Annual Compliance in Hong Kong
Hong Kong is the center of Asian financial markets. The desired location for foreign investments, Hong Kong, has open-oriented business policies. The incorporation process is quick and easy, but there are some annual compliance requirements in Hong Kong that should be observed to maintain its legal status. Supported by law, Hong Kong companies must manage the Company's management and the annual filing with the Companies Registry (C.R.) and also the Inland Revenue Department (IRD).
Unless advised, the Hong Kong Company is basically referred to the Private Company Limited by shares incorporated or registered as per the Hong Kong Companies Ordinance. Hence, after incorporation, a company incorporated in Hong Kong is required by the Hong Kong Companies Ordinance and arrange the audit of its annual financial statements to file returns for both the Hong Kong Companies Registry (Company Registration Authority) and the Inland Revenue Department.
The annual costs that are expected for maintaining a private company limited by shares that have registered in Hong Kong are divided into two parts:
- The first part is totally fixed and is considered to be the primary or minimum costs needed.
- The second part varies and is determined by the nature of the business, the volume of transactions, and the amount of turnover with a few other factors.
The Essential Requirements for Annual Compliance in Hong Kong Companies
It is always necessary to understand the requirements for annual compliance in Hong Kong Companies to stay away from any type of legal hassles. Some of the facts that the Hong Kong private limited companies are needed to follow:
- Maintain a local secretary for your Company (either a body corporate or an individual).
- All the private limited companies must sustain the required permits and licenses for the Company.
- Have a local registered address for the Company other than a P.O. Box.
- Must have a minimum of one director in the Company. The person can be a foreigner or a local person, but they must be above 18 years of age.
- They must maintain an audit for the proper accounting transactions of the Company. Otherwise, the business will be given a dormant status as per the Companies Ordinance in Hong Kong.
- Must maintain at least one shareholder for the Company, both for local as well as foreigners. The age of the shareholder must not be less than 18 years old.
- The private limited companies of Hong Kong must sustain the accounting transactions' detailed records to determine the business's assessable profits.
- The records or documents must be maintained for at least seven years from the transaction period.
- It is required to maintain all the documents and records for a private limited company that includes company sealing, incorporation certificates, identification documents, share registers, updated financial records, members register, minutes of all the meetings for its members and directors, share certificates for the business organization.
- All the business owners must renew their registration documents one month before the expiry date once every three years on an annual basis.
- All the business persons must follow all the annual filing requirements and deadlines of Hong Kong’s tax authority and Companies Registry.
Information to be Provided to Company Registry as part of Annual Compliance in Hong Kong
In case of any change in the business, an entity's the company owners are requested to inform the Companies Registry about all the particulars, including the registered address of the Company Secretary, shareholders, directors, and changes in the shares capital, etc.
Some of the critical information to be notified to the Companies Registry as part of the annual compliance in Hong Kong are as follows:
- Notify the Company Registry within one month of the issue or allotment of new shares.
- The Company Registry must be notified about the change of directors and shareholders (Appointment/ Removal) within 15 days from the appointment or removal of directors.
- Notification for replacement of the registered office address within 15 days after the date or time of the change.
- Companies need to notify the Companies Registry for passing a special resolution with 15 days of passing the decision or resolution.
- The information must be given concerning the change of particulars for the directors and secretary with 15 days from the date of change in
- Information regarding the change of the business statutory or lawful books from the Company's registered office within 15 days after the move.
- Notification regarding Company name for filing of NNC2 statutory within 15 days after the change of the Company's name.
Annual Compliance in Hong Kong Company
A Hong Kong company must pay attention to its annual compliance in Hong Kong Company to stay legally active. The obligations include corporate managements, reporting, and yearly filing. The annual compliance in Hong Kong Company has been explained below:
Renewal of Company Secretary and Registered Office
Both offshore and local companies need to appoint a Hong Kong resident as a Company Secretary. The secretary can be an individual or a body corporate.
A local registered address is mandatory to form a Hong Kong Company, whereas the P.O. box is not acceptable. This address must be given to the Companies Registry to receive notices from the authorities in Hong Kong. The Company formation package at Enterslice includes a company secretary and registered office for a natural formation as part of annual compliance in Hong Kong.
Accounting and Auditing
Unless the Company is in dormant status, a firm in Hong Kong must maintain an appointed auditor. Besides, the accounting records and annual accounts need preparation and retaining, followed by Hong Kong accounting standards that must be examined by a Hong Kong-registered auditor annually.
Renewal of Hong Kong Business Registration
The business registration in Hong Kong is valid for one year or three years. One month before the expiration date, the annual renewal must be made to meet the Companies Registry's annual compliance in Hong Kong obligations.
The corporate in annual compliance in Hong Kong company are always advised to keep these records and documents available with them:
- Certificate of Incorporation (CI).
- Certificate of Business Registration.
- Articles of Association (AOA).
- Records of Resolutions, minutes of all the meetings.
- Updates of all the financial documents (retained for seven years from the transaction date to avoid penalties).
- Company seal.
- Share certificates.
- Registers of members and directors.
- Business licenses (if applicable).
- All the Company's statutory records must be retrained at the Company's registered office or any other places in Hong Kong till the Company informs C.R.
- Records of the Company's former members, meetings, resolutions must be maintained for at least ten years.
Holding Annual General Meeting
- A Hong Kong Corporation as part of Annual Compliance in Hong Kong must follow the compliance requirements must hold an Annual General Meeting (AGM) for the first time within 18 months from incorporation date and every financial year.
- An Annual General Meeting (AGM) must be performed for less than 15 months from the previous one and within a period of 9 months after the end of the Company's accounting reference period.
- Complied with the Hong Kong law, Profit and Loss Account, and a balance sheet should be audited by the Hong Kong-registered auditors and filed with the Inland Revenue Department. Along with this, a director's report needs to be prepared, including the details based on the checklist of the Companies Ordinance. All these documents shall be approved by the directors and presented to the shareholders within 21 days before AGM.
A Hong Kong Company need not hold an AGM if it falls in any of the following mentioned cases:
a) A Single member company.
b) A Dormant company.
c) All the activities must be done in the meeting and are done by a written specific resolution.
d) A company can also dispense with holding of AGMs by a written resolution passed by all members.
Company particulars to the Companies Registry as part of annual compliance in Hong Kong
As per the requirements of Annual Compliance in Hong Kong, at least one director must be a natural person and one shareholder, i.e., an individual or body corporate. A local or offshore company is acceptable, but for this, the individual must be above the age of 18 years. An individual can become a sole director and shareholder in a Hong Kong Company.
The Companies Registry must be notified about the changes in the Hong Kong company within 15 days from the date of change of each of the following:
- A proper Registered office address.
- A Secretary and director's appointment or removal.
- Particulars of Secretary and director.
- Company name: the filing form NNC2 after passing the special resolution of the name change.
- The issuance or allotment of new share: within one month.
Annual Return and Tax Filing
The companies set up in Hong Kong are responsible for the annual filing of the requirements. A company shall file an annual return in Form NAR1 with the CR, the details of the particulars i.e., the registered address, shareholders, directors, and Company Secretary. Meanwhile, the Company needs to complete the annual profit tax return with the IRD.
Annual Filing Requirements in Hong Kong as part of Annual Compliance in Hong Kong
According to the Hong Kong Companies Registry (C.R.) and Inland Revenue Department (IRD), local or offshore corporations are accountable for annual filing requirements as part of annual compliance in Hong Kong:
Annual Return with the C.R.
How to file an annual return?
- Filing of Annual Return in form NAR1 signed by a director or company secretary or a manager or some authorized representative.
- Except for certified true copies of financial statements must be attached with form NAR1. The documents should contain the report of the auditors and also the report of the directors.
- If there is no change available from the last return file, just file a simplified version in form AR2 or AR3.
- Dormant corporates as per the Companies Ordinance that is exempted from filing of annual returns.
- Online forms must be downloaded at cr.gov.hk.
- Online submission is also acceptable at eregistry.gov.hk.
- Purchasing physical types and submitting directly at the following address:
When annual compliance must be filed
- Private companies must file once each year, within 42 days from the date of incorporation.
- Any type of late filings must pay a higher registration fee (from amount 870 HKD for private companies to 1200 HKD for the others that are computed based on the date of the return delivered to C.R.
- Moreover, the companies that fail to comply are liable to prosecution if they are convicted, and the default fines up to 50,000 HKD each for breach and 1,000 HKD per day fine.
Annual Tax Return with IRD
- Filing the profits tax return along with its audited accounts.
- Audited accounts that include:
a) The balance sheet of the Company;
b) Auditor's complete report;
- On the basis of period Profit and Loss Account ;
a) A tax computation that illustrates how assessable profits or adjusted losses are calculated.
b) The Forms of profits tax return in Hong Kong;
c) For Corporations (BIR52);
- For individuals other than Corporations (BIR52); and
- For Non-resident Individuals (BIR54).
- Online you can download forms at ird.gov.hk
- The e-filing of annual tax returns at gov.hk/tc/residents/taxes/etax/
- The forms will be directly issued and submission at the following address:
When is it released
- An annual tax return is released by IRD on the 1st each year.
- For the newly formed companies, PTR must be filed for a maximum of 18 months from the date of incorporation, and then every 12 months after the first tax return is made up.
- PTR must be submitted to IRD within one month from the issuance date.
- Failed to file the tax return by the due date, filers may incur a penalty or prosecution.
Employer's return with the IRD
How to file IRD?
- Filing an Employer's Return for Remuneration and Pensions (BIR56A) and all the related forms (IR56B/E/F/G/M) with IRD.
- Completing BIR56A without hiring any employee, not operating, or being removed.
- An employer must maintain payroll records of at least seven years.
- Informing to IRD about changes in employees' particulars, the terms of employment, and identity card mumber of Hong Kong.
- After the filing, a copy of the complete form should be provided to the employee.
- You can download the online forms at the www.ird.gov.hk.
- Electronic filing is also available at gov.hk/tc/residents/taxes/etax/
- Physical form that can release and submission at IRD.
When to file
- IRD generally issues Employer's Return on the first day of business in April.
- If you are a first-time employer, complete and send Form IR6163 to notify IRD if you do not receive Form BIR56A by mid-April.
- The failure of submission is liable to hefty penalties and even convicted.
Due Date for Filing of Annual Return
The table below is a summarize for filing due date and use of each form:
Purpose of notification
Annual employer’s return
Within one month from the issuance date
Still underemployment as of 31st of March
Within one month from the issuance date of BIR56A
Submitted annually together with BIR56A
Commencement of employment
Within three months of the beginning of employment
Offered along with IR56E in the commencement year
Termination of employment or Death
Not later than one month before the removal
Submitted along with IR56B for the cessation year
Employee Departure from Hong Kong
One month before the expected departure date
IR56M & IR6036B
Payments to persons other than employees
Submitted annually together with BIR56A
Consequences of Non-filing or Filing Late Companies Annual Returns
Companies must pay higher registration fees for filing annual returns late. For a private company (local) having a share capital, the registration fee payable for the late delivery of the annual return:
- In case the Annual Return is delivered: HKD (Hong Kong Dollar) more than 42 days after but within a period of 3 months after one year of incorporation.
- HKD 870 if it is more than three months after but within six months after the anniversary of incorporation.
- 1,740 more than six months but with nine months after a year of incorporation.
- HKD 3,480, in addition to the companies that fail to file the annual returns that are late and are liable to prosecution and, if convicted, pay the fines charged by the court.
- The maximum fine for a company that has failed to comply with specific requirements for completing and filing of annual return is a fixed penalty of HK $ 50,000 and a daily default fine of HK $ 700.