Top Tips & FAQs for Start-ups

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As a savvy entrepreneur, it’s always good to be better equipped to cope with the tax filing season. As step number 1, you should pay heed to the answers with advice of the following popular tax-related FAQs among our clients to know how to build a good filing practice for your business :

 

1. Which Types of Tax Returns I Need to File?
Generally, the Inland Revenue Department (IRD) will issue 3 types of tax returns to each entrepreneur every year since the very first return issued: Employer’s Return, Profits Tax Return and Individual Tax Return

The IRD will issue Employer’s Return and Profits Tax Return on the first working day of April every year, and issue Individual Tax Return on the first working day of May every year. It is required for you to complete your tax filing within 1 month from the date of issue; otherwise, you may face penalties or even prosecution.
 

2. I Don’t Need to File the Employer’s Return If My Company Has 1 Director Only with No Staff Hired?
Whether your company has got any paid staff during the fiscal year or not, once the Employer’s Return is received, it is mandatory for you to file it within the indicated time. Even though there are no other people working for you, your identity as a Director will incur either Director’s fees or Director’s salary (two ways to give remuneration to a Director), and both are taxable. Thus, you will need to report this to the IRD by filing the Employer’s Return, no matter how many staff was hired: a group of staff or only one ‘staff’ - yourself.

Moreover, if you have hired sub-contractors / freelancers or part-time staff (e.g. for designing a project-based brochure for your company) in the previous fiscal year, no matter they are located in HK or overseas countries, all these people should also be reported in your Employer’s Return to the IRD. Don’t miss out on this part as many entrepreneurs did not realize they have to do so. 
 

3. Should the Details I Filled in My Employer’s Return Match with the MPF Scheme?
Absolutely. Your completed Employer’s Return ought to match with the MPF scheme registered since your company can claim tax deductions for the mandatory and voluntary contributions made for your employees, to the extent that they do not exceed 15% of the employee’s total emoluments (this maximum amount is declared by the Mandatory Provident Fund Schemes Authority). Whether your employees working in HK are full-time staff, part-time staff or freelancers, if there is an employment relationship between you and your employees for 60 days or more, you are required to enroll them in an MPF scheme, and file their details in your Employer’s Return as stated in question 2. Any further queries about MPF registration? Our payroll team is here to help anytime.
 

4. I Don’t Have Time to Complete My Profits Tax Return. Can the Deadline Be Extended?
The good news is yes, those unable to finish their tax returns on time can apply for permission for late submission. Extensions are usually 7.5 months from the end of the company's financial year. Depending on whether it is 31 December or 31 March, the extended deadline will be mid-August or mid-November. If you find any difficulties in applying for an extension, you can seek help from a professional agent to help you send a request letter to the IRD for permission.
 

5. Someone Told Me That I Can Skip My Profits Tax Return If I Have No Income at All. Is That True?
No, you still need to file your Profits Tax Return with well-prepared audit reports and tax computation, even your company has no profits gained.

However, if after a few years of unprofitable performance, a company may not receive the Profits Tax Return again. In this case, the company doesn’t need to contact the IRD unless it starts to earn profits in the current financial year. Then, it requires to notify the IRD of its tax chargeability within 4 months after the end of the profit-making year. Also, please be reminded that your previous filing records of Individual Tax Return as a director should match with the figures you report in your Profits Tax Return. 
 

6. Why Does My Offshore Business Need to File Tax Returns to the HK Government?
The reason is that if your business has profits derived from HK, even if your company is registered in offshore jurisdictions, your profits are still liable to HK Profits Tax and you need to file the Profits Tax Return compulsorily. However, if your company (whether it is registered in HK or offshore jurisdictions) does not involve a trade, profession or business in HK that has profits arising in or derived from HK, i.e. your company is operating and generating all profits wholly outside HK, it is possible that your company can be claimed as an ‘offshore business'.

Several criteria need to be met to qualify for such definition, e.g. the terms of the purchase and sale contracts are completely negotiated and concluded with suppliers and customers outside HK, the service is performed in a place wholly outside HK, etc. To prove your profits are not liable to HK Profits Tax, it is suggested to get a proper planning with an experienced agent at the initial stage.
 

7. Lost or Need Help? Figure Out the Benefits of Filing Tax Returns via a Good Agent
For busy entrepreneurs like you, appointing a reliable agent like BRIDGES to manage the whole filing process for you could be the most hassle-free option. We will make sure all your tax returns (i.e. Employer’s Return, Profits Tax Return, Individual Tax Return, etc.) will be filled in carefully and properly, and filed to the IRD by hand to ensure the IRD has well received them on time, since there could be uncertainty with the post method.

Furthermore, our tax specialists could advise on how to adopt an appropriate tax optimization strategy if applicable when we arrange to help prepare the company’s audit report and fill in the tax returns to maximize your tax efficiency.

Chat with our in-house Tax Team to get more advice for your company's proper tax filing! 

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