Audit of Investment Companies in Hong Kong

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Audit of investment enterprises in Hong Kong

In Hong Kong company audit, corporate investment is also relatively common. Investment is to make full use of idle funds of the company and put them into a certain market to obtain economic benefits or capital appreciation. Common types of investment include: buying bank financial products, buying funds, futures, stocks and investing in subsidiaries. If Hong Kong companies involved in these businesses in the audit when doing something noteworthy, let's share.

Details to be paid attention to in the audit of investment enterprises

First: to provide bank financial products trading listUsually, the bank statement will show the transaction record and investment income details at the back. The company recognizes interest income only during the "contracted interest payment period," not when it actually receives interest. Interest income is tax-free in Hong Kong, so interest income is shown separately.
Second: Provide a complete transaction list of investmentsTo purchase funds and stocks through a securities company, the first step is to check the name, quantity and fair value of the investment products related to the audit deadline with the securities company. In Hong Kong, financial assets are generally measured at fair value and their changes are recorded into current profit and loss, unlike in China, which divides financial assets in detail: The change is measured at fair value and booked into current profit and loss or other comprehensive income, so in Hong Kong, such financial assets do not draw impairment reserve, investment income needs to be reflected in the income statement, can not directly through other comprehensive income into the owner's equity account.
Third, if you invest in a subsidiary, you need to provide the shareholder identification documents issued by the subsidiary and the audit report or financial statement of the subsidiary which is the same as the audit closing date of the Hong Kong company. The audit report or financial statement can only be in Chinese or EnglishSome clients of our company often mention that the investment subsidiary has not been audited or has no financial statement. In Hong Kong, if there is an investment subsidiary, the audit report or financial statement of the subsidiary is the main basis for judging whether the investment has impairment. If the investment information of the subsidiary cannot be provided, the auditor cannot judge the fair value of the subsidiary. I would have reservations about it. Some subsidiaries only need to produce a consolidated report of the subsidiary company and the Hong Kong company, so there is no need to issue a separate report on the Hong Kong company. A Hong Kong company has invested in a subsidiary only in a Hong Kong company by another company100%In the case of controlling shares, there is no need to issue a merger report because the obligation of the merger is the controlling parent of the Hong Kong company.
If a client has a subsidiary, he must provide the information of the subsidiary completely. One of our clients did not provide the information of the subsidiary during the audit, because his Hong Kong company had a multi-layer organizational structure. When he asked him to provide the final organizational structure chart, he found that the Hong Kong company held two subsidiaries, and the client said that the company did not invest in these two subsidiaries, so it could not be reflected in the report. Finally, the client provided the shareholder certificates of the two subsidiaries and reflected them in the report.
Fourth: Provide the dividend declaration documents of the invested unitThe dividend income obtained by the invested entity shall be subject to "the date of dividend payment declared by the shareholders' meeting of the invested entity or similar authority", rather than the actual receipt of dividends as the time point of dividend recognition. It is necessary to provide the dividend declaration documents of the investee.
Fifth: Provide details of legal advisory fees and consulting service feesInvestment enterprises will involve a large number of legal advisory fees and consulting services in the process of subsidiary acquisition and material assets reorganization. Auditors also pay special attention to such fees and disclose them in the notes to the audit report. Therefore, contracts, invoices and payment related bills should be complete and clear about the reasons for the entire fees. Some clients of our company made an approximate value of42$10,000 consulting fee, when it was only39The invoice of consulting fee of ten thousand US dollars could not be provided for the rest of the invoice. Finally, the auditor asked him to adjust the difference and not deduct it before tax.

In Hong Kong, the tax ordinance states that "capital gains are not subject to profits tax", so many companies choose to use Hong Kong companies for equity investments

If you get dividend incomeNeither individuals nor businesses pay taxes on such income.
If the gain is the bid-ask spreadIf the main business of a company is not investment, but the occasional investment in stocks, funds, and futures, the difference in income is not taxed. If the main business of the enterprise is to invest in stocks, funds and futures, then it still needs to further analyze the location of the stock exchange where the relevant stocks or securities are traded. If the enterprise invests in the stock exchange in the United States, the United Kingdom or mainland China, the spread income obtained is not taxable. If an enterprise buys and sells shares in the Hong Kong Stock Exchange, the income from the price difference is derived from Hong Kong, and it shall be taxed in Hong Kong.

As a professional audit service institution in Hong Kong, Huanze has served many types of enterprises. If you have an investment-oriented Hong Kong company, in addition to the details mentioned above, there are more detailed knowledge about auditing worth knowing when doing auditing. Only by being familiar with auditing and relevant policies can you help your Hong Kong company reduce tax costs to the maximum extent and enhance its visibility within a reasonable and legal scope.

HUANZE focus on Hong Kong company audit accounting tax17years

: I have experience in auditing Hong Kong companies in various industries, and have served many private enterprises, listed companies, multinational groups and state-owned enterprises. I can tailor service solutions for overseas companies based on industry customers' conditions, so as to avoid overseas risks and gain more corporate interests.