In this article, we will cover the basics of annual compliance requirements to keep your Hong Kong company within the local regulations, so it does not affect your day-to-day operations or your long-term business goals.
You have been convinced to establish your business in Hong Kong due to its many advantages with its business-friendly policies, its strong legal system, and its attractive tax regime. You have devised your business plan and submitted your incorporation forms to form your Hong Kong company.
Now with your corporate certificates in hand, you notice that some of them have an expiration date until the next year, and you start to wonder what else you need to prepare for your company beforehand and how it could affect your business plan if these documents expired.
As we briefly mentioned above, when incorporating a company, the Hong Kong Companies Registry, and the Hong Kong Inland Revenue Department will issue company documents and certificates for the business entities registered in Hong Kong. For this article, we will focus on the specific case of a Private Limited Company and the documents that expire, for example, the Annual Return and the Business Registration Certificate.
To understand what Hong Kong Private Limited Companies must do every year, the Companies Ordinance should be analysed, which is the law that dictates the obligations of the companies. One of these requirements is to fill and file the NAR1 form, otherwise known as the Annual Return. This form helps the authorities to keep the most updated information on Hong Kong companies. This form includes the following information:
- The company incorporation number.
- Company name.
- The type of company.
- The date of incorporation.
- Business or office address.
- Share capital.
- Company Secretary.
Every year on the date of the incorporation of the company, this document must be submitted, as stipulated in Chapter 622 of the Companies Ordinance. Additionally, any further change in the structure of the company such as removing or adding directors or shareholders should be also updated with the Companies Registry (CR).
Business Registration Certificate
Issued by the Inland Revenue Department (IRD), the Business Registration Certificate (BR) is a corporate document that contains the name of an entity registered in Hong Kong. This document allows the public to check if a company is real and is listed with the Hong Kong authorities. Furthermore, the registration number included in the certificate is generally used as the tax identification number of a Hong Kong Company. The certificate also needs to be renewed every year, but contrary to the Annual Return, this document is processed with the Inland Revenue Department.
As we move into the next section, we will explore the notifications that a Hong Kong company receives to their business address. These notification letters are known as tax returns, and we will cover the one related to the company’s profit and the one related to the payment of salaries to their employees and directors.
Profit Tax Return
The Profit Tax Return will be issued to a company every year around April by the Inland Revenue Department. However, the return should be submitted according to the date set as the financial year-end of the company.
For new companies registered in Hong Kong, there is a grace period of 18 months in which they may not receive the notification. Nevertheless, is not an exception to presenting the tax declaration, it allows the company to have more time to prepare when the notification finally comes for the first period.
As a company must report the information of their employees to the Hong Kong authorities, the Employer’s Return form helps the Inland Revenue Department to know the number of employees hired by the company and the salaries and remunerations that are being paid. This return will also be received in April, and it covers a fiscal year from March to April.
Renewal and submission
Now that we have covered the basic concepts of compliance for a Hong Kong Private Limited Company, let's discuss how to submit the forms and apply for the renewals in the following section.
Annual return and Business Registration Certificate
The renewal of the Business Registration Certificate and Annual Return needs to be done within the incorporation date of the company. However, for the Annual Return, there is a 42-day period to complete the process from the anniversary day of the company. Additionally, the government charges an administrative fee for the process. Each process is submitted to different offices. For example, the Business Registration Certificate is submitted to the Business Registration office that belongs to the Inland Revenue Department, while the Annual Return is submitted to the Companies Registry.
It is important to note that from time to time, the Hong Kong government will not charge the complete fee for Business Registration to incentivize the growth of the economy. To know more information about the fees for the Annual Return and the Business Registration Certificate, please see the links to the Companies Registry and the Inland Revenue Department.
Although the Hong Kong government has developed the return e-filing services platform, the Profit Tax Return can only be submitted online under really specific situations that do not apply to most companies.
A normal submission of the Profit Tax Return will be posting the form to the Inland Revenue Department officer within or before the date indicated in the return. However, in some cases, your tax advisor can request an extension from the authorities to avoid delaying the submission of the tax declaration of your company.
Submitting the forms and the returns is a mandatory requirement for Private Limited Companies in Hong Kong, failing to do so in the proper time frame could generate legal liability to your company and also penalty fees that would need to be covered.
It is important to watch over the dates to avoid getting penalty fees as some of them increase over the past due date for submission, such as the Annual Return. Although there is no set penalty for the Profit Tax Return, the Inland Revenue Department could generate a provisional assessment of Profit, which is an additional tax payment based on the calculations from the government.
Changes in the company structure
As your company evolves and your business operation changes, you wonder if the initial company structure still holds the current purpose of your company. In this section, we will briefly go over the changes that can be performed to the structure of your company.
Changing or adding the Directors
Hong Kong has simplified some of its processes so much that it will allow you to swiftly make changes to your company. This is not the exception to the role of director. Nevertheless, it is important to always make the change effectively and officially by notifying the corresponding local authorities, since any change that is only reflected internally will have no effect outside the company. Additionally, failing to notify the authorities in time will also carry out some legal consequences and even penalty fees. To know more about this topic, please read our dedicated article related to the change of directors.
Changing your registered office of address
As we know, a Hong Kong company must have a registered address, and this will serve as the official location for the government to make contact with the owners of the company. Furthermore, official notifications will be sent out to this address. However, due to different reasons such as cutting down on operation costs or either reduction or increase of the number of the staff, a company may consider changing their current office address. Although it is a simple process, the change and notification to the Companies Registry should be conducted swiftly to avoid misplacing official documents from the authorities. To learn about changing your registered office address, please read our dedicated article.
Changing or adding shareholders
When a company changes or requires an injection of capital, is the time when its internal company structure should evolve. One of the ways to do this is by conducting a transfer of shares or issuing new shares to a third party. Taking out this process in Hong Kong is simple and can be done in a matter of a week. Nevertheless, it is always advisable to consult with an expert on the matter since delicate elements are involved such as capital and delegating control of your company. If you want to learn more about this topic, please read our dedicated article on the topic of changing directors.
To summarize, a Hong Kong Company has a few points to check in order to keep in compliance with local regulations. Nevertheless, business owners and entrepreneurs should not ignore them as they can pile up and later on cause trouble to the business. It is always advisable to get a professional opinion on how to keep the good practices and learn how to avoid these issues later down the line.
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