Company Secretary Services in Hong Kong (HK)
A Hong Kong registered company must appoint a local Hong Kong company secretary. This company secretary may be an individual person, or a body corporate, but must reside (or locate) in Hong Kong with a registered office address.
The Hong Kong company secretary must ensure the company is always in compliance with the statutory requirements of the Companies Ordinance of HK. This involves the maintenance of the statutory books and records of the company.
What services may be included in Hong Kong company secretary services?
Registered Office Address
A company that has been incorporated in Hong Kong must maintain a HK registered office address (i.e. Business Address in Hong Kong). This is a business address and cannot be a P.O. box address. The main functions of the registered address include the reception of letters from the HK government, and the maintenance of physical statutory records.
Some companies running small business from home or remote locations may not intend to pay the rent for a physical office space in HK. The alternative solution is that the company may use a company secretary service that is able to provide a business address.
Having the registered address with a Hong Kong company secretary service enables the company to:
- Have a registered office address and correspondence address for all post mails.
- Receive physical mails and parcels that are intended for the company owners.
- Make arrangements for forwarding or courier.
- Hold a client meeting when needed at the registered office address.
Depending on the service terms of company secretary service provider, the following services may also be provided:
- A dedicated or private telephone number
- Answering of all phone calls under the name of the company
- Forwarding of selected and important incoming phone calls
A company needs some accounting and/or bookkeeping to keep accurate business records.
Having accurate records, it lets the owner to fully understand the big picture of the company in terms of finance, and plan ahead to be in better control of the business.
Often a company may have to deal with local banks in Hong Kong, including lending capital or funding.
Only with accurate business records, a company will be able to correctly file profits tax return to the Hong Kong IRD (Inland Revenue Department).
According to HK Inland Revenue Ordinance, a registered company must keep sufficient records. All records must be retained for seven years from the transaction dates. After the company ceases trading or operations, this company record-keeping obligation must continue until the end of the seven year period. It is an offence not to keep the records, and the offended company may be fined up to HK$100,000.
To make life easier for the owner, he/she may opt into using Xero accounting software or other accounting tools including Quickbooks or more. For example, Xero is totally cloud-based, and can connect with online payment processors such as Stripe. Invoices that are scanned through Hubdoc may be sent to Xero for reconciliation. In short, the company owner may do all the accounting/bookkeeping and keep all the business transactions and records in Xero, with minimal effort.
A financial auditing includes a review of the company’s financial accounting processes and a measure of how well the company is recording and reporting the financial information based on Financial Reporting Standards set by the Hong Kong IRD.
The audit of the accounts must be performed by a Certified Public Accountant (CPA) in Hong Kong. The CPA is separate professional person from the accountant/bookkeeper who does the bookkeeping work.
The audited accounts must be filed with the tax annual return to the HK Inland Revenue Department (IRD).
The auditing may include the following procedures:
- The size of the audit is assessed.
- Potential mistakes/errors may be identified.
- An audit strategy should be created.
- Signatures of the all outgoing checks/cheques, and the checks are accounted for the specific accounts are verified.
- All the financial statements are reviewed.
- The compliance with all IRD requirements is ensured.
- Post opinions of the audit are given.
- Signature of the CPA is provided.
Annual Profit Tax Return
Started in the tax year of 2018/2019, the two-tiered profits tax rates regime has become effective. The profits tax rate for the first $2 million of assessable profits is 8.25% for HK companies. Any assessable profits above $2 million is subject to 16.5%.
As the owner of your HK company, planning for the tax is a method to ensure you are ahead in business. Maximum tax saving may be achieved through an efficient tax planning for a tax payer who owns a company in Hong Kong.
The profit tax return of a Hong Kong incorporated company works like this:
- A newly incorporated company in HK will receive the first profit tax return 18 months after the date of incorporation.
- The first profit tax return (of the HK company) has to be completed within 3 months after the issue date.
- Profit Tax Return in all other years should be completed within 1 month after the issue date.
One example involves deductible expenses and depreciation. All expenses that have contributed towards the production of assessable income, are allowed to be deducted from assessable income, provided the tax payer is in possession of proper records and/or receipts.
A second example is the quarter rent payments. The quarter rent payments of director/employee can be reimbursed by the employer (i.e. the owner of HK company). The employer may get deduction in full amount as an expense when calculating the net profit.
The third example is about personal expenses paid by the company. To qualify such expenses for deduction, the company has to prove the expenses are not for personal use.
The fourth example is the 60-day visit rule in which a person visits Hong Kong for no more than 60 days during the year of assessment. This person is exempt from salary tax.
Opening of Local Hong Kong Bank Account
In Hong Kong, there are different banks that offer business accounts, including DBS Bank, Standard Chartered Bank, HSBC Bank, Citibank, and more.
An interview which is to be arranged at the bank for the applicant (i.e. the company owner) is required, before the bank approves the business bank account opening.
With a business bank account, it allows the company free capital transfer. The business bank account usually requires no tax to be paid on interest gained, but there is usually a minimum balance that must be kept in the bank account at all time.
When you have hired employees to work in your company in HK, whether the staffs are local Hong Kong citizens or foreign persons, you will have to take care of payroll.
Payroll involves two parts:
- Monthly payment to employees – Are you going to set up payroll autopay from your business banking service?
- Monthly MPF enrollment and payments according to the requirements of Mandatory Provident Fund Schemes Ordinance in HK.
For each tax year, you have to prepare for the annual filing of the employer’s return of remuneration and pensions forms (i.e. BIR56A and IR56B).
For each tax year, you must prepare the filing of form IR56F for Hong Kong Inland Revenue Department. This form reports the salaries of employees up to the date of resignation and/or termination.
A nominee shareholder is needed when:
- The real shareholder of the HK company does not want to make his/her personal information available to the public.
- The real shareholder is not willing to explore his/her identify due to some business considerations.
The nominee shareholder:
- May be an individual person, or an organization, and is not required to be based in the same country as the beneficiary owner.
- Does not own the shares or benefit from the shares (of the Hong Kong company).
- Has no claim over the shares and have to sign a declaration of trust which states that they will not benefit and they have no legal claim over the shares.
- Has no access to the company bank accounts.
- Does not have any rights to make decisions for the HK company.
- Should not sign any commercial contracts and/or agreements without the authority of the beneficial owner.
The beneficial owner (of the HK company) has the rights to dismiss the nominee shareholder at any time.
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