Recently, three companies in Shenzhen received the Notice of Tax Administrative Punishment and were fined for their illegal acts such as tax evasion and tax avoidance.
source: shenzhen.chinatax.gov.cn
For example, one of the companies was fined over 8 million yuan, because it didn’t report and pay tax according to law.
The company set up the shell company and open bank accounts in Hong Kong to receive business funds paid by overseas institutions, and it hid the income to get out of paying taxes.
All these behaviors are illegal and companies doing this will be punished.
In fact, concealing income or not declaring tax according to the regulations will have bad influences on enterprises. In order to maintain the good reputation of enterprises and ensure the normal operation of enterprise businesses, it’s really important to do auditing in time and complete the tax declaration in obedience to the law.
Hong Kong, an international metropolis, is regarded as the freest economy in the world. Hong Kong has free and relaxed business environment with low tax rates and few types of taxes, which keeps attracting more entrepreneurs to register their companies in Hong Kong and develop foreign trade with other countries.
According to the laws and regulations in Hong Kong, once a HK company creates business deals and there is cash flow in its bank account, the HK company is required to make a declaration and submit its audit report to Inland Revenue Department within required time. If HK companies don’t complete their tax declaration in time, they will face the risk of being fined.
As the measures are strengthened to crack down on tax evasion, enterprises start to be aware of the importance of declaring tax and doing auditing. Many HK companies begin to prepare for the tax declaration and the audit report. Before doing this, it’s also significant to learn the common ways of tax declaration in Hong Kong.
1
Non-Business Audit
If a HK company has no actual business activity in a financial year, it can submit a non-business audit report to the government in that year and the HK company can apply for tax exemption.
Applicable Situations
1.The HK company does not have a bank account, but it needs to list necessary expenses every year in the tax return, such as the company's annual audit expenses and the directors' salaries.
2.The HK company has a bank account, but the account is inactive or there is only the advance deposit in the account.
2
Annual Audit
Hong Kong companies which have bank accounts and normal dealings need to do auditing before submitting the profit tax return and paying tax to Inland Revenue Department. According to the regulations, Hong Kong companies are required to do auditing every year. After receiving the profits tax return, the HK company shall complete its audit report examined by professional accountants, and submit both the profit tax return and the audit report to Inland Revenue Department in time.
ATTENTION
After receiving the profit tax return, the HK company must remember to deal with it and choose the suitable way of tax declaration according to its actual situation. If HK companies ignore the profit tax returns, they will be fined. After being warned by Inland Revenue Department many times, they will be prosecuted or even jailed.
If HK companies that have bank accounts and normal dealings don’t declare tax according to law, such behaviors will be regarded as tax evasion, which will cause bad consequences.
In order to avoid large fines, Hong Kong companies should correctly understand the ways of tax declaration, declare their taxes in accordance with laws and regulations, and do auditing timely!
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