A profits tax return is a form required by law for every business in Hong Kong to report their taxable income. It enables the Inland Revenue Department to assess and collect profits tax based on your company’s earnings.
Why is it vital?
The filing of Profits Tax Returns continues corporations in compliance with Hong Kong’s tax guidelines, avoids penalties, and indicates monetary transparency.
Who needs to file?
All Hong Kong corporations, which include businesses, partnerships, and sole owners, which have generated assessable income, have to.
The Basics of Hong Kong's Profits Tax
Synopsis of the system for profits tax:
Profits sourced from Hong Kong are charged for tax.
The principle of territoriality allows for levying of the tax on income arising within Hong Kong alone.
Tax Rates
Companies: 8.25% on the first HKD 2 million and 16.5% thereafter
Unincorporated businesses: 7.5% on the first HKD 2 million and 15% thereafter.
Exemptions and concessions: Exemption may be available to certain industries, such as charities or offshore profits.
Who have to File a Profits Tax Return?
Eligibility criteria: An enterprise incorporated in Hong Kong or having income sourced from Hong Kong needs to file.
New businesses: A new business has to file a return after it is so required by a notice from the IRD.
Inactive companies: They may be exempt but must be notify IRD of such inactivity.
Penalties for Non-Filing: Late filing may get legal action from IRD.
Major Requirements in Filing of Profits Tax Return
Required documents:
Supporting schedules, including but not limited to depreciation schedules.
Profits tax return form (BIR51) duly completed.
Time of Submission:
The filing date: Usually, one month from the date of issue of the profits tax return notice, but an extension to companies whose fiscal year ends on 31st March may be granted.
Means of lodging:
e- Tax filing: Easy and quick.
Paper: Traditional means for those without digital access.
How to File a Profits Tax Return: A Step-by-Step Guide
Prepare your record: Make financial data of income and expenditure and supportive evidence ready.
Fill out the BIR51 form: Be precise in the declaration of profits and deductions.
Make your submission: Submit online through the e-Tax system or post it to the IRD .
Check your submission: Log into the e-Tax system for follow-up on the progress of the document and its updates.
Common Mistakes to Avoid
Inadequate data on bureaucracy: Double-check all containers of the BIR51 form.
Late submission: Remember the date of submitting.
Deduction mistakes: Know what costs are deductible to avoid over or underneath-reporting.
Missing tax incentives: Find out if there are any concessions or exemptions.
Penalties and Appeals for Profits Tax Return Issues
Penalties:
Late filing attracts penalties that variety from HKD 1,200 to HKD 10,000, plus additional charges.
Incorrect returns may also entice penalties or hobby fees.
Appeals:
Lodge an objection within one month of the date of the evaluation notice.
State your case and provide motives to aid your appeal.
Conclusion: A Smooth Path to Filing Profits Tax Returns
The accuracy and timeliness of the profits tax return submitting is essential for the groups to stay compliant and keep away from any penalties. By adding experts, you can lead your business to go further.
How FastLane HR Can Help
FastLane HR offers professional guidance for profits tax return submitting in Hong Kong. Our team ensures correct submissions, minimizes mistakes, and helps you navigate tax rules effectively. Contact us today for professional guidance!