Accounting services play a pivotal role in the process of setting up a company in Hong Kong. Beyond ensuring compliance with tax and reporting requirements, these services become a crucial instrument in propelling your business towards achieving its envisioned and measurable objectives.
The Need for Accounting
Section 51C of the Inland Revenue Ordinance mandates that any individual conducting a trade, profession, or business in Hong Kong must maintain adequate records in either English or Chinese. These records should accurately document their income and expenditure, making it easy to determine the assessable profits, and kept for a minimum of 7 years.
Failure to comply with these obligations, without a reasonable excuse, may result in a maximum fine of HK$100,000. The records required by the Ordinance encompass various documents, such as books of accounts that record receipts and payments or income and expenditure, vouchers, bank statements, invoices, receipts, and records of assets and liabilities related to the trade, profession, or business.
Filing Deadlines in Hong Kong
As per Section 379(1) of the Companies Ordinance (CO), all directors of a Hong Kong company are obligated to prepare financial statements for each financial year. Additionally, the CO mandates that these financial statements must adhere to the accounting standards specified by the Hong Kong Institute of Certified Public Accountants (HKICPA).
A company’s initial financial year commences on its incorporation date and concludes on a date chosen by the directors within 18 months from incorporation. Subsequent financial years will end on the anniversary of this specified date. To organise consolidation processes better and present a more coherent picture to stakeholders, subsidiaries often adopt the same financial year-end as their holding companies, though this is not mandatory.
Regarding taxes, Hong Kong-incorporated companies receive their first profit tax return (PTR) from the Inland Revenue Department 18 months after incorporation. Deadlines for filing the annual profit tax return vary based on the company’s year-end date. For instance, companies with a financial year-end on 31 December must submit their PTR by mid-August each year, while those selecting 31 March as their year-end date must file by mid-November annually. Other financial year-end dates have a filing deadline at the end of April each year.
Accounting Services
Paul Hype Page & Co stands out as a leading provider of accounting services. Explore our range of common accounting services in Hong Kong to align your business with its financial objectives and fulfill tax and reporting obligations effectively.
- Cash Flow and Working Capital Analysis
We assist small and medium enterprises (SMEs) in identifying, assessing, and addressing gaps in managing their working capital and cash flow effectively. - Accounts Consolidation Services
Our expert team provides consolidated financial statements to allow a company’s shareholders or management to gain insights into its current financial status. - Management Reports and Accounts
We offer accurate and timely financial and statistical information to aid managers in making informed day-to-day and short-term decisions for the organization’s internal audiences. - Financial Planning and Budgeting
Our services help SMEs implement robust planning and budgeting practices to effectively manage their financial resources.
Accounting Standards in Hong Kong
HKICPA
The Hong Kong Institute of Certified Public Accountants (HKICPA) oversees the accounting industry in Hong Kong, ensuring compliance with accounting standards. Companies incorporated in Hong Kong are required to maintain proper accounting books and fulfill statutory audit requirements annually as per the Hong Kong Companies Ordinance.
In 2010, the HKICPA introduced the Hong Kong Financial Reporting Standard for Private Entities (HKFRS for Private Entities) as an option for private entities to ease reporting requirements under full HKFRS. The HKFRS for Private Entities sets qualifying criteria outlined in Section 1 for applying this standard.
Accounting standards in Hong Kong follow the accrual basis, recognizing transactions and events within the same financial statement periods. Financial statements prepared on this basis provide insights into past transactions, future cash obligations, and potential cash accruals.
HKICPA’s responsibilities include applying HKFRS to general-purpose financial statements of profit-oriented entities, and serving various users’ information needs, such as shareholders, creditors, employees, and the public. HKFRS includes Hong Kong Financial Reporting Standards, Hong Kong Accounting Standards (HKAS), and Interpretations delivered by HKICPA. The required financial documents comprise a statement of cash flow, accounting policies, explanatory notes, a statement of financial position, a statement of comprehensive income, and a statement showing changes in equity.
GAAP
Hong Kong Generally Accepted Accounting Principles (GAAP) comprise of a set of accounting principles, standards, and procedures that companies in Hong Kong must adhere to while preparing their general-purpose financial statements. Compliance with HK GAAP is particularly crucial for companies distributing their financial statements outside the organization.
Publicly traded corporations must ensure that their financial statements also conform to the rules set forth by the Securities and Exchange Commission. GAAP covers diverse aspects, including revenue recognition, balance sheet presentation, item classification, and measurement of outstanding shares.
Investors should exercise caution if a financial statement deviates from GAAP standards. Some companies may use both GAAP and non-GAAP measures in their financial reporting. However, non-GAAP measures must be explicitly identified in financial statements and other public disclosures, such as press releases, in accordance with GAAP regulations. This transparency ensures informed decision-making by investors.
Articles about Accounting
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Why Outsource Your Accounting Function
Your time is precious – spare your time and leave the hard work to us.
In the fast-paced business world of today, opting to outsource your company’s accounting function to a professional accounting firm in Hong Kong presents numerous benefits. Here are compelling reasons to consider this approach: