Tax Tips for Small and Medium Enterprises
- Hong Kong is a low tax jurisdiction but not a tax haven. Hong Kong's low tax regime is due to the Hong Kong SAR Government's success in managing its public finance. It is essential to familiarise with the Hong Kong tax law and practice in order to be able to handle one's tax affairs effectively and efficiently. Useful tax information can be obtained from Hong Kong Inland Revenue Department's (IRD) website (http://www.ird.gov.hk) or its general enquiry hotline on 187-8088. Full copy of the Inland Revenue Ordinance and other legislation can be found at http://www.legislation.gov.hk/eng/home.htm. Your tax case officer (usually an assessor) is also a useful source for tax information.
- In order to avoid unnecessary fines or penalties, please submit tax return and information requested by the IRD on time. Ask for an extension with valid reason if necessary. It will save costs and hassle to comply with the law.
- Your tax accountant can help you to prepare the tax returns with IRD, but it will be the taxpayers' ultimate responsibilities to ensure that the information provided in the tax returns are true, complete and correct. Therefore, it is essential that as the owner of a business, you should check the tax returns carefully and raise questions with your tax accountant promptly.
- Make sure that the business has claimed all eligible expenses for the production of profits and depreciation allowances in the earliest possible year of assessment.
- Making use of a credit card, for example, the Commercial Credit Card, which can separate a taxpayer's personal and business expenses can enable a taxpayer to cope with the record keeping requirements and improves compliance.
- Make sure that profits are recognised in the correct year of assessment and accrued expenses and provisions are afforded the correct tax treatment .
- Where a business has operations both onshore and offshore Hong Kong, those profits derived from outside Hong Kong may fall outside the Hong Kong profits tax net. The rules for determining the source of profits for profits tax purposes is a complex matter and advice should be sought from professionals.
- If a business has cross border operations it may be relevant to consider any double taxation relief under any double tax treaty which Hong Kong has entered into. As at August 2009, Hong Kong has entered into 5 comprehensive double tax treaties (including the mainland of China, Belgium, Thailand, Luxembourg and Vietnam.)
- Profits derived from the disposal of a capital asset also falls outside the Hong Kong profits tax net.
- Loss sustained from a year of assessment can be carried forwarded indefinitely to the following years until it is fully utilised.
- Where a taxpayer has various sources of income in the same year of assessment, the election of a personal assessment may help to reduce the overall tax liability - but whether this election will work depends on personal circumstances.
- Be sceptical about any tax planning ideas.
- Seek professional advice from tax lawyer or tax accountant
whenever you are in doubt.
The views expressed are the author's own and do not necessarily reflect the views of Visa or any other individuals. They do not express the views, opinions or beliefs of any organization or individual other than the author's, nor do they represent Visa in any respect nor are they endorsed by Visa.
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