【Tax Regulations】Financial Statements Required for Non-operational Companies

According to the recent regulations announced by the Tax Department, starting from April 1, 2023, Hong Kong registered limited companies are required to submit audited financial statements and supporting documents when filing their profits tax returns. 

Even if the annual total income of the corporation or business does not exceed HKD 2 million, there is no exemption. Limited companies must engage a professional accountant for auditing every year and submit the tax returns on time, even if the company did not engage in any transactions or have a bank account during the fiscal year.

How to Choose the “Company Year-end Date”?
Generally, the Tax Department requires companies to submit their tax returns within one month after receiving the tax forms. However, according to the Hong Kong Companies Ordinance, companies can choose their own accounting year-end date. While enjoying the freedom to choose, it is important to make a careful decision as the year-end date will impact the company’s operations.

Companies primarily engaged in local business often choose March as the year-end date to align with the Hong Kong fiscal budget. 

On the other hand, companies with subsidiaries in mainland China or closely cooperating with mainland companies often choose December as the year-end date to synchronize with their mainland counterparts. 

This ensures smooth reconciliation. Due to the large number of companies choosing either March or December as their year-end date, the Tax Department processes tax returns in batches. 

Therefore, companies with a March year-end date have a submission deadline in November, while companies with a December year-end date need to submit their tax returns before August.

Due to the time required for accounting and auditing, it is recommended to contact professionals early to avoid penalties for late filing or even more severe legal consequences.

There are various forms of business collaborations, and it is advisable to seek the advice of professional accountants to tailor the most ideal tax planning strategies.

With the right people and the right actions, everyone can become an expert.

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