What are the general compliance requirements of a Hong Kong company?
03 June, 2020
Apart from being the financial hub of Asia, Hong Kong is one of the best locations for companies that want to benefit from foreign investment. Fortunately its transparent business policies, quick and easy incorporation process, and friendly business environment give this city an edge. Though it is quite easy to incorporate a business in Hong Kong, it's important to follow the legal requirements for all companies doing business.
Every business owner needs to follow the compliance requirements of Hong Kong companies to operate effectively. Under the Companies Ordinance (CO), Hong Kong companies must maintain sound company management and adhere to the annual filing with the Companies Registry (CR) and the Inland Revenue Department (IRD).
These filings include the filing of the tax returns, annual returns, and the Employer's return, to name a few. Companies also need to complete the timely disclosure and reporting of specified information regarding the company, its officers, shareholders, as well as any changes in such information to the Companies Registry.
Keep on reading to find out the compliance requirements of Hong Kong companies.
General compliance requirement in Hong Kong
Every incorporated company in Hong Kong must carefully follow the corporate compliance requirements to avoid future issues with the government. General annual compliance for your business entity in Hong Kong includes the annual filings and reporting obligations.
A private limited company in Hong Kong needs to maintain a local registered address for their business. This address must be located in Hong Kong, and cannot be a P.O. Box. Business owners need to have a local registered address and a local resident company secretary as per the CO.
To handle the business operation smoothly in Hong Kong, every private limited company needs to appoint a minimum of one director and shareholder. Appointing shareholders and directors is one of the most vital requirements for Hong Kong Companies. The director and shareholder has to be above 18 years and can be any nationality.
Under the CO, it has become an essential requirement for limited businesses to have a company secretary. This is usually a registered company providing services for the company for its compliance requirements, not a personal secretary. A company secretary ensures that the business complies to all the laws related to the working of the organization.
Every Hong Kong company also needs to maintain an audit for the proper accounting transactions of the company. Otherwise, under the CO in Hong Kong, the business may be deemed as in "dormant" status. If the companies don't maintain the audited reports for their financial transactions, it will signify that they do not have any relevant accounting transactions during a fiscal year.
There are also some records and documents that companies need to maintain and prepare to operate the business effectively under the CO. The documents include the Incorporation Certificate, Business Registration Certificate, Articles of Association, minutes of all meetings of directors and members, updated financial records, share certificates, significant controller register (including members register, directors register, and share register).
Annual filings for a Hong Kong company
Besides the basic corporate compliance requirements, Hong Kong companies need to follow all the annual filings and reporting with the Companies Registry. The annual filing requirements of Hong Kong private limited companies are as follows:
Internal Records and Annual General Meeting (AGM)
Hong Kong companies need to conduct the annual general meeting (AGM) within 18 months from the incorporation of every calendar year. An AGM should be performed less than 15 months from the previous one and nine months after the company's accounting reference period.
Annual Return (NAR1)
Following the CO, an incorporated private limited company should file an annual return with the Companies Registry. It should be signed by the manager, company secretary, director or even authorized representative. It is a type of specialized form which includes the company's particulars, such as the company's address and director/shareholder information.
Renew Hong Kong Business Registration (BRC)
The Business Registration Certificate (BRC) is a document which shows specific details of the company, such as the business nature and how long the certificate is valid until. This form is essential for business owners to conduct its operation in the marketplace. In short, this document shows that the company operations are valid and registered with the IRD. The Business Registration Certificate would show certain details of the company as in:
- Company Name
- Company Address
- Nature of Business
- Company Type
- Date of Commencement
- Date of Expiry
- Certificate Number
The BRC for any business can be valid for one or three years in Hong Kong. So, one month before the annual basis, the business registration certificate should be renewed to meet the compliance obligations of the CR.
Accounting and Auditing and Profits Tax Return (PTR)
The next annual filing that needs to be filed to meet all the compliance obligations of the Companies Registry is the profits tax return (PTR). Hong Kong enterprises are responsible for the annual filing of the PTR requirements along with its audited accounts with the IRD.
Every year on April 1st, the IRD issues Tax Return filing notifications to companies to file their Tax Return, normally within one month from the date of notification. The organization can request for the extension of filing the form. But if they still fail to submit it by the due date, then they may incur a penalty or even prosecution. The following supporting documents must be attached while filing for the PTR in Hong Kong:
- The company's balance sheet, auditor's report and Profit & Loss Account relating to the basis period
- A tax computation indicating how the amount of assessable of profits (or adjusted losses) has been arrived at
- Report of Employers Return (ER)
The IRD issues the Employer's Return of Remuneration and Pensions (ER) and related forms to all the employers on the first working day of the assessment year. So all companies which receive this form need to complete it within one month from the date of issuance. Otherwise, it could lead to the penalties set up by the IRD. Though employers can ask for an extension in writing, it should be filed on or before the deadline for submission.
Significant Controllers Registry (SCR)
Hong Kong companies are also required to take reasonable steps to identify the significant controller(s). A significant controller includes:
- a registrable legal entity e.g., a company, which is a shareholder of the company that has significant control over the company;
- a registrable person who is a natural person that has significant control over the company
To identify the significant controller, of any person or the registrable legal entity, you need to review the company's register of members, articles of association, shareholders agreements, or other agreements and issue notice(s).
There might be a chance all of these general compliance requirements for Hong Kong companies seems too complicated. If you are thinking about setting up a new business in Hong Kong, Startupr can help you manage and mitigate the risks of corporate compliance. Our expert team has years of experience with keeping our companies in good standing and annual filings up to date.
When you engage with a professional like Startupr to comply with all the annual requirements, you will have more time to operate your business. With this kind of help, administrative burdens will never be as bothersome as they used to be. We can also help you in bank account applications, bookkeeping services, and other corporate solutions for your company.
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