Hong Kong tax return “zero return”? Do “dormant companies” must file taxes?

I believe that many proprietors have questions. If the company does not operate any business, is it necessary to file a tax return for the financial year?

In fact, if the limited company meets the requirements of the “inactive company”, it can apply to the government for exemption from accounting, and this process is called “zero declaration”.

However, what should I pay attention to if I want to “zero declaration”?

What is a “zero return” tax return?

According to the Hong Kong Companies Ordinance, all proprietors of limited companies registered in Hong Kong and operating businesses are required to file a limited company tax return/unlimited company tax return in each financial year. together with the tax office.

Among them, the company’s tax declaration process can be divided into two types, “account tax declaration” or “zero declaration”.

In short, if the company has no business activities and no profit in the financial year (subject to the following conditions), it will be regarded as a “dormant company”, also known as a “dormant company”, and can make a “zero” to the tax bureau. Filing”, i.e., applying for exemption from accounting, auditing, and tax payment.

What is considered a “dormant company”?

Therefore, a limited company that wants to apply for “zero declaration” must prove that the company is in a state of no business, that is, an “inactive company”.

According to the requirements of the Inland Revenue Department, in the financial year, as long as the company does not have any commercial transactions, including the bank in and out records, and no income and expenditure expenses are generated, the application for “zero declaration” will be accepted.

Specifically, a “dormant company” has the following conditions:

• do not have any bank business account (or have no funds flowing in the account);

• No accounting, transaction records (or no business dealings); or

• In government agencies, there is a record of “non-operating”.

It should be reminded that the “Inland Revenue Ordinance” also stipulates that a limited company under the following circumstances will be regarded as a “starting business”, that is, it cannot apply for “zero return”, and it must submit a tax return to the Inland Revenue Department for tax assessment every year.:

• make investments (stocks, bonds, industries, etc.);

• investment holding;

• Funding deployment;

• Hire staff;

• Rental offices;

• Any transaction (including banking transactions).

Matters needing attention in “zero declaration”?

In fact, a limited company registered in Hong Kong has certain risks for “zero declaration”, and its requirements will be higher. All “zero declaration” should preferably be applied within one month after the limited company receives the tax return.

Secondly, for a limited company that wants to make a “zero declaration”, the tax bureau may investigate the company’s account details for the past seven years. During the audit, bank information and customs records are not excluded.

However, since the implementation of the Common Reporting Standard (CRS) in 2017, the audited accounts of companies regulated by the Hong Kong government have become much stricter, and applications for “zero reporting” have become less and less.

Furthermore, according to the Inland Revenue Ordinance, once a company is found not to meet the zero-declaration requirements in Hong Kong, the company is more likely to be accused of false tax evasion or deliberate tax evasion. Fines and up to 3 years in prison.

The above information is for reference only.

If you have any questions about tax declaration and “zero declaration”, Mexus Accounting and Taxation Company welcomes your inquiries about the accountant’s tax declaration fee.