Tax – Accounting & Auditing - FAQs

There are mainly 3 types af tax returns, you need to file to the IRD: Employer’s Return, Profit Tax Return and Individual Tax return. 

Each entrepreneur is obligated to file these 3 tax returns each year since the first return is received.

If you have formed a HK company, you’ll receive your first Profit Tax Return (PTR) in 18 months after the date of incorporation. Thus you’ll need to well prepare your accounting records and submit your first audit report together with the completed tax return to the IRD.

Generally, all outgoings and expenses, to the extent to which they have been incurred by the taxpayer in the production of chargeable profits, are allowed as deductions.

For those companies registered in offshore jurisdictions but having profit derived from HK, they are still liable to HK Profit Tax. It means these businesses need to file the Profit Tax Return to the IRD

Read more: Hong Kong offshore tax exemption

The requirement to audit the accounts of the company is set down by the Companies Ordinance. The Ordinance does not provide any conditions under which no audit is required.

8.25% on assessable profits up to $2,000,000; and 16.5% on any part of assessable profits over $2,000,000 from 2018/19 onward.

The IRD will issue Employer’s Return and Profits Tax Return on the first working day of April every year, and issue Individual Tax Return on the first working day of May every year. It is required for you to complete your tax filing within 1 month from the date of issue; otherwise, you may face penalties or even prosecution. 

Read more: 

• Accounting and Auditing services
• Auditing service Hong Kong

The Government of Hong Kong requires all companies incorporated in Hong Kong must keep financial records of all transactions including profits, revenues, expenses should be documented.

18 months from the date of incorporation, all companies in Hong Kong are required to file their first tax report which consists of accounting and auditing reports. Furthermore, all Hong Kong companies, including Limited Liability, the annual financial statements must be audited by external independent auditors who hold the Certified Public Accountants (CPA) license.

One IBC offers our Accounting & Auditing services to all of our clients who are operating their companies in Hong Kong. Our offered services include:

1. Coordination and advice for setting up bespoke accounting systems.
2. Bookkeeping and annual accounts preparation.
3. Periodic management accounts and reports.
4. Budget and cash flow preparation and forecasts.
5. Compliance with Hong Kong Inland Revenue Department (IRD), Securities and Futures Commission (SFC) reporting requirements if any.

For more information, please send us an inquiry via email: [email protected]

Read more:

• Auditing service Hong Kong
• HK profit tax rate

The Profit Tax Return shall also be submitted to the IRD even if the limited company has not commenced its business.

The reason is that if your business has profits derived from HK, even if your company is registered in offshore jurisdictions, your profits are still liable to HK Profits Tax and you need to file the Profits Tax Return compulsorily.

However, if your company (whether it is registered in HK or offshore jurisdictions) does not involve a trade, profession or business in HK that has profits arising in or derived from HK, i.e. your company is operating and generating all profits wholly outside HK, it is possible that your company can be claimed as an ‘offshore business’ for tax exemption. To prove your profits are not liable to HK Profits Tax, it is suggested to select righ experienced agent at the initial stage

Read more: 

• Accounting and Auditing services
• Auditing service Hong Kong

Generally, offshore companies are free from tax liabilities, all foreign-sourced incomes are tax exempted for companies incorporated in Hong Kong. To be qualified for Hong Kong offshore tax exemption, companies need to be assessed by the Inland Revenue Department (IRD) of Hong Kong.

According to IRD, the following are excluded from the assessable profits:

• dividends received from a corporation which is subject to Hong Kong Profits Tax;
• amounts already included in the assessable profits of other persons chargeable to Profits Tax;
• interest on Tax Reserve Certificates;
• interest on, and any profit made in respect of a bond issued under the Loans Ordinance or the Government Bonds, or an Exchange Fund debt instrument or a Hong Kong dollar-denominated multilateral agency debt instrument;
• interest income and trading profits derived from long term debt instruments;
• interest, profits or gains from qualifying debt instruments (issued on or after 1 April 2018) exempted from payment of Profits Tax; and
• amounts received or accrued of a specified investment scheme by or to one person

If you still want to know more information about tax exemptions for Hong Kong offshore companies, you can contact our consulting team via email: [email protected]

Read more: 

• Profit accounting Hong Kong
• Auditing service Hong Kong

The accounts of a limited company shall be audited by a Certified Public Accountant before submitting to the Inland Revenue Department (IRD) together with an auditor's report and Profit Tax Return.

If the corporate profits do not derived from Hong Kong, and the company has not set up an office in Hong Kong nor hired any Hong Kong employees, its earned profits will be exempt from Profits Tax. But the Company should apply for the offshore claim exemption position from IRD.

Any person who fails to file tax returns for Profits Tax or provide false information to the Inland Revenue Department is guilty of an offence and liable to prosecution result in penalties or even imprisonment. In addition, section 61 of the Inland Revenue Ordinance addresses any transaction which reduces or would reduce the amount of tax payable by any person where the Assessor is of the opinion that the transaction is artificial or fictitious or that any disposition is not actually in effect. When it applies the Assessor may disregard any such transaction or disposition and the person concerned shall be assessed accordingly.

Read more: 

• Accounting and Auditing services
• Auditing service Hong Kong

A beginning penalty of few thousand dollars or above may be applied if a Profit Tax Return hong Kong is not submitted before the due date.

A further fine may also be applied by a district court from the Inland Revenue Department.

You still must tell HMRC your company is liable for Corporation Tax. You must do this within 12 months of the end of your Corporation Tax accounting period. If you don’t, your company or organisation may be charged a penalty. HMRC calls this a ‘failure to notify’ penalty.

The first account must be filed in 21 months after registration with Companies House.

• Income Tax
• National Insurance
• Corporation Tax
• Capital Gains Tax
• VAT

Read more: 

• Difference between LLP and private limited
• How to open a limited company in UK?

HMRC may charge a penalty of up to £3,000 per tax year for a failure to keep records or for keeping inadequate records.

You must register for VAT with HM Revenue and Customs (HMRC) if your business’ VAT taxable turnover is more than £85,000.

Read more: 

• How to register a company in United Kingdom?

A company or association may be ‘dormant’ if it’s not doing business (‘trading’) and doesn’t have any other income, for example, investments.

Yes. You must file your confirmation statement (previously annual return) and annual accounts with Companies House even if your limited company.

Your unique taxpayer reference , is a unique code that identifies either an individual taxpayer or an individual company. UK UTR numbers are ten digits long, and may include the letter ‘K’ at the end.

Unique taxpayer reference numbers are used by HMRC to keep track of taxpayers, and is the ‘key’ that the taxman uses to identify all of the different moving parts related to your UK tax affairs.

Read more:

• United Kingdom company formation
• Company tax return UK

Yes. You must file your confirmation statement (previously annual return) and annual accounts with Companies House even if your limited company

In most cases, overseas companies are required to send accounting documents to Companies House in UK. The accounting documents an overseas company delivers will depend on the following circumstances,

• The company is required to prepare and disclose accounting documents under parent law (the law of the country in which the company is incorporated)
• If it is required to prepare and disclose accounting documents under parent law is it an EEA company. An EEA company is an overseas company governed by the law of a country or territory in the European Economic Area (EEA)

Read more:

• United Kingdom company formation
• Establishing a business in the UK

In the UK, internal and external audits serve different functions and adhere to different standards:

1. Internal Audit

• Objective: Focuses on evaluating and improving the effectiveness of risk management, control, and governance processes within an organization.
• Scope: Broad and varies, covering areas like compliance, risk management, and operational efficiency.
• Functionality: Internal auditors are either employees or contractors for the organization, reporting functionally to the audit committee and administratively to management.
• Frequency: Conducted throughout the year based on a risk-based audit plan.

2. External Audit

• Objective: Provides an independent opinion on the financial statements, ensuring they are free from material misstatement and comply with statutory and accounting standards.
• Scope: Narrowly focused on financial records and statutory compliance.
• Functionality: External auditors are independent of the organization, appointed by shareholders, and must strictly maintain their independence.
• Frequency: Typically conducted annually, culminating in an annual audit report.

3. Key Differences

• Independence: External auditors require strict independence; internal auditors have functional independence within the organization.
• Reporting: Internal auditors report to both the audit committee and management to improve business processes, while external auditors report to shareholders, focusing on transparency and regulatory compliance.
• Purpose: Internal audits aim to enhance internal controls and business efficiency; external audits validate financial integrity for stakeholder assurance.

These distinctions ensure that both types of audits work in tandem to enhance organizational accountability and efficiency while meeting regulatory requirements.

In the UK, accounting serves several essential functions in business operations:

1. Financial Reporting: Accounting ensures systematic recording of transactions, leading to the creation of financial statements that summarize a company’s financial status and performance.
2. Regulatory Compliance: It helps businesses comply with statutory regulations, including tax laws and financial reporting standards (UK GAAP or IFRS), ensuring accuracy in tax filings and other mandatory reports.
3. Decision Making: Financial data derived from accounting assists in making informed business decisions, helping managers with budget allocation, investment choices, and strategic planning.
4. Budgeting and Forecasting: Accounting is crucial for preparing budgets and forecasts, which predict future financial conditions and guide effective resource management.
5. Performance Evaluation: It enables the evaluation of the efficiency and profitability of different departments or projects within the business, aligning performance with strategic goals.
6. Risk Management: By analyzing financial ratios and trends, accounting helps identify financial risks, facilitating proactive management to safeguard the company’s interests.
7. Audit and Assurance: Organized financial records support audit processes, enhancing the credibility of the business with stakeholders.
8. Cost Management: Effective accounting aids in tracking and controlling costs, optimizing pricing and resource use to improve profitability.

Overall, accounting underpins financial transparency, compliance, and strategic management in UK businesses, forming the backbone of financial health and operational effectiveness.

In the UK, tax planning and tax management serve different functions in handling taxes:

1. Tax Planning

Tax planning is about strategically arranging financial affairs to minimize tax liability. This proactive process involves:

• Utilizing tax-efficient investments and allowances.
• Timing income and expenses to optimize tax benefits.
• Structuring business operations to reduce tax obligations.

2. Tax Management

Tax management focuses on ensuring compliance with tax laws and managing administrative tasks associated with taxes. This involves:

• Timely and accurate filing of tax returns.
• Keeping detailed financial records.
• Handling communications and audits from tax authorities.
• Ensuring that all tax payments are made on schedule.

3. Key Differences:

• Purpose: Tax planning aims to reduce future tax liabilities, whereas tax management ensures compliance with current tax laws.
• Timing: Tax planning is a proactive, forward-looking activity; tax management is reactive, dealing with ongoing tax obligations.
• Scope: Tax planning involves strategic financial decision-making; tax management focuses on administrative accuracy and procedural compliance.

Together, both practices ensure that an individual or business optimizes tax liability while adhering to legal requirements.

In the UK, it is generally discouraged for external auditors to also perform internal audit functions due to independence and conflict of interest concerns:

• External Auditors provide an independent opinion on financial statements, which requires them to remain completely independent from the organization they audit.
• Internal Auditors assess and enhance internal controls and governance within the organization, often working closely with it, which could compromise the independence required of an external auditor.

Mixing these roles can lead to conflicts of interest and may impair the external auditor's ability to provide an unbiased opinion. UK professional standards, upheld by bodies like the Institute of Chartered Accountants in England and Wales (ICAEW) and the Association of Chartered Certified Accountants (ACCA), emphasize the importance of maintaining strict auditor independence, thereby generally advising against an external auditor undertaking internal audit duties.

Once a company has been granted a waiver from a specific date, the company will not be issued with Form C-S/ C from that date onwards.

As such, a company whose waiver application had been approved will not need to submit the application form on a yearly basis to IRAS.

An AGM is a mandatory annual meeting of shareholders. At the AGM, your company will present its financial statements (also known as "accounts") before the shareholders (also known as "members") so that they can raise any queries regarding the financial position of the company.

You can still e-File the ECI if no assessment for the YA has been issued to your company. However, you cannot pay by instalment. Instalments are only granted by IRAS when a company files its ECI within three months after its financial year end and is on GIRO.

All companies incorporated in Singapore which are either limited or unlimited by shares (except exempted companies) are required to file their full set of financial statements in XBRL format according to the recent guidelines released by ACRA (Accounting and Corporate Regulatory Authority) Singapore June 2013.

 

 

You do not need to file an ECI for your company if it is nil and if your company meets the following annual revenue threshold for the Waiver to File ECI:

Annual revenue not exceeding $5 million for companies with financial years ending in or after Jul 2017.

XBRL is an acronym for eXtensible Business Reporting Language. Financial information is converted to XBRL format then, sent to and fro between business entities. Singapore government has mandated it for each Singapore company to file its financial statements only in XBRL format. The analysis of the data, thus, accumulated gives accurate information about the trends in finance.

Remuneration or revenue received in the form of virtual currencies (such as Bitcoins) is subject to normal income tax rules. The receipt will be taxable if it is revenue in nature, and non-taxable if it is capital in nature

The financial year end (FYE) of Singapore is the end of the fiscal accounting period of a company which is up to 12 months.

Generally, a private limited company is required under the Companies Act (“CA”) to hold its AGM once in every calendar year and not more than 15 months (18 months for a new company from the date of its incorporation).

Financial statements no more than 6 months old must be laid at the AGM (section 201 CA) for Private limited companies.

In the United States, the timing of tax payments for small businesses can vary depending on the type of business and the tax responsibilities involved. Here are the general guidelines:

1. Income Tax: Small businesses, depending on their structure (sole proprietorship, partnership, corporation, or S corporation), may pay income taxes differently:
   • Sole Proprietors and Single-member LLCs: They typically pay income tax on business earnings through their personal tax returns using a Schedule C with Form 1040. Taxes are usually paid by April 15th of each year. They also make estimated quarterly tax payments if they expect to owe tax of $1,000 or more when their return is filed.
   • Partnerships: They file an informational return on Form 1065, and the partners pay tax on their share of the profits via their personal tax returns, also typically making quarterly estimated tax payments.
   • Corporations: They file taxes using Form 1120, and tax payments are due by the 15th day of the fourth month following the end of their fiscal year (April 15th for those on a calendar year). They also make estimated tax payments quarterly.
   • S Corporations: They file an informational return on Form 1120-S, but the income flows through to shareholders’ personal tax returns, with taxes paid at the individual level, often requiring estimated quarterly payments.
2. Estimated Quarterly Tax Payments: Most small businesses need to make quarterly estimated tax payments if they expect to owe $1,000 or more in taxes for the year. These payments are typically due on April 15, June 15, September 15, and January 15 (of the following year).
3. Employment Taxes: If a business has employees, it must also handle withholding taxes, Social Security, and Medicare. These taxes are generally paid either monthly or semi-weekly, depending on the amount of tax reported.
4. Sales Tax: If applicable, sales tax requirements vary by state and locality, and the frequency of payments can be monthly, quarterly, or annually.
5. Other Taxes: Depending on the nature of the business, other taxes such as excise taxes may also apply, with varying payment schedules.

Small business owners often work with tax professionals to ensure compliance and optimize their tax strategy throughout the year.

In the United States, self-employment taxes consist of Social Security and Medicare taxes for individuals who work for themselves. If you are self-employed, these taxes are typically paid through the process of making estimated tax payments throughout the year if you expect to owe $1,000 or more in taxes.

Here’s how it generally works:

1. Estimated Tax Payments: Self-employed individuals often need to make quarterly estimated tax payments to cover their self-employment tax and income tax liability. These payments are due:
• April 15 (for January 1 to March 31)
• June 15 (for April 1 to May 31)
• September 15 (for June 1 to August 31)
• January 15 of the following year (for September 1 to December 31)
2. Annual Tax Return: The final accounting for these taxes is made when you file your annual tax return, which is typically due by April 15 of the following year. When you file your tax return (using Schedule SE with Form 1040), you calculate the exact amount of self-employment tax you owe.

If your estimated payments are less than what you owe, you will need to pay the difference by the April 15 deadline. If you overpay, you may be eligible for a refund. It's important to keep accurate records and calculate your estimated taxes carefully to avoid any underpayment penalties.

In the United States, property tax rates can indeed change each year, but the extent and nature of these changes can vary significantly depending on the location and local government policies. Here are some factors that can affect property tax changes annually:

1. Property Value Assessments: Property taxes are generally based on the assessed value of the property. Most jurisdictions re-evaluate property values periodically (this could be annually, biennially, or every few years) to reflect changes in the market. If the assessed value of a property increases, the property tax owed could also increase unless the tax rate is adjusted downward.
2. Tax Rate Adjustments: Local governments set the tax rates, and these can change from year to year. Changes in tax rates could be influenced by the financial needs of the municipality, voter-approved measures, and budgetary requirements. For example, if a town needs more funds for public schools or infrastructure, it might raise the property tax rate.
3. Local Government Decisions: Decisions by local governmental bodies such as city councils, county boards, or school boards can influence property tax rates. These entities decide on budget needs and set the tax rates accordingly.
4. Voter Initiatives: In some areas, voters can influence property taxes directly through referendums and initiatives. These can include measures to cap tax rates, increase or decrease taxes for certain expenditures, or make significant changes to how property taxes are calculated.
5. State Laws: State legislation can also impact how property taxes are assessed and collected, including imposing caps on increases in property tax assessments or rates.

Overall, while property tax rates can and do change from year to year, the specific changes depend heavily on local and state circumstances. Property owners should pay attention to notifications from their local tax assessor's office to understand any changes in their property tax assessments and rates.