Checklist for Accounting and Auditing in Hong Kong

If you are interested in running a business in Hong Kong, the first thing you need to know about are accounting, auditing standards, and tax filing. In order to stay away from any penalties for incorrect tax filings and any legal issues down the road.

The Inland Revenue Department ( IRD)  financial year starts on April 1st and ends on March 31st of the next year. If you have a newly formed Hong Kong company, then within the first 18 months of the incorporation of your business. The IRD will issue a letter requesting to submit the Profit Tax Returns and the supplementary Form.

Submission of the Profit Tax Returns form probably a big headache for you. The good news is that Centre O have created a checklist to make the process easier and to make sure you are not going through it by yourself.

Keep Operating Records

Gather the company’s operating records including bank statements, invoices, vouchers, bills and receipts. The records should keep in an order and in month-to-month basis. Then it simplifies the process of management account generation.

Decide Financial Year End

The first account closing of a company can be within 18 months from the incorporation date. However, it is common in Hong Kong to close accounts in December or March. Once you have confirmed the closing date, it will remain the same in subsequent years. Unless you request a specific change.

Prepare Management Accounts

Preparing management accounts is a hard time traditionally. It involves lots of paper work and calculation. Over the years, some cloud-based accounting software for example: XERO. It can help company work better, quicker and truly go paperless with their accounting. It can generate a full set of management account (Profit and Loss and Balance Sheet) by simply clicking a button.

Audit the Management Accounts

Hong Kong companies have to present the management accounts and operating record to an appointed licensed Certified Public Account (CPA). CPA will examine the audit report and documents. The audit process takes 8-10 weeks. Once the audit report has been approved and signed by relevant parties. It is ready to be submitted to IRD together with the Profit Tax Return (PTR).

Fill in and File the Profit Tax Return

A company can expect its first PTR from IRD around 18 months after its incorporation date, and then yearly thereafter. The original PTR form must be filled, signed and submitted together with the audited accounts to IRD. 

Wait for IRD to Review and Conduct Tax Assessment

IRD will assess the amount of tax you should pay based on the information on the PTR form and audit report. If any tax is payable, IRD will issue a tax assessment to the company. Hong Kong has a Two-Tier tax system. 8.25% for the first $2 million profit; while 16.5% for profit over $2 million.

Still need help on the work, you can simply hire Centre O to be your tax representative, we will notify, fill and file all the necessary IRD documents for you.  For further information, please contact us.


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