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The conditions for zero declaration of Hong Kong companies
Hongyuan International Consulting suggests that Hong Kong companies should judge whether they meet the zero declaration requirements for Hong Kong companies from the following aspects. If one of the following is not met, zero declaration cannot be made:
2. No bank account or accounting records have been opened, and there are no records of monthly bank statements;
4. There are no employees in Hong Kong;
6. No purchase or sales relationship with Hong Kong merchants;
The corresponding zero declaration for Hong Kong companies is the actual tax declaration for Hong Kong companies. If the company operates well, has frequent account transactions, and has a large amount of money, considering the future development of the company, tax reporting can be implemented. There are three situations for actual tax reporting: loss, profit, and balance. If it is a loss, there is no need to pay taxes, just keep an account and provide corresponding documents; If it is for profit, 16.5% of the net profit will be charged.
If a Hong Kong company has not engaged in physical operations and meets the zero declaration criteria, it can file a zero declaration. The process of zero declaration is relatively simple as it does not require auditing, and the service fees charged by secretarial service companies are also relatively low.
If a Hong Kong company does not comply with the zero declaration recommendation, it is recommended to file actual tax returns. The service fees for general tax reporting include audit report opinions, income statements, balance sheets, changes in shareholders' equity statements, as well as the cost of accountants sorting bills and consulting with tax authorities. The most important aspect of an audit report is the accountant's opinion. It seems that the cost of actual tax reporting is higher than the cost of zero reporting.
However, many Hong Kong companies may file zero declarations for convenience or to save money when they do not meet the requirements. Hongyuan International Consulting reminds with years of experience in Hong Kong company audit services that if a registered Hong Kong company generates business during its business period and still has zero declaration at this time, the risk it bears is very high. In Hong Kong tax law, there is a clear provision that the Inland Revenue Department has a 7-year legal recourse over the tax management of Hong Kong limited companies. If a company fails to truthfully declare and still adopts the zero declaration method, even if it was not investigated at the time, but is found by the government during the effective period of legal recourse, the cost it faces is to accept fines or court summons, with a maximum fine of HKD 50000, in addition to paying three times the amount of taxes, and its company directors can be imprisoned for up to three years. Of course, it is not necessary to pay taxes without making zero declarations. In fact, whether a Hong Kong company needs to pay taxes depends on whether it is profitable. If it is not profitable, there is no need to pay taxes, which is what we call Hong Kong company profits tax.
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