What is bookkeeping?
Bookkeeping is the process of recording and tracking, on a regular basis, all the company’s transactions. The role of the bookkeepers is to enable the company to check and meticulously summarize all the business activities in its books and produce reports to track the business’ activity and financial situation.
In accordance with the local and international accounting principles, each and every transaction must be reported in the company’s books – whether it refers to a sale or a purchase.
Bookkeeping is a function needed by all companies, from Small and Medium to Large Multinationals, and it is not industry or sector specific. Most companies support their bookkeeping with an accounting software to facilitate the reporting and management of their documents and transactions.
Consequently, the bookkeeping refers to most of the daily tasks related to the financial records of a company. It overlaps with the accounting responsibilities, which spread over the daily financial information documents of the company to produce periodic reports and the according filings.
Accounting and bookkeeping standards in Hong Kong
Hong Kong has a 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 small and medium size companies 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, MyBusiness in Asia can assist clients with all their bookkeeping compliances and requirements! Interested by our Bookkeeping Services Hong-Kong?
Bookkeeping Services Hong-Kong : What is the role of bookkeepers?
The role of the bookkeepers is crucial in any business organization, essentially the task of bookkeepers is to record, following specific methods, all the numbers of the financial transactions of a business in an organized way. In Hong Kong as well as many other jurisdictions, bookkeeping is a legal requirement for companies.
Because bookkeeping is a pillar of the tax filing, it is compulsory in Hong Kong but does not require to be conducted monthly. This means that if a company has a low to medium number of transactions, they can conduct an annual or quarterly bookkeeping.
The reports prepared by bookkeepers and accountants are used by decision makers within a business organization to take informative and strategic key decisions.
Bookkeepers core activities
- Data Entry: recording transactions by using an accounting software or database
- Manage the account receivables cycle of a company: prepare and issue to clients the sales invoices for the sales of goods or services, and tracking the payments of such invoices
- Manage the account payables cycle of a company: collect, review and organize all the purchase invoices received form suppliers and ensure they are paid according to the agreed payment terms
- Prepare the payroll reports for the company: calculate the gross and net pay for all the employees, including any social contributions, deductions or variable compensation elements. All in accordance with the terms and conditions of the employment contracts and local labor laws.
- Prepare and reconcile Financial Statements: ensure the accounting records and bank account balances matches and generate Balance Sheet, Profit and Loss Statements, Cash Flow statements.
Taxation in Hong Kong
Taxation is the consequential output of an accurate bookkeeping and has a significant impact on the business’ results.
The taxation system in Hong Kong is territorial, which means that taxes will be imposed on Hong Kong located activities through a trade, business, or profession. For companies, the main fiscal implication is that profits derived from outside Hong Kong are not subject to profits tax. But this also implicates that non-resident can be taxed in Hong Kong. Hence, maintaining an accurate bookkeeping is extremely important to avoid fiscal misreporting across different jurisdictions.
Double tax treaties between Hong Kong and other countries
The Double Tax Agreements (DTA) are legal agreements between two jurisdictions to avoid double taxations of companies and individuals which conduct business across the two geographies. Hong Kong secured a high number of DTA to secure and strengthen its regional financial and economical hub in Asia.
Mostly the Double Tax Agreements:
- Clarify and lay down rules for division of revenues between the two jurisdictions of the Agreement.
- The DTA gives the information of the responsible authority on transnational tax matters and defines the maximal liabilities of taxpayers across the two countries.
- DTA are often crafted to avoid tax evasion and ensure compatibility of the taxation systems between the two jurisdictions.
- Taxpayers are allowed to avoid the double taxation of their profits or incomes by claiming reliefs for taxes already paid overseas.
In Hong Kong, the different DTAs of the Special Administrative Region (SAR) only applies to individual tax resident of Hong Kong. To qualify the HKSAR residents must not be at the same resident within the other DTA’s jurisdiction.
For companies, the DTAs apply to Hong Kong incorporated companies or companies regarded as managed and controlled from Hong Kong.
The Inland Revenue Department gives out a comprehensive list of Hong Kong’s Double Taxation Agreements.
Filing tax returns in Hong Kong
The tax returns in Hong Kong are directly or indirectly linked to the timely and accurate bookkeeping of companies. Indeed, the Hong Kongese legislation requires companies to be audited by a Chartered Public Accountant (CPA). Accounts, books, returns, management reports and financial statements must thus be thoroughly maintained and prepared. The reporting and management of your accounts should thus be done by a trust worthy accountant.
The required filed documents must be sent to the Inland Revenue Department (IRD) of Hong Kong.
Profit Tax Return
Every company needs to file a Profit Tax return that will help to compute the amount of tax payable on profits made by the company. Although the profits that are made outside Hong Kong are generally not taxable, a company with business in Hong Kong will still require to prepare and file the Profit Tax Return.
The Employer’s Return is to be filed with the IRD and will contain information such as the salaries, pensions, wages, etc. of the employees for the financial year. The scope of the information submitted in the Employer’s return extend to all employees of the local company as well as directors.
Individual Tax return (not filed by the company)
The Individual Tax return in Hong Kong is a document that the IRD will send to the taxpayers. The Individual Tax Return is completed by the individual and must include all the incomes that must be subject to taxation. Even if the IRD misses out a source of income, the individual should report the missing source to the IRD.
Why Bookkeeping is important?
Bookkeeping is an integral and crucial part of every business, even small entities, and, it ensures the basis for the tax calculation are accurate and the company financial representation is truthful and correct.
Most importantly, bookkeeping and its subsequent accounting reports allow business owners, founders, entrepreneurs, CFOs, CEOs and all decision makers in the company to take informative decisions based on up-to-date records. Whether the company is facing crucial decisions on assets disinvestments, loans, or acquisitions the reports produce by bookkeepers and accountants are the basis of every informative decision.
Keeping an accurate, transparent, and updated representation of the company’s financials adds a layer of accountability to the business.
This is beneficial to all company’s stakeholders: financial institutions are more likely to grant a loan, line of credit or discount invoices, investors have an accurate tool to evaluate the business performances and inject capital in the company, customers are reassured and brand image is consolidated.
When it comes to accounting, MBiA combines the state-of-the-art accounting cloud software solutions to help with maintaining your accounts on an annual, quarterly or monthly basis as well as dealing with your payroll, taxes, etc.
Our services include all your needs such as registered office address and company secretary to guarantee your peace of mind and compliance for your end of financial year filings.
Opening a bank or business accounts in Hong Kong
Bookkeepers use the bank accounts’ reports to ensure of the comprehensiveness of your accounting. Indeed, the reporting and management of your transactions must be done in time and thoroughly in order to ensure compliance and filing of all the accounting documents.
MBiA offers to open a bank account for you, we will handle the due diligence and help you to assemble the documents required to pass the KYC process of the bank. Although the process can be lengthy and cumbersome, leading to delays in your monthly accounting.
As part of our services, we also provide a free business account opening that has the advantage of being faster to process and has a streamlined due diligence. Moreover, the services include global accounts located in key business jurisdictions (European Union, United Sates, Hong Kong, Australia, Singapore, etc.) that allow you to receive payments in time and lower your transaction and foreign exchange fees.
Additionally, the business account allows for easy expenses and claims as well as sending moneys to suppliers, dealing with payroll or any business partners.
Our bookkeeping and accounting offer
If you manage or want to register a company Hong Kong, you probably already understand the extent of the compliance requirements for companies which include bookkeeping. MyBusiness in Asia can help you with your bookkeeping as well as accounting. It means for you to send our accountants your invoices by your preferred channel of communication (email, online cloud-based solution or through our messaging platform). All you have to do is take a picture of your receipts and send it to us.
Our accountants will handle your bookkeeping while you can focus on your business. You are assigned one accountant who will get to know your business, payroll requirements and accounts. They will ensure that your books’ reporting is ready to produce the management reports and then will complete the financial year end filings.
Whether you have a small business or a medium company, our accountant is familiar with your needs and can leverage our internal cloud software solutions to help you save time!
Our annual, quarterly, and monthly services are the best way to save up your time and money while staying compliant with the local regulations. MyBusiness in Asia is registered in Hong Kong and include local experts and accountants with years of experience serving businesses.
Whether it is the company registration process, accounting, tax filing, or payrolls, we can support and handle your back-office for you to focus on growing your business. Now you know everything about Bookkeeping Services Hong-Kong.
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