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In accordance with Section 51 of Hong Kong Inland Revenue Ordinance (Cap 112)(the “IRO”), An assessor of the Inland Revenue Department gives notice in writing to a company requiring it within a specified time stated in such notice to furnish a tax return for profits tax (i.e. profits tax return).
In addition, any company chargeable to profits tax for any year of assessment must inform the Commissioner of Inland Revenue (the “CIR”) in writing that it is so chargeable not later than 4 months after the end of the basis period for that year of assessment.
In accordance with Section 51C(1) of the IRO, every company carrying on a trade, profession or business in Hong Kong must keep sufficient records in the English or Chinese language of his income and expenditure to enable the assessable profits of such trade, profession or business to be readily ascertained and shall retain such records for a period of not less than 7 years after the completion of the transactions, acts or operations to which they relate.
For companies incorporated in Hong Kong, audited accounts with an auditor’s report must be submitted with the profits tax returns in all cases, except those companies classified as small corporations and those dormant companies within the terms of Hong Kong Companies Ordinance (Cap 32).
A company is classifed as a small corporation if it satisfy all the following conditions in the relevant year of assessment:
- Gross income for the basis period does not exceed HK$2,000,000;
- It has not paid or accrued to a non-resident person any sum for the use of intellectual property specified in Section 15(1)(a) , Section 15(1)(b) or Section 15(1)(ba) of the IRO during the basis period for the relevant year of assessment;
- It does not have any deemed assessable profits pursuant to Section 20AE of the IRO for the relevant year of assessment;
- Its assessable profits/adjusted loss for the relevant year does not include any interest, profits / loss arising from “medium term debt instruments“ as defined in Section 14A(4) of the IRO;
- It does not wish to claim a foreign tax credit for the relevant year of assessment; and
- It has not obtained an advance ruling on any of its tax matter in relation to the relevant year of assessment.