A Guide to Profits Tax Return in Hong Kong

As a business owner, you might be in the midst of registering a new business venture in Hong Kong or you may already have a business entity set up in this country.

One of the benefits that attract most entrepreneurs to Hong Kong is its simplified tax regulation and low tax regime. In this article, we will explore the different types of profits tax return forms and the filing processes.

By the way, we really get it that all this paperwork might get confusing and painful to fill up. You don’t have to figure it out alone. Our experienced accountants can walk you through it.

What is a Profits Tax Return?

Profits Tax Return refers to income tax that is chargeable to all profits a company has made within Hong Kong. It is also chargeable to all persons, professions or businesses in Hong Kong, except for the profits from the sale of capital assets.

Individuals who are self-employed will be liable to profits tax as well.

The important thing you must remember is that every April, the Inland Revenue Department (IRD) will issue profits tax return form to companies that are carrying out their business in Hong Kong.

How many forms are there?

There are 3 types of profits tax returns form to corporations, small businesses and partnership businesses for profit tax purposes. They are:

1. Profits Tax Return – Corporations (BIR51)

Applicable to corporations that operate in Hong Kong.

2. Profits Tax Return – Persons other than Corporations (BIR52)

Applicable to corporations that operate as a partnership.

3. Profits Tax Return – In Respect of Non-Residents Person (BIR54)

Applicable to non-resident persons whose income is chargeable from any trade, profession or businesses in Hong Kong.

These are only samples for you to refer to so you know what information to prepare before you login to eTax, the gateway to the Inland Revenue Department's electronic services.

A note on Supplementary forms

There are 10 supplementary forms, which you can complete during your filing of tax. The purpose of supplementary forms is to report information about preferential regimes and tax incentives.

These supplementary forms should be filed together with your profits tax return forms. Though it is not mandatory to submit supplementary forms, you will still need to prepare those documents in the event the authorities called for them. You may look at these forms for your reference. Our accountants can advise you on which forms you may need to fill in as the forms you will need to submit differs depending on your business.

What are the requirements for Profits Tax Return?

Now you might be wondering: does my company need to pay profits tax? And what happens if my company has changed from being a corporation to a sole proprietorship within a year?

Here are some of the requirements you may want to pay attention to:

1. New registered companies will file profits tax returns 18 months after the date of commencement or incorporation.
2. For corporations, you will need to submit profits tax return form (BIR51) and audited financial statements.
3. For small corporations and dormant companies, you are only required to submit Form BIR51 and other required supplementary forms. You do not need to submit audited financial statements. For small corporations, the data filled in the Form BIR51 must be based on the audited financial statements and you should retain them in the event the authorities request for it.
4. If your business moves from a partnership to a sole proprietorship within a year, it is advisable to report your profit & loss for the full year in Form BIR52.

When and where do you file your profits tax return and supplementary forms?

The profits tax return and required supplementary forms must be filed within one month after the date of issue. You can file your profits tax returns and supplementary forms on the Hong Kong e-Tax.

What if you are unable to submit on time?

Yes, we understand that the one month time frame is insufficient for you to complete your profits tax return form. But don’t worry, you can request for an extension. At the beginning of the year, IRD will issue a Circular Letter to advise representatives on the Block Extension Scheme. It contains applications for block extension and notifications of changes of details. So do look out for the letter!

Is there a penalty or fine for any non-compliance?

Yes. There is a penalty and fine if you fail to comply with the requirements of the notice or maintain proper records. The maximum penalty is HK$100,000 with an additional fine of three times the undercharged amount. Imprisonment can be up to 3 years.

With such hefty fines and penalties, it’s scary to be in this situation. If you are looking for an accounting service, look no further. Our experienced team is able to assist you in the completion of your profits tax return form, so you don’t have to worry about making mistakes. Come and speak with us today!

Key takeaways

1. Every April, IRD will issue a profits tax return form - either BIR51, BIR52 or BIR54. For limited companies, you will receive BIR51.
2. There are ten supplementary forms for you to fill in your preferential regimes and tax incentives if needed.
3. Profits tax return and supplementary forms must be filed within one month of the date of issue.
4. Submission deadlines can be extended, provided that you give sufficient reasons. Tax representatives could apply for extension for clients on the Block Extension Scheme at the beginning of the year.
5. There is a penalty and fine for any non-compliance. Penalty can be up to 3 years of imprisonment, and fine will be a maximum of HK$50,000.

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