracts with customers;
• Documents confirming the movement of goods from the supplier to the customer.

Accounting organization should prepare a financial report, which includes the general ledger, report on profits, company expenses, balance sheet report. After preparing the financial report is ready, the documents are transferred to the auditor. It is important that the auditor has the right to submit to the tax service a report and a conclusion on the state of reporting from the accounting department to existing standards.

When checking the documents, it is determined whether the company conducted activities in Hong Kong. These data are indicated by the auditors in the report. A note is drawn up that according to the documents, the company’s activities should not be taxed.

What does doing business mean in Hong Kong?

If there are signed agreements with other companies in Hong Kong, or individuals resident in a special area, we can say that the company operates in Hong Kong.

This fact may indicate the presence of invoices received or issued to legal entities, individuals, residents of Hong Kong. In addition, this is evidenced by contracts concluded in the district, the fact of negotiations and discussions of transactions within Hong Kong, storage and movement of goods in the territory.

To resolve some issues related to the Tax Service, you should contact the IT-OFFSHORE specialists. Experts will be able to answer questions relating to the preparation of reports and an audit, confirmation of tax-free status.