Filling Profits Tax of HK Limited Company

Last update: March 2025

When it comes to filling profit tax returns, along with all accounting and tax compliance, Hong Kong is no exception to the rule. Every active Hong Kong company must file a Profits Tax Return (PTR) annually, issued by the Inland Revenue Department (IRD). To prepare, companies must organize their accounts, submit them to a Certified Public Accountant for auditing, and then file the audited report and tax computation with the IRD alongside the PTR.

Hong Kong’s Tax Year and Filling Profit Tax Requirements

In Hong Kong, the tax year aligns with the fiscal year, beginning in April and concluding on March 31st, rather than the standard calendar year. Consequently, Profits Tax Returns (PTRs) adhere to this fiscal structure. For example, the 2025 (2024/25) PTR will cover the period from April 1st, 2024, to March 31st, 2025.

Hong Kong companies can choose their preferred financial year-end, which will then correspond to the Hong Kong fiscal year. For instance, if your company’s year-end is December 31st, 2024, those financial figures will be used for the 2025 PTR. Any profits from January 2025 to March 2025 will be included in the 2026 PTR. While this period falls within the Hong Kong government’s fiscal year, it also falls within the subsequent year of your company’s fiscal year (i.e., December 31st, 2025).

Normally a company will have only one month to file and complete this PTR form, before the IRD issues any penalties for the late filing of this tax form. In the case of the first PTR for the company, the company can extend this filing for up to 3 months from issuance date. This PTR filing can be extended for certain year end dates, but needs to be applied for each year for a filing extension.

The dates for the extension of filing are as below:

Financial Year end as at 31st of March

• Tax Filing Date – 15th of November
• Documents Ready for Audit – Not later than 1st of September

Financial Year end as at 31st of December

• Tax Filing Date – 15th of August
• Documents Ready for Audit – Not later than 1st of June

or Financial Year end as at Other dates than a) or b) e.g. 30th of June

• Tax Filing Date – 30th April
• Documents Ready for Audit – Not later than mid of February

1st tax filing request

The first PTR for the company will usually be issued around 18 months after the incorporation date of the company. For instance, if a company was incorporated on 01 January 2024, it will receive it’s first PTR from the government around June 2025.

During this time, if the company has commenced business either in Hong Kong or abroad, it will need to prepare the accounts for the company. Even if the company has conducted it’s business outside of Hong Kong, it would still need to report it’s accounts and any profits earned to the IRD in the annual reports, in order to claim the profits tax exemption.

It will need to complete the PTR if the company had a profit or loss for the period. The company will then need to submit the completed PTR together with the supporting documents within three months from the date of issuance. A certified public accountant can assist you with preparing the audited financial statements and completing the PTR for the company.

NIL Return vs. Profits Tax Exemption: Hong Kong Tax Compliance Explained

Hong Kong’s simple tax system, with its low rates, relies heavily on taxpayer compliance and understanding, especially regarding filling profit tax returns. Taxpayers are legally obligated to file accurate and timely returns with the Hong Kong Inland Revenue Department (IRD).

A common misconception is that “NIL” PTR returns are for businesses with no Hong Kong-based activities. This is incorrect and can lead to tax complications, penalties, and legal action. “NIL” returns should only be filed when a company has not engaged in any business transactions during the reporting period. “Commencement of business” refers to the start of a company’s operational activities.

Hong Kong’s territorial tax system taxes profits earned within Hong Kong, exempting offshore profits. However, companies must apply for and be granted profits tax exemption (offshore status). This status is not automatic, and assuming it will be granted when filing a “NIL” PTR is a mistake.

The Inland Revenue Ordinance (IRD) allows for penalties under section 80(2) of Part XIV if, without reasonable excuse, a taxpayer:

• Files an incorrect return;
• Makes an incorrect statement;
• Provides incorrect information;
• Fails to file a return on time; or
• Fails to report tax liability.

​​The offence is subject to a fine of $10,000 and triple the amount of the undercharged tax.

Startupr can offer our professional advice on these filings, as we have experience in properly handling “Nil” PTR returns and offshore status for profits tax exemption cases. In the case your company has improperly filed a “Nil” PTR when it has conducted business activities outside of Hong Kong, Startupr can assist in getting your company back on track with the correct tax return filings.

“NIL” Profits Tax Return in Hong Kong

Companies can file a “NIL” Profits Tax Return. First, the company must not have commenced any business transactions. Specifically, “commencement of business” means when the company starts business activities. However, the exact day of commencement is difficult to pinpoint. Generally, it occurs when a business engages in related activities.

Furthermore, if a company has not started any business, it files a “NIL” PTR. In essence, this declares no business activity. Therefore, the company states it conducted no business in Hong Kong or elsewhere.

Conversely, companies that commenced business solely outside Hong Kong can apply for Offshore Profits Tax exemption. Notably, this differs from a “NIL” PTR. Instead, the company files financial figures, then applies for exemption under Hong Kong regulations. Additionally, they apply for this exemption when submitting the Audit Report and PTR. Ultimately, this step recognizes the company’s offshore business activities as exempt from Hong Kong profits tax.

Note: In case the tax return for a HK business has not been filed to the IRD by the deadline, it is taken as an offense that is subject to government penalties.

Profits Tax Exemption

In case a HK business is running entirely from outside the country, it is qualified for the Profits Tax Exemption that the authorities of the Hong Kong tax office grants.

This means that there is a 0% rate of Income tax that would be applied to the income of the company that is coming in from the outside of the country, permitting the company enjoys a tax-free profit.

You can enjoy this only if the Profits Tax Exemption claim has been approved. These are the things you would need to do for it:

• Submit the PTR & audited financial statements.
• File an offshore exemption claim with the audited financial statements.
• The IRD will issue an offshore claim inquiry letter for the firm as proof.
• The company’s directors and/or sales representatives have to provide their passports to the IRD along with the sales representatives, company invoices, contracts, arrangements, shipping documents, etc.
• After the verification has been done, you would be issued the offshore tax exemption by the IRD.

Note: The Offshore tax exemption is valid for maximum five years for the offshore profits only.

Is offshore income taxable for companies in Hong Kong?

Hong Kong uses a territorial tax system. First, it taxes corporate profits. Specifically, it taxes profits from trade within Hong Kong. However, it does not tax profits from overseas business. Furthermore, this applies even if funds move through Hong Kong. For example, a company trades overseas. Yet, it receives funds in a Hong Kong bank. Therefore, Hong Kong may not tax these profits. Conversely, a company trades in Hong Kong. Then, it receives funds in an offshore bank. Consequently, Hong Kong may tax these profits.

Moreover, this system ignores residency, which impacts Filling Profits Tax obligations. Thus, residents may have non-taxable overseas profits. Also, non-residents may have taxable Hong Kong profits. Ultimately, profit origin determines tax.

Finally, the location of business and profit origin are factual questions, vital for accurate Filling Profits Tax submissions. Indeed, Hong Kong courts provide guidance. Thus, businesses can review these court cases.

Profits Tax Return Information

Here are some other general information for the profits tax return:

• Your company will need to file the Profits Tax Return once per year, as issued by the IRD.
• The first PTR will be issued around 18 months after incorporation, and will cover the first 18 months of the company.
• Each subsequent PTR for the company will cover 12 months and should be filed annually.
• The PTR should be accompanied with supporting documents, such as a certified audit report and tax computation.

Hong Kong Inland Revenue Ordinance and Hong Kong Companies Ordinance

There are some general information about Hong Kong Inland Revenue Ordinance and Hong Kong Companies Ordinance. So, what is Hong Kong Inland Revenue Ordinance (Cap.112)? It is one of Hong Kong’s ordinances that regulate the inland revenue of Hong Kong. This ordinance is stated briefly in the IRO section14. In this section, the government is responsible for collecting the tax and duties directly.

The IRD is answerable for the organization of the accompanying Hong Kong ordinances on taxes and duties and the connected principles and guidelines:

• Business Registration Ordinance Cap.310
• Hotel Accommodation Tax Ordinance Cap.348
• Stamp Duty Ordinance Cap.117
• Tax Reserve Certificates Ordinance Cap.289
• Inland Revenue Ordinance Cap.112
• Estate Duty Ordinance Cap.111
• Betting Duty Ordinance Cap.108

What is Hong Kong Companies Ordinance (Cap.622)?

On 3 March 2014, an entirely new Hong Kong Companies Ordinance came into effect in Hong Kong. The new Companies Ordinance is a comprehensive rewrite of the predecessor Companies Ordinance to improve Hong Kong’s company law and further improve Hong Kong’s status as a significant international business financial center.

Five rounds of public meetings and endless discussions were conducted during a series of public forums and seminars over the years; the Companies Bill was finalized and introduced into the Legislative Council “LegCo” on 26 January 2011. In February 2011, a Bills Committee to examine the Bill was composed. After studying over 200 papers or submissions that are available on the Legislative Council website and 44 meetings lasting over 120 hours, the Bills Committee completed its scrutiny of the Bill in June 2012. On 12 July 2012, the Companies Bill was passed by LegCo.

Key Provisions: Accounting, Auditing, and Reporting Exemption

The account and audit section consists of the accounting and auditing provisions concerning the keeping of accounting records, the preparation and distribution of annual financial statements, auditor’s, director’s reports, and auditors’ appointments and rights. New terms are introduced to facilitate SMEs to take advantage of accounting and reporting requirements, requiring public and massive companies to introduce an analytical business review in directors’ reports and improve auditors’ right to information. This section also includes new sanctions relating to the contents of auditor’s reports.

In terms of Reporting Exemption, the new Companies Ordinance relaxes the criteria for companies to prepare simplified financial reports and directors’ reports (i.e. the “reporting exemption”). Private or guarantee companies (other than certain companies specifically excluded) that are qualified for the reporting exemption are exempted from certain specific requirements relating to the preparation of financial statements, directors’ and auditor’s reports, which in turn can simplify the process of filling profit tax return. The accounting standards applicable to companies falling within the reporting exemption are less complicated than the standards applicable to listed, public or other companies not qualified for simplified reporting. However, audit of the financial statements is still required for all companies, except dormant companies (section 447), under the new CO.

Differences between Hong Kong Inland Revenue Ordinance and the Companies Ordinance

Under Hong Kong Inland Revenue Ordinance, in case the company does not have a business or is at a loss, they don’t have to submit the audited accounts for tax filing. Nevertheless, if there is receipt of profits tax returns from time to time, it is mandatory to compile the tax. Under Hong Kong Companies Ordinance, audited statements are needed to be done annually.

Managing the records of the accounting and compiling the annual audited report and financial statements are legally required under Accounts and Audit of the Hong Kong Companies Ordinance (Cap. 622) for a company incorporated in Hong Kong. It refers to all the firms incorporated in Hong Kong, whether they are starting a company in Hong Kong or abroad.

In order to keep the business running smoothly, it is essential to maintain the company records. One must maintain the records of accounting and compile the annual audit accounts. Even though in certain situations, IRD won’t require these records, keeping the accounting records will be beneficial for you. Accurate business accounting laws will help you in preparing financial statements accurately and quickly. Therefore, enable the cash flow in your business and run it smoothly with all the documents handy.

Simplify Your PTR: Essential Advice for New Businesses

The first financial period of the business will normally begin from the incorporation date until up to 18 months from incorporation. The company should also select a financial year end. For instance, if the company selects a year end on March 31st, every subsequent year after the first day of the new year will be on April 1st and ending on the proceeding March 31st. All financial statements will have to be prepared during this financial year time.

Worried about who would take care of all this? If you decide to Contact Startupr, you need not worry about any of these things. Everything would be notified to you way ahead of the time and the right advice would be given to you at all points.

FAQ

Understanding the nuances of the reporting exemption can significantly impact your company’s compliance and efficiency, particularly when it comes to filling profit tax returns. Below, we address frequently asked questions to clarify how this exemption can benefit your business.

What is the reporting exemption under the Hong Kong Companies Ordinance?

The reporting exemption allows certain private or guarantee companies to prepare simplified financial and director reports, streamlining their compliance obligations.

How does the reporting exemption simplify the process of filling profit tax returns?

By allowing for simplified financial statements, the exemption reduces the complexity of preparing documents required for filling profit tax returns, potentially saving time and resources.

What are the benefits of qualifying for the reporting exemption?

Benefits include reduced administrative burden, simplified accounting standards, and potentially a less complex process for filling profit tax returns.

How does the simplified financial reporting relate to the documents needed for filling profit tax returns?

The simplified financial reporting produces documents that are then used as the basis for the information that is needed when filling profit tax returns.