Hong Kong Company Maintenance and Compliance Guide (8) – Filing of Profits Tax Return

1. Filing of Profits Tax Return and Supporting Documents

A corporation carrying on a business in Hong Kong has to file a Profits Tax Return (tax return Form BIR51) for every year of assessment. The tax return must be supported by the following:

(1) a certified copy of audited Balance Sheet and Profit and Loss Account and Director Report;

(2) a certified copy of Auditor Report;

(3) a tax computation showing how the Assessable Profits are computed from the accounting profits;

(4) schedules of the following items (where applicable):

(a) capital expenditure incurred, capital assets sold, depreciation charged in the accounts and assets not in use at the end of the basis period;
(b) details of expenditure incurred on, and disposal proceeds of, scientific research;
(c) details of expenditure incurred on refurbishment of buildings — the location and the usage of building during the year;
(d) details of reserves and provisions, showing transfers to and from the related accounts;
(e) details of extraordinary gains and losses;
(f) details of any service / management fee received including name and address of each payer,
(g) details of interest paid or payable, including name and address of the lender, any security to the lender, and the usage of the loan;
(h) details of income claimed to be with a non-Hong Kong source;
(i) details showing the name and address of payments involving contractor / sub-contractor fees, management fees, commission, royalties, legal and other professional fees, and hiring charges for the use of a movable property in Hong Kong;
(j) details of bad debt provisions and write-offs;
(k) details of change in method of valuation of stock; and
(l) details of rent payments including name and address of the landlord, the property location, the total rent paid, and the period covered.

Note: The Inland Revenue Ordinance does not require the corporation¡¦s accounts to be audited. Rather, it is the Companies Ordinance that makes the requirement. So, if the corporation is registered in a country without audit requirement, the Revenue may accept unaudited accounts providing they are certified by the directors. Besides, a Hong Kong limited company may be exempt from audit under the Companies Ordinance — for example it is a dormant company. In that case, the Revenue will also accept unaudited accounts.

2. Deadline for Filing of Profits Tax Return

There are two types of issue of profits tax returns: (a) the odd issue and (b) the bulk issue.

The odd issue of tax returns is on a case by case basis throughout the year of assessment at the discretion of the assessing officer. The time limit to file a tax return is usually set at one month from the date of issue save the urgent cases, for example a sole trader has ceased his business and is going to leave Hong Kong permanently, in which the time limit may be less than one month.

The bulk issue of tax returns is done by the computer in April to a lot of taxpayers according to their accounting dates. Although the time limit for filing the tax returns on bulk issue is also set at one month from the issue date, the taxpayer can ask for an extension of the time limit if his accounting date falls in the category’s “M” and “D”.

Category Accounting date Extension of time limit up to
M The accounting date falls in the period of 1 January to 31 March. Early November
D The accounting date falls in the period of 1 December to 31 December. Early August
N All other cases. No extension

The extension applies to the current year of assessment only. Automatic extension is granted to those taxpayers who are represented by a tax representative. Unrepresented taxpayers will be granted the extension upon written request. The exact dates and details of the extension may differ slightly from year to year and they are published on the IRD’s website. Although in general no further extension will be granted beyond the above time limits, the assessor may extend the time limit in special cases where the taxpayer has pressing problems in meeting the deadline.