Annual Compliance Requirements for Hong Kong Companies

Every Hong Kong Private Limited Company must submit statutory returns to the authorities on time, in compliance with the Companies Ordinance (CO) and Inland Revenue Ordinance (IRO) requirements. 

Failure to do so, the directors, shareholders, beneficial owners, company secretary and other members who authorizes or permits the contravention are liable to prosecution and default fines if convicted. Therefore, it's essential to pay attention to its annual legal requirements to ensure that the Hong Kong offshore company stays active and maintains good standing. Let us guide you through.

1. Annual Return

The Annual Return (Form NAR1) must be filed within 42 days after the anniversary of registration. The document contains the particulars of the company including the address of the registered office, shareholders, directors, company secretary, etc. as at the made up date of the return. 

It's unable to extend the statutory time limit for the delivery of annual return. The company and every responsible officer are liable to prosecution if failing to deliver the annual return on time. 

2. Renewal of Business Registration in Hong Kong

The Business Registration Certificate (BRC) of the Hong Kong offshore company must be renewed at least one month before the anniversary date of incorporation. The valid business registration certificate must be displayed in the address where the business is carried out. Failure to renew your BRC can lead to penalties, including but not limited to:

• Penalty of at least HK$300 for late renewal
• Additional penalties or court proceedings
• Unable to continue conducting the business in Hong Kong

3. Annual Tax Return

3.1. Audited Financial Statements

The registered offshore Hong Kong companies must keep a full record of its accounting transactions and all should be entered in accordance with the Hong Kong Financial Reporting Standards. Certain documents might be required to prepare the financial statements are as follows:

• Sale invoices & Receipt
• Contract or Service Agreement
• Bank statement
• Bill of lading
• Payment slip
• Inventory list (including quantity and unit cost of every item)
• Obsolete or slowing-moving inventory
• Salary record
• Other documents requested based on instructions from IRD 

The financial statements for the current year must be audited by a Certified Public Accountant in Hong Kong, with corresponding amounts for the preceding year, including a balance sheet, profit and loss account, and a cash flow statement. The audited financial statement should be approved by the Board and adopted by the members of the company.

Dormant companies are exempted from submitting audited financial statements.

3.2. Annual Tax Return Filing

The profit tax returns have been normally issued by The Inland Revenue Department (IRD) on the first business day of April each year for all offshore companies registered in Hong Kong. Taxpayers are required to complete and send the tax return along with its audited financial statements back to IRD within 1 month from the issue date stated on the tax form. However, the specific deadline may vary depending on the company's financial year end or whether an extension has been requested. 

Failing to file your tax return on time can result in penalties or prosecution. Additionally, you may end up paying more tax. Without your submitted details, the Assessor will issue an estimated assessment and tax demand which won't include your allowances and deductions for contributions.

4. Annual General Meeting

An annual general meeting (AGM), a mandatory yearly gathering of a company's interested shareholders and all the members of its board. During the AGM, the company presents its annual financial statements, reviews the year's performance, and discusses future strategies. It is also a time for shareholders to vote on crucial matters such as the election or re-election of directors, appointment of auditors, discussion and make decisions on important matters that affect the company's governance and operations. 

A Private Limited Company in Hong Kong must hold an AGM for the first time within 18 months from incorporation date and every financial year. An AGM must be performed for less than 15 months from the previous one and within a period of 9 months after the end of the Company's accounting reference period.

It is not required to hold an AGM in the following circumstances: 

• Everything that is required to be done at the meeting is done by a written resolution 
• A single member company is not required to hold an AGM.
• A written resolution or a resolution at a general meeting passed by all members.
• A dormant company

5. Employer’s Return Filing

Hong Kong Companies are obliged to file Form BIR56A and all related forms (IR56B/E/F/G/M) for all its employees with IRD, whether the employee rendered services in or outside Hong Kong, as long as their total income exceed the limit confirmation on the Notes and Instructions for Form BIR56A. 

The Form must include detailed information on all employees, including their personal details, period of employment, and amounts of remuneration paid during the year. 

In case of no hiring employee, not operating or being removed, please complete BIR56A Form. In case of no hiring employee, not operating or being removed, please complete BIR56A Form. An employer must maintain payroll records of at least seven years.

If there are any changes in an employee's particulars such as the terms of employment, identity card number,..etc, the company must inform IRD accordingly. Failure to file the Employer's Return on time can result in penalties or even prosecution.

Conclusion:

Ensuring compliance with annual requirements is crucial for Hong Kong companies to maintain good standing and avoid legal and financial penalties. By adhering to the above obligations, companies demonstrate their commitment to transparency and accountability. Timely compliance not only fulfills legal obligations but also fosters trust with stakeholders and regulatory authorities, supporting the company's long-term success and stability.