Compliance obligations in Hong Kong
There are various routine compliance requirements in Hong Kong, including but not limited to:
- Filing annual returns
- Keeping company registers and records
- Annual general meeting
- Accounting & tax reporting
- Business registration renewal
- Compliance related to employment
Filing annual returns
Local companies need to file annual returns to the Hong Kong Companies Registry.
- Directors should prepare and file an annual return form (NAR1) signed by the director, company secretary, manager or authorised representative. For companies other than private company, a certified true copy of the financial statements is required along with the NAR1 form.
- E-submission or physical submission are available.
- Private companies must file the returns within 42 days from the anniversary date of the incorporation. Additional filling fees will be incurred for late filling.
Keeping company registers and records
Every company in Hong Kong is required to maintain an up-to-date registers and records, including:
- Register of shareholders/ members
- Register of directors
- Register of beneficial owner
- Register of company secretary
- Minutes of meetings and resolutions
- Accounting records for at least 7 years
The registers may be kept at the registered office or any other place.
Annual general meeting
Companies must hold an Annual General Meeting (AGM) for shareholders within 18 months after incorporation. After that, it should happen at least once every calendar year, and no more than 15 months after the previous AGM. The AGM must take place even if there are no financial accounts to present or no other business to discuss.
Before the AGM, directors need to approve the financial accounts and their report. They can suggest a dividend if they want, and they must decide to call the meeting. If all shareholders who can attend and vote agree, the meeting can be held with short notice. Otherwise, at least 21 clear days’ notice is required, unless the company’s Articles of Association state something different. Copies of the audited accounts for discussion must be sent to all shareholders, debenture holders, and others entitled to receive them at least 21 days before the meeting, unless all eligible voting shareholders agree otherwise.
Accounting & tax reporting
Companies must prepare annual financial statements in accordance with Hong Kong Financial Reporting Standards (HKFRS) or SME-FRS for smaller entities.
For tax reporting:
- File a Profits Tax Return (BIR51) to the Inland Revenue Department (IRD), together with detailed profits tax computation and audited financial statements.
- Pay taxes on Hong Kong-sourced profits at 8.25% on the first HKD 2 million and 16.5% thereafter (two-tiered system).
- Employer obligations include filing Employer’s Returns (BIR56A) by May 1 annually for employee salaries.
- Late filing penalties start at HKD 1,200, with potential court surcharges.
Business registration renewal
All companies conducting business in Hong Kong must hold a valid Business Registration Certificate (BRC) issued by the IRD. The BRC is valid for 1 year or 3 years and must be renewed within 1 month before its expiry date.
Compliance related to employment
Employers must comply with the Employment Ordinance, Mandatory Provident Fund (MPF) Schemes Ordinance, and other labor laws. Key requirements include:
- Providing written employment contracts outlining terms like wages, hours, and leave.
- Enrolling employees in an MPF scheme within 60 days of employment, with monthly contributions (5% from employer and employee each, up to caps).
- Reporting new hires and terminations to the IRD via Form IR56E/F.
- Paying minimum wage (Currently HKD 42.1 per hour) and providing statutory benefits like annual leave (7-14 days), sick leave, and maternity/paternity leave.
- Filing annual Employer’s Returns by May 1.
- Maintaining payroll records. Non-compliance can lead to fines up to HKD 350,000, imprisonment, or back payments. Work visas are required for non-residents.
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