Hong Kong's ease of business will allow international companies and entrepreneurs alike to use its simplified system to expand their business plans and ideas. Nevertheless, it is important to not let the responsibilities slip aside and watch out for the important dates of your Hong Kong Private Limited Company and very importantly, the date to present your Profit Tax Return.
Normally, after a year has passed since the incorporation date of your company, it will receive a few notifications from the local authorities such as tax returns from the Inland Revenue Department, as well as other related declarations on the salaries paid such as the Employer’s Return.
In this article, we will focus on the Profits Tax Return document itself, rather than on the concept of the profits companies in Hong Kong being taxed or the Profits tax rate. For information related to the later topics please consult our dedicated article on Hong Kong Corporate Taxes.
Hong Kong Profits Tax Returns (PTR) - What is it?
The Hong Kong Profits Tax Return is a form that the Inland Revenue Department sends to companies registered in Hong Kong. This form is officially known as the Profits Tax Return for Corporations (BIR51). This form must be filed based on the audited financial statements of a Hong Kong company with the intent of declaring the taxable income generated within a defined period, depending on the taxable income the authority will determine the amount of tax payment for that company in that specific period.
Normally, the period consists of 12 months. However, when a company receives its first tax notification, there is an extension in which the period to be covered cannot be more than 18 months. This is commonly known as the fiscal period of a company, and it is marked by the year-end, and it is an important element to check out.
When forming a company, the directors can choose any date within the calendar year as their year-end according to their needs either back at home or because it will suit better their operations in Hong Kong. According to the month chosen, a company will need to submit the tax computation form and the supporting documents. More details about the dates will be discussed in the following section.
When is it likely to arrive?
As mentioned above, the chosen date for the year-end of a company would determine the submission date for their tax declaration. Nevertheless, the Profit Tax Return will arrive every year on the first day of April. For example, if your company was incorporated in July 2022, it will likely receive its first Profit Tax Return on April 2023, independently of the chosen year-end.
So let's continue with the example previously mentioned, you have received the profit tax form, but you are not sure about the correct date for submitting the form to the Inland Revenue Department. Therefore, you need to identify which accounting code your company falls in, to identify when you need to present your Tax Return.
Accounting date codes
For this purpose, we have prepared the following section to help you identify the accounting date code for your company. In the following chart, we will present the accounting date codes, which are divided into 3 categories:
|Year-end||Filing normal date||Extended date|
(April 1st to November 30th)
|May 2nd||No extension date|
(January 1st to March 31st)
|May 2nd||August 15th|
It is important to mention that companies that are represented by a qualified accountant or service provider in Hong Kong are the ones that can file an extension form for the dates mentioned above, and it is subject to the government accepting or rejecting the extension application. For more information about the accounting codes in Hong Kong, you can consult the following link from the Government of Hong Kong for your easy reference.
What are the contents of the Profit Tax Returns?
Now that we have discussed the important dates for the Profit Tax Return, let's go ahead and analyze the form itself. The form BIR51 is composed of 4 pages, and it is divided into the following 13 parts:
- Part 1 to part 3: The form requests information related to tax calculation, such as the assessable profit from the company, the loss from previous periods, as well as other sources of income.
- Part 4 to part 6: Information about the company should be included such as address, contact information, language chosen to communicate with between English and Chinese, as well as the tax representative in the case someone occupies this position. For example, when you hire accounting services, there is someone assigned to be in communication with the tax authorities as well, and this is the designated person as a tax representative.
- Part 7 to part 8: Here more details of the transaction of the company should be disclosed, such as the period basis where the business was carried out and the transactions with non-residents in Hong Kong.
- Part 9: For certain situations, as the form explains, it is needed to prepare additional forms to submit together with the BIR51. To obtain the supplementary documents, the Inland Revenue Department includes a link with the corresponding codes.
- Part 10 to Part 12: These sections become more technical and complex since they involve tax information that requires assistance from a tax expert. For example, tax deductions that can be claimed, allowances, as well as financial data.
- Part 13: the last section of the form is the signature from one of the persons authorized to sign on behalf of the company. Normally, the original form needs to be signed by the director of the company after it has been duly filled out. However, your Company Secretary can sign on your behalf in case an urgent matter arises, such as the director not being in Hong Kong.
Once the form has been prepared by a qualified person, it is important not to forget that the audited financial statement and a tax computation are required as supporting documents as part of the process, as well as the signature of one of the directors of the company. If you have a tax representative, they can guide you through the submission process, gather all the documentation and then send the form and the supporting documents to the Inland Revenue Department before the indicated date. If you would like to consult a list of service providers for this related matter, please consult the Company Secretary Review page. On the other hand, to find out more information about the form, you can consult the following link of the BIR51 form of the Inland Revenue Department.
Provisional Profits Tax
When the Profits Tax Return form is not submitted on the specified due date, the Inland Revenue Department can issue a Provisional Profit Tax form. The tax authority makes estimated calculations based on the last year's profits. The important point here is that the more time passes for submitting the BIR51, the government will keep issuing additional provisional tax forms that will demand immediate payment and will only increase the penalties that will only count towards a percentage of the actual tax payment.
When facing situations like this, it is better to ask the help from your tax representative and your accounting team or service provider, since the tax authorities may impose interest rates on the tax amounts due and also escalate the situation and send the case to the court. In this scenario, the expenses keep accumulating until the situation is solved, and the proper documents are presented to satisfy the queries from the government authorities.
As we have seen in this article, the BIR51 form, also known as the Profit Tax Return, is one of the most important aspects to take care of regarding the compliance of your company. It is important to keep in mind the dates when the form will arrive and when it needs to be submitted to avoid any of the situations aforementioned. Keeping your company records and transactions in order can be the key to avoiding paying additional tax. For technical issues such as tax matters, it is always advisable to request the guidance of your accountant.