Financial Reporting of Companies in Hong Kong and Rules for Submitting Reports
Information in this article will be useful for:
Those who already own a company in Hong Kong. You will be able to check the work of your current secretaries, learn about the real hidden risks of audits, and ensure that your tax-free status is not threatened.
Those who are only planning to open a business here. You will understand the rules for submitting financial reports in advance, be able to correctly calculate future expenses for maintaining the structure, and protect yourself from mistakes even at the stage of company registration.
All active companies in Hong Kong are required to undergo an audit every year.
Financial reporting in Hong Kong is an annual complex of documents that includes financial statements prepared in accordance with HKFRS standards, and a mandatory opinion of a certified public accountant (CPA). It is required for business to comply with the legislation requirements of the Companies Ordinance (Cap. 622) and to report to the national tax authority — the Inland Revenue Department (IRD). The main difficulty is that even companies without a physical presence are required to undergo a local audit.
Main documents:
Financial Statements;
Auditor’s Report;
Profits Tax Return;
Supporting Schedules;
Accounting Records.
Company Status and Its Impact on Financial Reporting in Hong Kong
The volume of reporting, audit requirements, and tax consequences for a Hong Kong company largely depend on the nature of its activities and tax status. Below is a comparison of the main scenarios that company owners in Hong Kong encounter most frequently.
Tax status of the company
Estimated period for reporting preparation and filing of return
Audit requirements
Tax risk factors
Onshore (taxable activity in Hong Kong)
2–3 months
Mandatory audit of financial statements by a certified CPA
Presence of clients or suppliers in Hong Kong, conclusion of contracts in Hong Kong, local staff, office, or business management from the territory of Hong Kong
Offshore Claim (заява про іноземне джерело прибутку)
4–6 months
Mandatory audit of financial statements and preparation of evidence base for the IRD
Signing contracts in Hong Kong, conducting negotiations in Hong Kong, presence of local staff, warehouse or logistics operations in Hong Kong, insufficient evidence base regarding the offshore source of profit.
Dormant company
1–2 weeks
Possible exemption from audit subject to proper registration of dormant status
Any business operation or accounting entry, including commercial receipts, payments to counterparties, or other transactions incompatible with dormant status.
Not sure which status applies to your company?
Correct determination of the status affects not only the size of the tax burden, but also the volume of documents for the audit and the risk of additional inquiries from the IRD. Our specialists will help to evaluate the business structure, prepare reporting, and support the Offshore Claim procedure.
Frequency and Deadlines: How to Correctly Calculate the First and Subsequent Reporting Periods
The First Reporting Period
Begins strictly on the day of company registration (specified in the Certificate of Incorporation). It can last for a maximum of 18 months. The first profits tax return is issued by the IRD exactly 18 months from the date of incorporation.
Subsequent Reporting Periods
The company is obliged to report once a year (annually). Each subsequent period lasts exactly 12 months and begins on the day following the end of the previous financial year.
Fixing the End Date of the Year
The company has the right to independently choose the closing date of the registers during the first submission. Traditionally, businesses choose December 31 (coincides with the calendar of the EU, USA, etc.) or March 31 (the end of the financial year in Hong Kong, which simplifies communication with the IRD).
Contact our specialists — we will help you correctly determine the reporting period, set up the reporting calendar, and avoid risks when filing the first return in Hong Kong.
OUR SPECIALISTS
Yevhen Sarafanov
Owner and CEO LOCMAN ICS LTD
Ludmila Chilik
Corporate and tax lawyer (Europe, USA, East Asia, UAE)
The first reporting period begins on the date of the company’s registration and may last for a maximum of 18 months.
If there were no financial transactions (not even bank fee deductions) in the company’s accounts and no contracts were entered into during the entire reporting period, the company is exempt from the requirement to undergo a CPA audit and must file a simplified report.
Yes, a company has the legal right to change the closing date of the financial year (for example, to move it from 31 March to 31 December). To do this, a special form (Form ND8) must be submitted to the Companies Register.
The IRD imposes an automatic initial penalty of HKD 1,200. If you continue to ignore the requirements, the penalty increases to HKD 10,000
Yes, you must. Even if the company has made a loss or broken even, the law requires the preparation of full financial statements and an independent CPA audit.