A Comprehensive Tax Deadline Checklist for Your Hong Kong Small Business
7 minute read
Benjamin Franklin once said that nothing is certain in this world except for death and taxes. Fortunately, the rate of tax in Hong Kong is among the most reasonable in the world.
Add to that a great infrastructure, skilled workforce, and plenty of opportunities, and it is easy to see why so many entrepreneurs and small businesses thrive in Hong Kong.
As one of them, it is your responsibility to meet tax obligations and deadlines throughout the year. Here is a comprehensive tax deadline checklist for the types of taxes you should pay and returns you should file.
Keep in mind that regulations and dates can change. Always double-check with the Hong Kong Inland Revenue Department (IRD) or consult with tax professionals to make sure that you are aware of the latest rules.
The First Steps
Familiarise Yourself with Hong Kong’s Tax System
The first step towards ensuring a smooth tax schedule is to understand the tax regime. Hong Kong operates on a territorial tax system. This means that businesses are taxed only on income derived from within Hong Kong. Various types of taxes apply, which we shall go on to discuss.
Obtain a Business Registration Certificate
Before you begin business operations in Hong Kong, you should register your company with the Business Registration Office. The certificate must be renewed every year or every three years, so ensure that your renewal date is marked on your tax calendar.
Keep Accurate Financial Records
It is crucial to maintain accurate and up-to-date financial records. Your receipts and accounts will not only help you track your income and expenses but also ensure compliance during tax audits. It is best to use professional accounting software or work with a professional tax and audit organisation.
Who Has to Pay Taxes in Hong Kong?
Any company or individual earning income in Hong Kong is liable to pay taxes and file returns. For example, the income could be a salary, pension, or business profits.
To spell it out, this applies to:
- Individuals who are considered to be residents in Hong Kong for tax purposes.
- Non-resident individuals are liable for their Hong Kong-sourced income.
- Companies incorporated/ operated in Hong Kong are liable to pay tax on their profits.
- Trusts that are resident in Hong Kong are liable to pay tax on their income.
Whether you are self-employed, a foreigner, or a small company in Hong Kong, you should be aware of the types of taxes you are liable to pay, as well as the tax deadline. Here is a handy guide for foreigners seeking more information.
Types of Tax Returns and Deadlines
As a small business owner, here are the primary types of tax returns that you should be aware of.
Profits Tax
At present, companies have to pay a Profits Tax of 8.25% on assessable profits up to $2,000,000, and 16.5% on assessable profits over $2,000,000.
Deadline: In general, the tax return deadline for Profits Tax depends on their financial year end date.
Deadline: This year, the Inland Revenue Department issued the majority of the forms on April 3, 2023. Employers are generally required to file their returns within one month from the date of issue. However, extensions are granted for specific cases.
Property Tax
The Property Tax return is for disclosing income from the property during a financial year that is earned by individuals and legal entities such as companies. This is primarily rental income. The current rate is 15%. There are deductions that you can make for any repairs and outgoings.
A property tax computation example: Source
Deadline: Property tax returns should be filed within one month of the date of issue. This year, the forms were issued on April 3, 2022.
Other Types of Tax Returns
The above tax returns are what companies should primarily be aware of. In addition, there are some other returns to be aware of.
Salaries Tax
Residents and foreigners have to pay personal taxes on income earned in Hong Kong. This is known as the Salaries Tax. This is a progressive tax, and the rate increases with the amount of taxable income.
Deadline: This year, the tax returns for individuals were issued on May 2, 2023. The tax return deadline is within one month from the date of issue.
In addition to the Salaries Tax, here are some other tax returns that you can check to see if they are applicable.
Stamp Duty:
This is levied on the sale of immovable property and stocks. The amount of tax is dependent on the taxable value of the proceeds.
Deductions and Exemptions
When racing to meet the tax deadline for business, you should not ignore the deductions and exemptions for businesses in Hong Kong.
Deductions
The specific deductions will depend on the nature of your business. Here are some you can look out for:
- Capital allowances for depreciating assets, such as buildings, machinery, and equipment.
- Business expenses for the cost of running a business, such as rent, salaries, and travel.
- Investment allowances for investing in new technologies or equipment.
- Start-up noncapital expenses for newly incorporated businesses.
Exemptions
To allow businesses to thrive, there are certain tax exemptions. These are specific to the circumstances and nature of the business. A few examples:
- An Exemption Order exempts individuals and businesses from the payment of salaries tax and profits tax in respect of financial assistance or relief provided under the Anti-epidemic Fund.
- Offshore companies can claim tax exemption because Hong Kong has a territorial tax system. The company has to show that it renders no services in Hong Kong, among other conditions.
Penalties for Not Paying on Time
You must make sure to pay taxes and file returns on time. Otherwise, there can be severe consequences.
The penalties depend on the nature of the offence. There can even be prosecution by the courts. Missing deadlines could result in fines from HKD$ 1,200 to the triple of the entitled profit tax.
These penalties are also applicable in case of fraudulent or missing information. Businesses in this situation may have to also pay a percentage of the tax withheld.
In a Nutshell
Hong Kong offers terrific business opportunities. To thrive in this environment, you must make sure to adhere to the tax deadline.
The region has an easy, efficient tax policy. The main taxes are profits tax, salaries tax and property tax. There are different deadlines, forms and pieces of information needed for each one.
To make sure that your returns are in order, you should rely on professional advice relating to the tax filing deadline for business. Get in touch with Sleek to put your worries to rest.
FAQs
The year of assessment begins on 1 April and ends on 31 March of the next year. The period to compute the taxable profits is the financial year after the assessment year.
Every individual, including foreigners, must pay tax in Hong Kong if they derive from Hong Kong.
