According to the Companies Ordinance Act of Hong Kong, all companies registered in Hong Kong are required to maintain business records in accordance with established requirements and rules. In addition, all companies in Hong Kong, 18 months after the start of business (transactions on company accounts) are required to undergo an annual audit.
An audit is a check of the correctness of accounting. The accounting materials after the audit are submitted to the Hong Kong Tax Department (HK IRD) together with the company’s income statement. Based on the results of the audit, the company is assigned offshore or onshore status. Offshore companies have tax preferences – are exempt from paying income tax, which in Hong Kong is 16.5%.
UGL offers its customers a choice of the following accounting methods accepted in Hong Kong:
Accrual basis accounting is an accounting method in which the company’s revenues relate to the period in which a business transaction took place, regardless of when the payment was made for such a transaction. The specified accounting method is relevant for companies operating on a deferred payment basis, since the use of accrual accounting makes it possible to most accurately reflect in the audit report all performed business transactions, including those for which payment was not made. This method of accounting complies with the requirements of Hong Kong law and is applied when it is necessary to create a positive credit history of the company.
Cash basis accounting is an accounting method in which income from business transactions refers to the period in which payment was made. The cash method of accounting is suitable for companies that provide services and sell goods without deferred payment, when payment for the goods or services occurs at the time of their transfer to the client (buyer). For such enterprises, this method will allow for the efficient assessment of revenue.
If there is no activity during the reporting period, enterprises file a zero tax return with the Hong Kong Tax Department.
The experience of UGL specialists shows that there are a number of requirements to the accounting procedure in Hong Kong. For example, in order to display business transactions at an enterprise, all daily monetary and commodity operations of the company should be properly recorded, a list of registered property rights of the company regarding movable and immovable property, a list of company assets, the state of the company’s receivables and payables should be kept.
Among the main types of accounting services provided by UGL for companies registered in Hong Kong are the following:
- Keeping records of cash flows (receipt and write-off of cash).
- Accounting for workflow (concluded contracts, applications, invoices for the supply of goods and services, etc.).
- Work on the preparation of primary documentation.
- Drawing up balances (quarterly, annual).
- Preparation and submission of audit reports.
- Submission of tax returns as part of the audit report, and zero.
UGL specialists also provide a number of additional accounting services for Hong Kong companies:
- Development of standard forms of primary documentation (contracts, invoices, applications for the supply of goods / services, specifications) for different types of business operations.
- Development of schemes and strategies for eliminating problem receivables.
- Representation of interests of the client in banking institutions.
- Solving issues related to problem payments.
According to the laws of Hong Kong, our specialists will duly draw up the initial documentation confirming all financial and commodity operations carried out by the company, as well as proving property rights to all the company’s assets. From the correct execution of all these documents depends on whether the company will be exempted from taxes, in connection with which you should not neglect the issues of the correctness of accounting and preparation of business documents.
For more than 12 years, UGL has been dealing with company registration, accounting and auditing in Hong Kong. For all the time in this service sector, our company has gained vast experience in the preparation and submission of documents to the registration and tax authorities of Hong Kong, taking into account all the features and nuances.
We work with audits of varying degrees of complexity, including audits confirming foreign assets of companies, as well as preparing consolidated audit reports for a group of companies (Hong Kong-China, Hong Kong-Russian Federation).
The cost of accounting services, as well as the audit of the company depends on the number of operations and the annual turnover of the company, the availability of a full package of necessary documents, as well as the presence of subsidiaries or affiliates in the group. The time period for preparing the audit report also depends on the above circumstances, but on average does not exceed 3-4 months.
We should not neglect the issue of preparing a high-quality audit report, since banks in Hong Kong, as well as insurance companies (including the Chinese insurance company Sinosure), are guided by them when assessing the solvency of the client and setting limits, which allows companies to buy goods with deferred payment.
Thanks to the work of UGL specialists, more than 500 of our clients successfully conduct business in Hong Kong, saving not only time on preparing financial statements and conducting audits, but also optimizing financial resources on paying taxes, forming a positive history of their company and successfully interacting with banks and insurance companies in China and the Hong Kong.