CAN DONATIONS BE TAX DEDUCTIBLE IN HONG KONG?

Donations to tax-exempt charities or to Government for charitable proposes is tax deductible. The amount can deduct from your net assessable income or assessable profits. Thus, a qualified donations is tax deductible for both an individual or a company.

Eligibility for Deduction

You may claim a deduction for a donation of money to any approved charity under section 88 of the Inland Revenue Ordinance or to the Government for charitable purposes. You can also claim a deduction for any approved charitable donation made but not claimed by your spouse.

Donations Not Accepted as Tax Deductions

Not all payments to tax-exempt charities are deductible. The following are not the examples of payments allowable donations:

  • Payments for lottery or raffle tickets; admission to film shows or charity shows; grave spaces
  • Payments made for services such as saying prayers or the reservation of a space for ancestral worship
  • Purchase of goods in bazaars
  • Payments made to a church, a tax-exempt charity, through dropping cash in the donation bag without donation receipt.

What is the tax-deductible ceiling?

Donors may claim up to 35% of total assessable income or profits for the tax year. This provides substantial benefits for donors in Hong Kong. For example, if the assessable income is HK$500,000 after allowable expenses, individuals may claim up to HK$175,000 in approved charitable donations. On the other hands, the aggregate deduction of donations cannot be less than HKD100.

Lodging a Claim for a Deduction

To lodge a claim, you should enter the total amount of approved charitable donations made during the relevant year of assessment in your Tax Return – Individuals (BIR60). This donation can be claim once.

Supporting Documents

You need not to submit any documentary evidence to your tax return. However, you must ask for donation receipts from the tax-exempt charity or the Government. Furthermore, you should retain the receipt for 6 years after the expiration of the year of assessment.

For further information, please contact us.

You may want to read: Tax Deduction for Charitable Donations in Hong Kong

Hong Kong Stamp Duty – Stamping of Tenancy Agreement (2)

Previously, Centre O talked about what is stamp duty and how to submit the stamp duty. In this blog, Centre O is going to talk about the duty rates, penalty and show you how to calculate the stamp duty.

Duty Rates

Stamp duty on tenancy agreements is calculated at rates. And the rate is vary with the term of the tenancy as follows: –

TermStamp Duty Rate
Not defined or is uncertain0.25% of the yearly or average yearly rent
Does not exceed 1 year0.25% of the total rent payable
Exceeds 1 years but not exceed 3 years0.5% of the yearly or average yearly rent
Exceed 3 years1% of the yearly or average yearly rent
Key money, construction fee etc.
mentioned in the tenancy agreement		4.25 of the consideration if rent is also payable under the tenancy agreement. Otherwise, same duty as for a sale of immovable property
Duplicate or counterpart$5 each

Penalty for Late Stamping

If you forgot or late to stamp. Then you are subject to have a penalty payment as below: –

Stamping DelayPenalty
Not exceeding 1 month2 times the amount of stamp duty
Exceeding 1 month but less than 3 months4 times the amount of stamp duty
Any other case10 times the amount of stamp duty

How to calculate the stamp duty

In order to show you a clear picture of the calculation, we have drafted some examples. Yet, the document is stamping within 30 days from the date of signing. Otherwise, there will be penalties.

1/ Fixed Rent8 months agreement with monthly rental $5000 Calculation: $5000x8x0.25% = $100
2/ Fixed Rent with duplicate24 months agreement with monthly rental $5000 + 2 copies Calculation: $5000x24x0.5% +$5 = $605
3/ Varied Rent48 months agreement + 2 copies First 24 months: $12,000 Last 24 months: $15,000 ($12000×24+$15000×24)/4 x 1% +$5 = $1625
4/ Rent-Free Period24 months agreement with 2 months rent-free period + 2 copies Monthly rental: $10,000 ($10000×22)/2x 0.5% +$5 = $555

For further information, please contact us.

You may want to read: CALCULATE STAMP DUTY RATES FOR COMPANY SHARE TRANSFER

https://www.centreo.hk/search/?q=stamp+duty

HONG KONG COMPANY’S OBLIGATIONS

Hong Kong is famous for easy and straight forward rule and tax policy. So Hong Kong can attract investment from worldwide entrepreneurs and startups. No matter how easy or simple regulations, you might miss or confuse with the mandatory submission. Centre O is going to go-thru 3 forms: Annual Returns NAR1, Employer’s Returns & Profit Tax Returns. We hope you can understand the whole progress in advance. Instead of learning via paying penalties.

Deliver to WHOM?

All business owners have to communicate with Inland Revenue Department (IRD) and Company Registry (CR)annually. CR is responsible for all Hong Kong limited company which is established under the Company Ordinances. While IRD is responsible for the Business Registration including tradename of sole proprietorship and partnership.

What forms you need to Deliver?

NAR1

You have to deliver annual return form (NAR1) to Company Registry . NAR1 contains the particulars of the company such as the address of the registered office, shareholders, directors, company secretary, etc. as at the made up date of the return.

Employer’s Return

Employer’s Return (ER) contains the amount your company have been paid for your employees. So, ER needs to deliver IRD. Then IRD can assess the tax payable for your employees.

Profits Tax Return

Profits Tax Return should deliver to IRD. Then IRD will access your company’s tax payable according to your filing.

Who needs to deliver?

NAR1

If your limited company is established under the Company Ordinances, then you need to deliver the NAR1 annually.  If you own a sole proprietorship or partnership, then NAR1 is not your issue.

Employer’s Return

All type of business structure, you have to submit your Employer’s Return. If you are owner of a limited Company, then you have to declare how much the company have been paid for directors, full time and part time employees. Even though the director doesn’t have any renumeration.

Profits Tax Return

All type of business structure, you have to deliver Profits Tax Return for your company. If you are running gain, you must deliver every year; Unfortunately, you ran loss, then IRD will not send Profits Tax Return to you in the coming 2 years. However, if you make profit, you must inform IRD.

When to deliver?

NAR1

For the limited companies, you have to file your NAR1 within 42 days on the company anniversary date to CR. For example, you incorporation date is 1 Jan 2023, then you have to file your NAR1 on or before 12 Feb 2024.

Employer’s Return

IRD schedules to deliver Employer’s Return in early April annually. You have to fill and submit to IRD within 1 month. IRD doesn’t accept any deadline extension. So, you better prepare your data accurately monthly. As you need to report the salary have paid from 1st April previous year till 31 Mar current year. Then you can fill up quick and accurately without headache.

Profits Tax Return

For the new startup, IRD will send Profits Tax Return after 18 months of your incorporation. If you are running gain, then every April you will receive a green envelope. And you have to file the Profits Tax Return within 1 month. However, for limited companies and partnerships still can apply for extension for 8-11 month via your tax representative.

For the sole proprietorship, your envelope schedules to come in May every year. Then you can file the Profit Tax Return with your Salary Tax Return together.

Starting from 2023, all business structure have to file your Profit Tax Return together with a management account statement and signed by an auditor or directors.

For further information, please contact us.

You may want to know: What are Hong Kong Limited Company Annual Obligations

ULTIMATE GUIDE TO SET UP A HONG KONG EMPLOYMENT AGENCY

Hong Kong is back to the world platform. Hong Kong is still serving as an internationally recognised commercial and business hub. Also, Hong Kong government encourages new business establishments. It attracts a huge number of professionals and talents around. In other words, Hong Kong is a perfect place to set up an employment agency (EA). As you are access a professionals or talents directly.

Employment Agency Licence in Hong Kong

According to the Employment Ordinance (EO), you must apply for an employment agency licence before you provide job placement service. However, if you are providing the job placement service without a valid licence is liable for an offence. Then the penalty is subject to maximum HKD350,000 and imprisonment for 3 years upon conviction.

How to set up a Hong Kong Employment Agency?

Before starting any kind of job placement business, you have to obtain an employment licence in Hong Kong Labour Department. No worries! The 2-step application procedure is very straightforward.

  1. Name approval
  2. Documents submission

Name Approval

Your employment agency must have a unique name. And meet the following conditions:

  • The name should not be similar to any of the competitor’s agencies.
  • No infringement of other companies’ trademarks
  • The name should not have any controversial or offensive element

Documents Submission

  1. For a Sole Proprietorship
    • Hong Kong Permanent Identity Card, otherwise, passport is needed
    • A recent passport photo of the applicant;
    • Photocopy of the valid Business Registration Certificate
  2. For a Partnership
    • Hong Kong Permanent Identity Card, otherwise, passport is needed
    • A recent passport photo of the applicant;
    • Photocopy of the valid Business Registration Certificate
    • Photocopy of the HKID / passport of each of the other partners
    • Document signed by all partners confirming the appointment of applicant as licensee
  3. For a Limited Company
    • Hong Kong Permanent Identity Card, otherwise, passport is needed
    • A recent passport photo of the nominated operator;
    • photocopy of the valid Business Registration Certificate
    • Photocopy of the HKID / passport of each of the other partners
    • Document signed by all directors or directors’ meeting minutes confirming the appointment of nominated operator; and
    • Photocopies of (i) the Certificate of Incorporation; (ii) Incorporation Form (NNC1) / Annual Return (NAR1) and (iii) Notice of change (in particulars) of company secretary and director (ND2A / ND2B), if applicable

For further information, please contact us.

You may want to read: THE NITTY GRITTY OF SETTING UP A BUSINESS IN HONG KONG

HONG KONG: ULTIMATE GUIDE TO SET UP A TRAVEL AGENCY

In general, “Travel Agency” means a company that arrange and organise services related to transportation & accommodations. In fact, travel agencies can provide far more services to customers than ticketing and hotels reservation. If you want to start a travel agencies business , you will need to apply for a Travel Agent’s license and Business Permit from Travel Industry Authority (TIA).

travel agency

Criteria for applying Travel Agent’s License?

  1. Incorporate your business properly in Company Registry
  2. Valid Business Registration
  3. The Travel Agencies license holder needs to fulfill below conditions
    • Not an undischarged bankrupt;
    • No criminal record;
    • Not a mentally disordered person;
    • Any payment arrangement with business creditors;
    • Taking care of the application and renew of license, permit and pass;
    • Response for the management of the travel agent business.
  4. Capital requirement: HKD500,000 or above
  5. HKD500,000 as a guarantee money in the form of bank guarantee
  6. Assign an authorized representative and the representative have to fulfil below conditions
    • Not an undischarged bankrupt;
    • Any payment arrangement with business creditors;
    • No criminal record;
    • Not a mentally disordered person;
    • Management role in the travel agencies;
    • Secondary Education Level and 5-year tourism management experience or 10 years tourism management;
    • Completed TIA authorized representative course

Criteria for issue business permit

  1. Applicant holds a valid travel agent licence.
  2. The local place of business and the location of the place are suitable for travel agent business. For example, you cannot set up a travel agencies with your residential address, virtual office or work space sharing office. While, you need to also have a company sigh on your main door for people to easily identify your travel agencies.

How Long does it take for the Licensing ?

The process takes 4-6 weeks. You can apply the travel agent’s license and the business permit at the same time.

For further information, please contact us.

You may want to read: THE NITTY GRITTY OF SETTING UP A BUSINESS IN HONG KONG

HONG KONG: AMBER CODE RESTRICTION RELAXES

Hong Kong Government relaxed the social distancing measures and effected from 17th November, 2022. In fact, the measures will continue to resume normalcy in orderly manner. Thereby, some premises of the vaccine pass will change to “Passive Checking”. Once the premises changed to “Passive Checking”, then the Amber Code Holder can enter the premises without restriction.

What is “Active Checking” or “Passive Checking” premises?

“Active Checking” means the premises will need to actively check patrons’ vaccination records or exemption certificates upon their entry. While Passive Checking Premises, patrons just need to check in with their LeaveHomeSafe App. Hence, an Amber Code Holder can enter the “Passive Checking” Premises without restriction.

Amber Code holders can enter below Premises started from 17th November, 2022

  1. Amusement game centres;
  2. Places of amusement (including billiard establishments, public bowling-alleys and public skating rinks), but excluding the public skating rinks where patrons are allowed to exercise without a mask;
  3. Places of public entertainment (such as theme parks, museums), but cinemas and performance venues where patrons are allowed to eat and drink as well as catering premises in theme parks will still be subject to “active checking”;
  4. Club-houses (catering premises and other applicable scheduled premises therein will still be subject to “active checking”);
  5. Mahjong-tin kau premises;
  6. Event premises;
  7. Barber shops/hair salons; and
  8. Religious premises.

What are the premises that an Amber Holder cannot enter?

Amber Holders still cannot enter below Premises:

  • Catering premises
  • Bar/Pub
  • Bathhouse
  • Fitness Centre
  • Public skating rink (only for premises where customers/users are allowed not to wear masks during exercise)
  • Cinema/Performance venue (only for premises where the audience is allowed to consume food/drink)
  • Party room
  • Beauty parlour and Massage establishment
  • Club/Nightclub
  • Karaoke establishment
  • Sports premises
  • Swimming pool
  • Cruise ship (i.e. “Cruise-tonowhere”)

Hong Kong Government will continue to adjust social distancing measures. And prevent Hong Kong from backtracking along the path to normalcy due to any change of the epidemic. Hong Kong is ready to return to Global Stage.  

For further information, please contact us.

You may want to read: HONG KONG NEW 0+3 QUARANTINE MEDICAL SURVEILLANCE POLICY UPDATED

Relocation of Inland Revenue Department Offices

IRD offices is going to move to the Inland Revenue Centre in Kowloon. The arrangement is scheduled by phases from late 2022 to early 2023. However, 4 offices will remain in Wanchai Revenue Tower:

  1. Computer Back Up (Accounts) Section;
  2. Estate Duty Office;
  3. Refund Section; and
  4. Tax Reservice Certificates Section

What are the actual relocation dates of each Inland Revenue Department?

The actual relocation dates of individual offices / sections will be announced in due course.

What can you do before visiting to the IRD office?

If you want to visit the IRD office in person, you better check with the IRD website www.ird.gov.hk for latest information.

For further information, please contact us.

You may want to read: Inland Revenue Department – Tax Audit & Investigation

CHINA: 5+3 NEW QUARANTINE POLICY FOR TRAVELLERS

China’s National Health Commission (NHC) announced to reduce the mandatory quarantine period for foreign arrivals from 7 days to 5 days. And followed by 3 days of medical surveillance at home. So, we call it 5+3 quarantine policy.

Inbound arrivals still need to undergo 6 nucleic acid test (NAT) and prohibit to go outside during those 8 days quarantine period.

When should you undergo NAT:

HotelDay 1Day 2Day 3Day 4Day 5Day 6Day 7Day 8
HomeNATNAT NAT NAT NAT
NAT Schedule

Ending the Practice of Cancelling International Flights

The International Travallers need to show 1 negative COVID test with 48 hours of boarding flight to China. While it needed 2 negative tests currently.

For further information, please contact us.

You may want to read: HONG KONG NEW 0+3 QUARANTINE MEDICAL SURVEILLANCE POLICY UPDATED

NEW INSPECTION REGIME FOR PERSONAL DATA ARRANGEMENT

Under the Companies Registry, the Companies Ordinance (Cap. 622) (“CO”) provided for a new inspection regime for personal data on the Companies Register (“the Register”)

In the past, the general public supposed to have the right to access the Companies Registry information. For instance, the director’s usual address and full identification numbers, full identification numbers of company secretaries, And some other individuals (such as liquidators and provisional liquidators). Similar personal information were also open for public inspection.

The New Inspection Regime will run in three phases

Phase 1

From 23 August 2021, companies may first replace Usual Residential Addresses (URAs) of directors with their correspondence addresses. Also, full identification numbers (IDNs) of directors and company secretaries with their partial IDNs on their own registers for public inspection;

Phase 2

Starting from 24 October 2022, Protected Information on the Index of Directors on the Register will be replaced with correspondence addresses and partial IDNs for public inspection.  Protected Information contained in documents filed for registration after commencement of this phase will not be provided for public inspection.  Hence, “Specified persons” could apply to the Registry for access to Protected Information of directors and other persons personal data. There are 7 types of “Specified persons” who can apply to the Registry for disclose of Protected Information. These 7 types are:

a liquidator,

a trustee in bankruptcy,

a public officer or public body,

a scheduled person,

a solicitor or foreign lawyer,

a certified public accountant , as well as

a financial institution or DNFBP.

Phase 3

From 27 December 2023, data subjects could apply to the Registry for protecting from public inspection. The Protected Information contained in documents registered with the Registry (“Withheld Information”), and replace such information with their correspondence addresses and partial IDNs.  Nevertheless, “Specified persons” could apply to the Registry for access to Withheld Information of directors and other persons.

For further information, please contact us.

You may want to read: NEW INSPECTION REGIME FOR THE COMPANIES REGISTER