Profits Tax/Corporate Taxation】Infinite Company, Limited Company Tax Rates, Allowances, and Tax Return Procedures

Company Tax ReturnsThe process is very different from filing a personal tax return in that it is more complex and requires specific rules and procedures to be followed. In this article, we will introduceprofits tax的tax rate和Tax Allowanceas well asUnlimitedThe different requirements for filing tax returns with limited companies will help you better understand how to prepare and submit your tax return.Company Tax ReturnsThe Company is also responsible for ensuring compliance with relevant tax laws and regulations.

 

profits taxWhat is it?

profits tax（Profits Tax is a direct tax in Hong Kong and is part of income tax. According to section 14 of the Inland Revenue Ordinance, Chapter 112 of the Laws of Hong Kong.profits taxApplicable to individuals or companies carrying on a trade, profession or business in Hong Kong and chargeable on their assessable profits arising in Hong Kong.

 

Who needs to payprofits tax？

According to the guidelines issued by the Inland Revenue Department (IRD), irrespective of whether a person is a Hong Kong resident or not, any person who carries on a trade, profession or business in Hong Kong and derives assessable profits from Hong Kong (excluding profits arising from the sale of capital assets) is subject to the following chargesprofits taxThe following persons are included in this category. People in this category include:

• Incorporation: refers to a company incorporated under the Companies Ordinance, such as a limited company.
• Persons outside the corporation: including sole proprietors, partnerships, trustees, organizations and self-employed persons.

   

factProfits tax rate

With effect from the year of assessment 2018/19, the Hong Kong Government has implemented a two-tier system of tax rates, namely the standard rate and the two-tier system, with the aim of enabling all entities with profits tax chargeable in Hong Kong to enjoy a lower rate of tax.Profits tax rateThis is provided that the entity does not already have other related entities that have been selected to participate in the two-tier system.profits tax rateTaxation. Under this new system:

 

1. Standard rate

The rate of 16.5% applies to corporations and the rate of 15% applies to persons other than corporations.

 

2. Two-tier tax system

	Tax rate (first 2,000,000 assessable profits)	Tax rate (on assessable profits in excess of HK$2,000,000)
Incorporated	8.25%	16.5%
Persons other than OCs	7.5%	15%

3. Ex gratia tax rate

In addition, some taxpayers are entitled to preferential tax rates on qualifying profits arising from or received in respect of certain specified qualifying transactions or activities, as set out below:

 

Eligible Transactions or Designated Entities	Preferential tax rates
Corporate Finance Center	8.25%
Aircraft and Ship Chartering	0% or 8.25% (as appropriate)
Insurance	8.25%
Professional Reinsurance	8.25%
Family Office	0%
Qualifying IP Revenue	5%
Short/Medium Term Debt Notes (issued prior to April 1, 2018)	8.25%
Short/Medium Term Debt Notes (issued on or after April 1, 2018)	0%

profits taxFormulas andCalculationmethodologies

profits tax的CalculationThere are 4 main steps:

1. Determination of gross income: The total income of the business earned in Hong Kong for the year of assessment is first calculated.
2. Deductible Expenses: business expenses incurred in the course of earning profits that are deductible from gross income and which are allowable deductions under the tax laws.
3. Calculation of Assessable Profit: The total income minus all deductible expenses gives the assessable profit.
4. Applying the applicable tax rate: The profits tax rate is applied according to the type of business (corporate or unincorporated) and the amount of assessable profits.

profits taxformulas

Acceptableprofits tax = assessable profit × applicable tax rate.

 

Profits Tax Allowance

Whether it is a limited company orUnlimitedI don't even have the basics.Tax AllowanceHowever, any expenditure used to produce assessable profits can be used as a tax deduction, for example:

• Corporate Rent
• Employee salaries
• MPF Contributions
• Socializing at work
• Premiums
• Maintenance costs related to the working environment or tools
• Computer Hardware and Software
• Charitable donations

constraintsCompany Tax ReturnsDocumentation/Steps

 

1. LimitedCompany Tax Returnsfile

• Profits Tax Return (BIR51): Completed by the company's tax representative based on the financial statements and the audit report.Tax ReturnsThe company provides a wide range of financial and tax information to assist the IRS in assessing tax liability.
• Audited Financial Statements: from April 2023, audited financial statements signed by an independent accountant will be required regardless of the company's income.
• Tax Computation: The accountant has to adjust the company's financial statements to determine the assessable profits and fill in the computation form according to the tax regulations.

2. LimitedCompany Tax ReturnsSteps

The process of filing a tax return is tedious and can take several months from the time you prepare your accounts to the time you complete your tax return. Below are the specific steps:

• Apply for an extension of time to file: Upon receipt of the tax return, the company should contact the tax representative as soon as possible to apply for an extension of time to file the tax return.
• Preparation of Accounts : The company is required to prepare accounts for the financial year including Profit and Loss Account, Balance Sheet etc. and maintain records of income and expenditure.
• Audit of Accounts: The accounts are audited by an auditor, who reviews them and provides an audit opinion as required.
• Preparation of Profits Tax Calculations: Based on the audit report, the tax representative is required to prepare calculations to determine the assessable profits.
• Completion of Profits Tax Return: Use the calculator to complete the tax return and submit the relevant financial and tax information.
• Filing Tax Returns and Documents: Submit signed tax returns, audit reports and calculations to the IRS.
• Tax assessment: The IRD will assess your tax return after about three months and you can raise objections if there are any errors.
• Payment of tax: After confirming that there is no error, the company should pay the tax within the stipulated period and complete the tax filing.

without limitCompany Tax ReturnsDocumentation/Steps

1. UnlimitedCompany Tax Returnsfile

• Sole proprietorship: SubmissionIndividual Tax Return (BIR60)Partners: SubmissionProfits Tax Return (BIR52)。
• Company Profit and Loss Account: A profit and loss account is required when the company's annual revenue exceeds HK$2 million.
• Company Balance Sheet: The same applies to companies with an annual revenue of more than HK$2 million, a balance sheet is required.

2. UnlimitedCorporate Tax Steps驟

without limitCompany Tax ReturnsThe process is relatively simple and there is no need to audit financial statements. Below are the simplified steps:

• Application for extension: receivedTax ReturnsAfter that, you can apply to the IRD for an extension of time to file.
• Preparation of Accounts: Unlimited companies are required to maintain accurate accounting records, and must prepare and submit accounting accounts when revenues exceed HK$2 million.
• Fill inTax Returns: Based on the accounting accountsTax ReturnsThe taxpayers are required to declare the deductible expenses and allowances.
• hand overTax Returnsand related documents: completedTax ReturnsAfter that, if the income exceeds $2 million, a balance sheet and profit and loss account are required.
• Assessment and payment of tax: The Inland Revenue Department will issue a notice of assessment and the tax will be paid on time if it is correct.

Troublesome to file tax return? One-stop tax filing service can help you!

Company Tax ReturnsThe process is very complicated, requiring the completion and preparation of a large number of forms and documents, and is prone to errors in the process. In order to help companies simplify the process of tax filing, theM & N BusinessSpecialized in providing a variety of tax service plans, one-stop to help you solve any tax problems, that is, to see the advantages of the service:

1. Save time and speed

M & N offers a full range ofCompany Tax ReturnsThe service covers tax consultation, bookkeeping, audit arrangement and filing of corporate profits tax returns to the Inland Revenue Department, so that enterprises do not need to worry about the cumbersome process of filing tax returns and can complete their compliance filings efficiently.

 

2. Understanding your needs

As a professional tax return preparation company, we understand thatCompany Tax ReturnsOur team will fully follow up the whole tax filing process to fulfill the statutory requirements.Company Tax ReturnsRequest.

 

3. Clarity of charges

M & N provides clear and transparent tax filing fees to ensure that prices are reasonable and fair with no hidden fees.