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What are the differences between tax filing in China and Hong Kong? In terms of tax treatment, Chinese companies must file monthly value-added and other tax returns. They need to pay 25% corporate income tax on any profits made, and 3% to 13% value-added tax. Hong Kong has no value-added tax and the Companies need to profits tax of 16.5% on any profits made. The Hong Kong companies are not subjected to any tax if they incur loss.


Does a non-operating Hong Kong company need to audit and file tax returns?
According to the provisions of Hong Kong's Companies Ordinance, if a Hong Kong company was inactive after registration, it does not need to be audited, but not auditing does not mean that it does not need to file  tax returns. It can apply to the government for exemption from accounting, and this process is called “zero declaration”.

After the company applies to the HK Government for exemption from accounting, it needs to apply to the Inland Revenue Department Provides "Business Inactive" reporting, i.e. zero tax returns.
If one of the following applies, it is considered to be in business:
1. The bank account has opened and has business records;
2. The companies have left import and export records;
3. Have purchase and sale relationships with Hong Kong customers;
4. Hired employees in Hong Kong;
5. Allow or authorize the use of patents, trademark designs and other information in Hong Kong;
6. Allow or authorize the use of real estate in Hong Kong to collect rent, leasing fees, etc.;
7. Act as sales agency in Hong Kong;
8. Other profits generated in Hong Kong.
If the Hong Kong company is not operating, the company does not need to be audited, and zero tax declaration can be made. If you fail to meet the above conditions and make a zero declaration, you will be treated as tax evasion after being found by the tax bureau. You will be fined a high amount and your bank account will be frozen and the tax payable will be directly deducted. Directors of companies with serious consequences may be subject to criminal penalties.

How does a Hong Kong company choose the year-end date for auditing?
Hong Kong companies can choose any day as the year-end date for auditing, but most customers will choose December 31 and March 31, because these two year-end dates can be extended by about 8 months when filing taxes, each of which the accounting period is 12 months. If the Hong Kong company later changes the year-end date, it can apply to the tax bureau at any time.

What are the requirements for setting up a company in Hong Kong?A shareholder and director who is 18 years old or above, a Chinese resident or overseas person holding a passport or ID card can establish a Hong Kong limited company. In addition, a Hong Kong address must be provided as the registered address, and a Hong Kong resident or a professional company must be appointed as the company secretary of the company.

What are the penalties for late filing of tax returns by Hong Kong companies?Failure to file a valid Profits Tax Return to the IRD by a specified deadline without reasonable excuse will potentially result into a compound penalty of maximum HK$10,000, issuance of an estimated tax assessment(s) by the IRD, a penalty in the form of additional tax under Section 82A of the Inland Revenue Ordinance and/or court actions.

If you file a tax late for the first time, you will be fined HKD 1,200, which must be processed within 14 days, otherwise the fine will be increased to HKD 3,000. The
second late tax return will be subject to a fine of HK$3,000, which also needs to be processed within 14 days, otherwise the fine will increase to HK$8,000. The fine 
depends on the company's circumstances, with the maximum fine being HK$50,000, as well as a fine of three times the amount of tax and imprisonment for three years for failure to pay the tax.

What documents are required to open a corporate bank account in Hong Kong?
Bank account opening form that has been duly completed and signed by authorized signatories, as per the Board resolution.
1. An extract of the board resolution approving the opening of a corporate bank account.
2. A certified true copy of the company’s Certificate of Incorporation, issued by the Companies Registry.
3. A certified true copy of the company’s Business Registration Certificate, issued by the Inland Revenue Department.
4. A certified true copy of the company’s Articles of Association.
5. A director declaration that provides the personal particulars of directors and principal shareholders. A principal shareholder is a person entitled to exercise or control the exercise of 10% or more of the company’s voting rights.
6. A copy of the Hong Kong identity card or passport; residential proof such as utility bills, bank statements, driving license etc.; and former name or alias proof (if applicable) for each of the directors, authorized signatories, principal shareholders and beneficial owners of corporate shareholders.
7. A list of specimen signatures of authorized signatories.
8. Proof of business such as business plan or audited financial statements.
9. For corporate shareholders of the company: A certified copy of an organization chart that shows the percentage of shareholdings held by each individual and the ultimate beneficial owners of the company.
10. Details of ultimate beneficial owners for nominee shareholders of a company.
11. For ultimate beneficiaries who are trusts: A certified copy of the trust deed or declaration of trust with details of the trustees, settlers and beneficiaries.

Important note: The copies of all documents submitted must be certified by either a certified public accountant, company secretary, lawyer or banker.