At present, there are many Hong Kong companies in the market that have been established for many years, have opened bank accounts, and the company has been operating, but for various reasons, the company has never done an audit, and the declaration to the tax bureau has been zero. Such cases are not uncommon. So what are the risks? What should be done to comply with the regulations?

According to the relevant provisions of the Hong Kong Inland Revenue Ordinance, any Hong Kong company is obligated to declare and pay tax to the Inland Revenue Department. If the company has operations, it must submit a financial report audited by a Hong Kong certified public accountant (CPA) together with the profits tax return to the Inland Revenue Department. If you only submit a profits tax return without an audit report, it will be rejected by the Inland Revenue Department and you will have to submit and complete a new return.

If the company does not operate, it can make a zero return (i.e. inactive tax return), but it must also meet the following conditions:
1No bank account has been opened under the Company's name, or an account has been opened but there is no money in or out of the account;
2The company has no employees under its name;
3The company has no assets under its name;
4There is no investment in the company.

If one of the above conditions does not meet, the Hong Kong company should make an active audit report. What are the risks if your Hong Kong company does not meet the above criteria but has not been audited because it has taken the advice of an unprofessional agency that it can make a zero filing as long as it does not operate in Hong Kong?

risk1If it is found by the tax bureau, first make upHong Kong corporate auditTax declaration, if the company is supposed to pay profits tax, to pay the tax and late fees, and then the director may be considered to deliberately hide tax and be required to bear criminal liability. risk2At presentCRSAlready in the world100In many countries or regions, in order to comply with relevant regulations and improve transparency, the bank will conduct annual audit on all customers who open accounts every year, requiring the provision of annual inspection records and audit reports. Failure to do so may result in the freezing or closing of bank accounts.

So what should be done to comply with the regulations? It is suggested that the company should make up all annual audit reports from the date of establishment, make a reasonable explanation to the tax bureau, and apply for exemption from possible fines and corresponding responsibilities.

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