Hong Kong Profits Tax Filing: Understanding the New Requirements

Are you preparing to file your profits tax return in Hong Kong? The Hong Kong Inland Revenue Department (IRD) has updated its profits tax return filing requirements, making it essential for businesses to stay informed and compliant. Below, we highlight the key changes and provide practical guidance to help businesses navigate the process efficiently.

1. Submission of Supporting Documents

Starting 1 April 2023, all corporations and businesses, regardless of their gross income, must submit their profits tax return along with the necessary supporting documents. These include:

• Financial statements
• Tax computation

This significantly changes the process for small businesses with gross income below HK$2 million, as they previously could file without supporting documents. Under the new rules, documentation is now mandatory for all entities, reinforcing the importance of accurate financial reporting.

2. Choosing the Right Filing Method

While the IRD has been giving some incentives for the more recent electronic filing options introduced, businesses should carefully evaluate what is the right filing method for them:

• Technical Complexity of e-Filing: The eTAX system requires familiarity with digital formats and submission protocols, which can be challenging for businesses without prior experience.
• Individual Account Requirement: eTAX filing for a company must be done via an individual taxpayer’s account. This means auditors or service providers cannot file on behalf of a business as the individual is required to sign off with their personal eTAX account.
• Paper Filing with a CPA: For most businesses, traditional paper filing through a qualified CPA remains the safest and most efficient method. A CPA can ensure accuracy, compliance, and minimize the risk of filing errors.

3. Compliance Tips for Businesses

Whichever method selected, to avoid delays and penalties, businesses should adopt these best practices:

• Start Early: Organize your financial statements and tax computation well before the deadline.
• Consult a CPA: If you’re unsure about the new requirements, consult with your Certified Public Accountant to guide you through the process. Giving you peace of mind that you will be compliant with IRD regulations.

4. Conclusion

The new profits tax return filing requirements reflect the IRD’s push for greater transparency and efficiency. However, e-filing in Hong Kong can be complex and may not be suitable for all businesses. To ensure accuracy and compliance, most businesses are advised to use traditional paper filing with a CPA. Start preparing now to meet your profits tax obligations smoothly and efficiently.