Accounting services Hong Kong : What are the accounting standards in Hong Kong?
In Hong Kong, each registered company must maintain proper bookkeeping and statutory audit requirements. This means that companies must do their own accounting based on the standards defined by the Hong Kong Institute of Certified Public Accountants (HKICPA) which also defines and regulate the accountancy profession in the Special Administrative Region.
The International Financial Reporting Standards (IFRS) are a set of principles and rules related to accounting that enable the comparison of companies’ financial situations across the world.
The IFRS are set out by the International Accounting Standards Board (IASB) and are frequently updated to reflect improved solutions and reporting of companies’ financial situations.
Hong Kong has its own set of standards called the Hong Kong Financial Reporting Standards (HKFRS) that are based onto the IFRS but applied with slight amendments to the local companies. The HKFRS also sets out the standards by which companies must abide to draft, file, and publish their financial statements.
A subset of accounting standards called the SME-FRS has been issued by the HKICPA for qualifying SMEs and the HKFRS for Private Entities that apply to selected Private Entities. The set of rules is extensive and navigating them can be tricky. Receiving accounting and bookkeeping assistance is often necessary, with Certified Public Accountants (CPA), MyBusiness in Asia can assist clients with all their accounting compliances, requirements, and filings!
As audit of companies are mandatory in Hong Kong, keeping clean bookkeeping records and accounting management reports is thus vital for your business.
The financial statements in Hong Kong
The HK Institute of Certified Public Accountants (HKICPA) defines the set of financial statements. They are required for the preparation and filing of yearly financial accounts for each company. The documents are:
- Statement of Comprehensive Income
This document summarizes both the standard net income of the company and the other comprehensive income. Often refers to the income statement or Profit and Loss (PnL / P&L) statement. - Statement of Financial Position
It is also known as the balance sheet. The statement of financial position gives you a view at a single point in time of what the company owns (assets) versus what it owes (liabilities). It will also help to have a view of the value of the firm at the specific date of statement. - Cash Flow Statement
Summarizes the inflow and outflow of cash and cash equivalents for the company. The cash flow statement measures the ability of the company to finance its debt obligations and operating expenses. - Statement of Changes in Equity
Less known than the 3 previous financial statements, the Statement of Changes in Equity summarizes the changes in the previous year of the company’s equity, it can be change partner’s equity in a partnership, a change of shareholder in a private limited company, etc. The document provides a view of who own the company through the financial year.
Check our Bookkeeping services Hong Kong, Corporate secretarial services Hong Kong, How to register a business in Hong Kong and all about Sole proprietorship in Hong-Kong.
Filings and reporting of the Financial Statements in Hong Kong
Often, the financial statements are complemented with certain accounting policies and explanatory notes. Indeed, the accounting reporting standards aim at giving out a clear view of the firm’s financial situation and notes can enrich the perspective given.
More specifically, additional information regarding the financial statements reporting requirements in Hong Kong can be found on the website of the Companies Registry (CR).
Moreover, in Hong Kong the financial statements are to be audited every year by a Chartered Public Accountant (CPA). In that regard, MBiA can manage your accounting and prepare your financial statements to ensure of a smooth audit of your companies’ documents.
Finally, the financial statements’ statutory filing within audited accounts must be done with the Inland Revenue Department (IRD) of Hong Kong. MyBusiness in Asia offers businesses to deal with the financial statements of your company as part of its accounting services in Hong Kong.
The SME FRS (Financial Reporting Standards)
Hong Kong has developed some Financial Reporting Standards that apply to qualifying Small and Medium size Enterprises (SMEs). The benefit is some simplified and exemptions reporting standards.
The SME FRS have been implemented through the new Hong Kong Companies Ordinance (Cap. 662) of which you can find the comprehensive document (2015 revised version) here.
Some of the criteria to qualify for the SME FRS in Hong Kong
- The company must be incorporated in Hong Kong under the Companies Ordinance
- Size based criteria, mostly based on revenues of the companies, assets, number of employees, etc.
- The shareholding structure of the company such as the presence of subsidiaries, the number of qualified private limited companies within the group, etc.
- Approval from shareholders requirements based onto the type of category the applying company fall under.
To understand the full set of criteria to qualify for the SME FRS, you can refer to the information provided by the HKICPA.
Profit tax declaration and filing in Hong Kong
Trade and businesses carried in Hong Kong are subject to tax on all profits whether resident in Hong Kong or not. What makes Hong Kong a preferred tax jurisdiction is that profits arising from outside Hong Kong are no taxed in Hong Kong.
The Profits Tax Return’s filing is compulsory about 18 months after the commencement date of the business in the Hong Kong Special Administrative Region (HKSAR).
Companies can benefit from a reduced profits tax rate on the first HKD 2 million of profits of companies as described below:
| Profits declared by the company | Tax rate applicable to corporate profits |
| First HKD 2,000,000 | 8.25% |
| HKD 2,000,000 onwards | 16.50% |
Please note that for partnerships and sole proprietorships in Hong Kong, the tax rate is respectively 7.5% for the first HKD 2 million of corporate profits and 15% onwards.
Hong Kong also does not impose capital gains tax unless it is demonstrated that the sale or profit is part of a business scheme.
The document linked to Profits Tax Return for Corporations is the Form BIR51. You can find more information and download the form from the Hong Kong government website.
If you are looking to benefit from the nontaxable revenues incurred outside of Hong Kong or file your annual Profits Tax Returns, MyBusiness in Asia can assist you and ensure full compliance with the local authorities.
Our services are provided by local tax and bookkeeping experts with extensive experience who have dealt with numerus different taxation situations in Hong Kong and the rest of Asia. We are able to handle complex and business-as-usual matters.
Modern software solutions to deal with your accounting and company matters
MBiA integrates the best available cloud software solutions such as Xero as a service to help and support the growth of its clients. Our set of online solutions allows for the management of your accounting, bookkeeping, payroll, and company secretarial records. You can access all your documents via smartphone, tablet, or computer.
This also help to keep track of your annual filings and deadlines and is combined with professional services to ensure a complete compliance. Therefore, we are confident in offering you audit support after preparing your books and reports.
Having solutions and documents online allows for an easier tracking of your tasks and to-dos so as not to miss annual deadlines for instance. We leverage the state-in-the-art cloud technologies to gain in efficiency!
More than a digitalized service provider MBiA is indeed a company that focuses on quality and human experience to assist with any of your corporate needs. We pride ourselves of combining the digital and expertise approach to our service offering and thus to bring smooth delivery and quality services.
Upgrade your accounting service to MBiA
Our accounting services in Hon Kong combine the expertise of our trusted accountants with a streamlined and fully digitalized process. Manage your accounts remotely, digitally, and paperless thanks to our accounting cloud software solutions:
- Simply, send us a photo of your receipts and transactions or share a digital copy of your invoices through our messaging app. You can directly take a picture of your invoices and we will manage the rest of the accounting.
- Manage your firm’s payroll and employees’ reimbursements from your phone, tablet, or laptop. Easily manage your company’s employment matters in compliance with the local regulations. All your documents are always available online on our cloud software platform.
- We are expert in corporate taxation for Entrepreneurs, SMEs and Start Ups. We guide you through the best available practices, so you never have to worry about annual tax compliance.
When your business grows and the complexity of your books increases, is when the value of MBiA services is most evident. From consolidation of accounts to cross border transactions and tax credits, our accounting team will proactively make sure you adopt the best strategy and ensure your transactions are compliant with the Hong Kongese regulations and statutory requirements.
Whenever you need it, you can request remote ad-hoc consultations by booking some time with our experts. We provide help and support as part of our services using the best-in-class bookkeeping and accounting cloud software solution Xero.
Receive professional support to handle all your payroll, bookkeeping records, accounting management reports, statutory filings and we provide help with your audit matters.
MBiA brings satisfaction to clients
Throughout the years we have gained deep cross-industry experience, which will allow us to assign the best accountant and supervisor based on your business model. From single entrepreneurs to SMEs with regional operations, from e-commerce to media companies, we have you covered.
- Our scalable services adapt to any business and evolve with the complexity of the accounts to provide professional and services
- Tax compliance is becoming more and more heavy. Our services will allow you stay ahead of any changes in the tax framework
- Timely and Value-driven reporting made possible thanks to the combination of our cloud IT solutions and team of experts
- We are Asia experts. Our group offices and cross-border partnerships will help you to expand in Asia developed and emerging markets
Now you know more about Accounting services Hong Kong, contact us.
