Declaration of Company Tax

All companies are required to file a tax return. However, an unlimited company is normally required to declare and file on the personal income tax return; while a limited company is required to file an audited independent tax return.

Notice for limited companies on their initial tax return.

First tax return：
The company will receive the first tax return ( BIR 51) after 1.5 years of operation. It has a longer time limit for tax declaration, and can be submitted within three months.
•File reference number:23/xxxxxxxx (company business registration number)
•For which period to be filed?
Assuming the year of the tax return is 2021:
1) From the opening of the business operation until 31/3/2021 or
2) From the opening of the business operation to a self-set closing date.
For example, from 1/7/2020 to 31/12/2021 or 1/7/2020 to 31/1/2021.
(that is to say, the next tax year in the above examples will be 1/1/2021 to 31/12/2021 or 1/2/2021 to 31/1/2022)

Subsequent tax returns

Usually the company will receive in April or May and should be submitted within one month after the date of issue.
Nevertheless, as a tax representative, we can submit an extension application for our clients, in accordance with the company’s settlement date with the following differences :

Category	Date of settlement	Submission date to be extended to *
N code	1^st Apr to 30^th Nov	31^st May
D code	1^st Dec to 31^st Dec	16^th Aug
M code	1^st Jan to 31^st Mar	15^th Nov
M code	1^st Jan to 31^st Mar	31^st Jan

(A case of financial loss this year)

*The date for reference is 2020/21. Arrangements may vary from year to year, subject to the publication by the Inland Revenue Department.

In addition, the prefix “23” in the first year file number will be changed to the corresponding trade class number, such as 05 ( import and export), 13 ( printing), 22 ( review cases) and so on.

What is required to submit in a tax return?

No business operations at all :

the income is zero or the company is declared in an inactive status. Tax returns are still required to be filed, but are exempted from auditing. Apart from filling in the appropriate date and the share capital, all others are declared as zero.

Business turnover over HK $1 – $2,000,000
plus other small corporation definitions*

It is not necessary to submit the audit report and the profits tax calculations, but is required by law to be audited. The name of the auditor and the date of signature of the audit report have to be included in the tax return.

*please refer to the #5:
https://www.ird.gov.hk/chi/tax/taxrep_ptr.htm

Business turnover of exceeding 2 million dollars :

The tax return should be submitted together with the signed audit report and the profits tax calculation form.

*In the case of having lost the tax return, one may write to the Inland Revenue Department for a replacement, which will be sent to the company’s registered address.
**As auditing and accounting must be carried out on a year-by-year basis. In the case of having lost the previous tax returns and accounting records, one may write to the Inland Revenue Department to request for the records of the documents previously submitted ( with relevant fees to be paid)

After filing the tax return

If the company’s finance after tax adjustment is:

Loss Case

The Inland Revenue Department may not issue the corporate tax returns every year, but only once every two or three years. However, even if the tax return is not received, the company is still obliged to notify the Inland Revenue Department whether the company has any assessable profits for taxation.

An accounting loss is not the same as a loss for taxation, because taxation has its own ways of calculation. For example, the initial tax allowance of the asset is 60% and the annual depreciation is 20%/30%, the initial tax allowance for the construction cost is 20% and then 4% per year afterwards.

Surplus

The first $2 million of tax adjusted profits will be entitled to a tax relief * calculated at an approximate half-price rate of 8.25%. Each partner can enjoy 8.25% discount rate once only, please refer to :https://www.ird.gov.hk/chi/faq/2trexample.htm

In addition to the current year’s tax, each of us has to pay a “provisional tax” each year ( that is, an advance payment of the following year’s tax)
The provisional tax can also enjoy the concessionary rate of 8.25%, but cannot be applied for the tax reduction.
For example, the tax reduction for the year 2020/21 is 100% with a ceiling of HK $ 10,000 :

	Example A	Example B	Example C
(1)Tax of this year	HK$12,000	HK$10,000	HK$7,000
(2)Tax reduction	HK$10,000	HK$10,000	HK$7,000
(3)Provisional tax	HK$12,000	HK$10,000	HK$7,000
(1)-(2)+(3)= Amount of tax to be paid after reduction	HK$14,000	HK$10,000	HK$7,000

The Inland Revenue Department will refund the money the next year if there is no tax to be paid after the tax reduction. In the case of payable tax, the difference will be refunded / made up.
* Annual tax reduction information: https://www.gov.hk/tc/residents/taxes/taxfiling/taxrates/salariesrates.htm

Limited company profits
tax declaration service

Check and audit services;
Prepare annual financial reports;
To be appointed as tax representative;
Complete the Profits Tax Returns;
Filing tax returns;
Taxation advice and suggestion.