As corporations in Hong Kong get ready for the yearly earnings tax go back submitting, we offer a temporary information on Hong Kong audit necessities, together with appointing auditors, required fabrics, and submitting audited paperwork.
Corporations whose monetary yr ends on March 31 and feature implemented for an extension may have till November 15 to document their annual earnings tax go back (PTR). Along with submitting the considered necessary tax shape, maximum corporations also are required to document audited monetary statements and an auditor’s record, which will have to be ready a couple of months prematurely of the PTR cut-off date.
Additionally, ranging from April 1, 2023, small corporations can be required to document supporting paperwork, audited monetary statements, and tax computations with the Earnings Tax returns.
Along with the audits related to submitting the PTR, Hong Kong calls for corporations to go through annually statutory audits and appoint an authorized auditor once a year.
Because the cut-off date for some corporations to arrange audited monetary statements approaches, we offer an summary of Hong Kong’s requirement for annually statutory audits and PTR submitting. We additionally be offering some elementary guidelines for corporations to take care of wholesome bookkeeping and audit practices.
Who must habits monetary audits in Hong Kong?
Underneath Hong Kong’s Corporations Ordinance (CO), a annually statutory audit of economic statements is needed for all corporations in Hong Kong. This contains corporations which might be eligible for positive reporting exemptions and simplified reporting procedures however excludes dormant corporations. The audits should be carried out in line with the disclosure necessities of the CO.
Along with the annual statutory audit, the Inland Income Ordinance (IRO) calls for firms in Hong Kong to post audited monetary data and an auditor’s record as supplementary subject material when submitting their PTR. As of April 1, 2023, small corporations with a gross source of revenue of below HK$2 million (approx. US$256,628) also are required to post audited monetary statements along side the PTR.
Notice that as of April 1, 2023, all required supplementary paperwork and different kinds should be submitted electronically. The tax go back and supporting paperwork will also be submitted in paper, with a signed Keep an eye on Checklist for supplementary shape uploaded.
Dormant corporations, corporations included in a jurisdiction that don’t require audited monetary statements, and Hong Kong branches of a overseas corporate don’t seem to be required to post audited monetary statements and an auditor’s record along side the PTR.
On the other hand, it is very important observe that Hong Kong branches of overseas corporations are most effective exempt from filing audited monetary statements and an auditor’s record if the next data is submitted along side the tax go back:
- Where of incorporation of the overseas corporate;
- Whether or not the regulations of that nation require a statutory audit of the global monetary statements of the corporate;
- Whether or not that audit has been carried out; and
- A temporary abstract of the monetary and accounting data maintained by means of the Hong Kong department.
|Audit Necessities for Corporations in Hong Kong|
|Necessities below Corporations Ordinance (CO)||Necessities below Inland Income Ordinance (IRO)|
|Form of audit||Every year statutory audit||Statutory audit for PTR submitting|
|Mode of submission||To the corporate individuals on the corporate AGM or different normal assembly||Along side the PTR to the Hong Kong Inland Income Division|
|Timeline for submission||Inside of 9 months after the corporate’s monetary year-end||Inside of one month from the date of factor of the PTR; or, if granted an extension:
|Applicability||All corporations, with the exception of:||All firms, with the exception of:
Making ready for the annual statutory audit in Hong Kong
Appointing an auditor
Underneath the CO, all corporations in Hong Kong are required to nominate an auditor.
The auditor should be an authorized public accountant (CPA) who’s registered with the Hong Kong Institute of Qualified Public Accountants (HKICPA). The auditor can’t be an officer or worker of the corporate, or be a spouse or worker of an officer or worker of the corporate.
An auditor should be appointed for each and every monetary yr (Hong Kong’s monetary yr runs from April 1 to March 31). The corporate administrators can appoint the primary auditor at any time prior to the yearly normal assembly (AGM) of their first monetary yr. (Corporations in Hong Kong are required to carry an AGM at least one time in a monetary yr, with a minimum of one held inside of 9 months after the top of the monetary yr.)
The primary auditor holds the location till the top of the primary AGM. The auditor can then be reappointed by means of the Board of Administrators on the AGM and can hang the location till the top of the next AGM. If an auditor resigns from the submit, a brand new auditor should be appointed inside of one month.
Issuing an auditor’s record for statutory audit
The corporate’s auditor is accountable for auditing the monetary statements ready by means of the corporate’s administrators, and for generating a record, which incorporates the auditor’s “opinion” at the accuracy and honesty of the monetary statements.
A duplicate of this record should be laid prior to the individuals on the AGM or every other normal assembly.
Underneath the CO, the record should come with the auditor’s opinion on:
- Whether or not the monetary statements were correctly ready in compliance with the CO; and
- Whether or not the monetary statements:
- give a real and honest view of the monetary place and fiscal efficiency of the corporate as required by means of the CO; and
- with regards to annual consolidated monetary statements, give a real and honest view of the monetary place and fiscal efficiency of the corporate and the entire subsidiary undertakings as required by means of the CO.
The CO additionally states that the auditor should shed light on within the record in the event that they consider that the tips supplied in a administrators’ record for a monetary yr isn’t in keeping with the monetary statements for the monetary yr. The auditor might also deliver that opinion to the eye of the corporate individuals at a normal assembly.
After all, throughout the audit, the auditor will have to additionally shape an opinion at the following issues:
- Whether or not the corporate has stored good enough accounting data; and
- Whether or not the monetary statements are in settlement with the accounting data.
The auditor is needed to state within the record in the event that they consider that the corporate has no longer met the above two necessities. As well as, the auditor should additionally state if they have got been not able to procure the entire data required or any explanations that can be essential for the audit.
Fabrics required for the statutory audit
Corporations should stay accounting data which might be enough to turn and provide an explanation for the corporate’s transactions and reveal the corporate’s monetary place and function with cheap accuracy. The data should additionally allow each administrators and auditors to make sure that the monetary statements agree to the CO.
Particularly, the accounting data should include:
- Day by day entries of all sums of cash won and expended by means of the corporate, and the issues in admire to which the receipt and expenditure came about; and
- The property and liabilities of the corporate.
The precise kinds of paperwork that businesses will have to take care of for the aim of formulating correct monetary statements is indexed within the desk under.
|Paperwork to be Maintained for Monetary Statements|
|Form of transaction||Document to be maintained|
|Gross sales||Gross sales bill|
|Items go back observe|
|Day by day receipt report|
|Petty money voucher|
|Normal bills||Bills bill|
|Financial institution transaction||Financial institution statements|
|Financial institution paid-in slip and similar receipt main points|
|Test stub and replica|
|Tangible property||Acquire and sale settlement|
|Bill and receipt|
|Test stub and replica|
|Stock||Acquire and sale settlement|
|Bill and receipt|
|Test stub and replica|
|Stock checklist (together with amount and unit value on each merchandise)|
|Out of date or slowing-moving stock|
|Funding||Safety ask/bid affirmation slip|
|Acquire and sale settlement|
|Capital inspection record (follow for PRC funding)|
Notice that consequences for no longer complying with bookkeeping necessities would possibly come with a nice of as much as HK$300,000 (approx. US$38,494).
Making ready audited monetary statements for PTR
As said above, many corporations in Hong Kong are required to post audited monetary statements and an auditor’s record as supplementary subject material when submitting their annual PTR. The audited paperwork and stories compiled for the statutory audit may also be used for the PTR.
Hong Kong’s tax yr in most cases follows the fiscal yr. On the other hand, corporations can select to stay their very own monetary yr, which is typically both in line with the calendar yr (January 1 to December 31) or the fiscal yr. The length for submitting the PTR will subsequently rely at the length of the corporate’s personal monetary yr.
Corporations are in most cases required to fill in and post the considered necessary tax paperwork inside of one month from the date of factor of the PTR (therefore, on the finish of April or January, relying at the corporate’s selected monetary yr). On the other hand, corporations can follow for positive extensions, which might push the submitting cut-off date again to August 15 for corporations whose monetary yr ends on December 31, and November 15 for the ones whose monetary yr ends on March 31.
Corporations will have to get ready the entire monetary paperwork for audit a minimum of a couple of months prior to the cut-off date of the PTR submitting—ideally early June for corporations with a monetary year-end of December 31 and early September for corporations whose monetary year-end is March 31.
Notice that for a newly established corporate, the primary PTR should typically be filed 18 months after the corporate’s date of incorporation. After the primary PTR submitting is finished, next filings will practice the timeline described above.
As with the statutory audit, the audit of economic paperwork and auditor’s record for submission with the PTR should agree to the necessities set out within the CO and IRO.
Concerns for audits for Hong Kong corporations
So as to ensure that a clean audit process and fascinating result of the audit, it is necessary for corporations to stay correct and up-to-date accounting data which might be in compliance with the Hong Kong Monetary Reporting Requirements (HKFRS) or World Monetary Reporting Requirements (IFRS). This additionally implies that the inner accountants will have to keep brushed up on the most recent adjustments to the reporting requirements and make sure that the monetary statements agree to the most recent necessities.
Additionally it is necessary to devise forward and make sure that all documentation is able for the auditor to have a look at smartly prematurely of submission time limits. As discussed above, monetary statements will have to be ready a couple of months prematurely of the PTR submission cut-off date, as an example. This may increasingly give you the auditor with sufficient time to get a correct evaluate of the statements and provides the corporate sufficient time to provide any lacking paperwork or data.
For this identical explanation why, keeping up shut verbal exchange and cooperation with the auditor all the way through the audit process can assist to forestall abnormal results of the audit.
The annual audits additionally provide a chance for corporations to deal with problems raised in earlier audits or put in force suggestions, thereby appearing the auditor that the corporate is striving to agree to audit necessities.
If you want help with accounting, audit, or monetary overview in your corporate in Hong Kong, touch us at email@example.com.
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