CentreO Blog

What is a bank confirmation?

Bank confirmation is the audit procedure. It allows to test the existence, accuracy and the ownership of banks account and bank balance of entity. 

When needing a bank confirmation?

Entrepreneurs need the confirmation during the interim audit rather than at the completion stage. The auditors review the bank balance and select some important accounts to be confirmed. Auditors draft the confirmation and the send to client review and get the confirmation signed. 

Once the confirmation signed, auditors is the one who proceeds the confirmation to banks. The bank confirmation is normally the positive confirmation and all the confirmations are responding to auditors.

What to be aware of when signing a bank confirmation? 

The denial is common. As you may involve some careless mistake. In other words, No worry, if you aware of the minor, common mistake. Then everything is going to alright. Yet, we are going to highlight some common mistakes as below:

Authorisation Signature and Chop

• Irregular Signature
• Irregular Company chop
• Incomplete stamp
• Lack of signature
• Irregular or lack of signature of the account which deduct bank charge
• Correction without an authorization signature

Incomplete documentation:

• Not specify the period of bank confirmation
• Incomplete / Lack of auditor information
• Requested bank confirmation period over 7 years
• No record with the bank
• Posted-date bank confirmation period

Others:

• Not an existing client of bank
• Service for Corporate client
• Name of bank confirmation is different from Bank account

In general, the banks will charge an admin fee from Hk$300 to HK$800 per document . So, once you found there is a mystery transaction of a few hundreds deducted from your company bank account.with the  description stating audit fee. Then this is a bank fee for the confirmation.

You may want to read: CHECKLIST FOR ACCOUNTING AND AUDITING IN HONG KONG

 

Company Financial Status is similar to physical health of a person. Your physical health is crucial to living a happy and successful life. So applies the same concept to your company. Company Financial Status refers to the state and condition of your company finances.

There are four main financial statements to look at when evaluating your company’s status.

Balance sheets

that shows what the company owns and what it owes at a fixed period of time.

 Income statements

that shows the company’s income and expenditures

Cash flow statements

shows the summarise of cash position

Statements of shareholders’ equity

shows the changes in the value of shareholders’ equity or ownership interest in a company

 

How can you obtain your Company Financial Status from Xero?

You don’t need to send your whole company books to your accountant. If you are Xero user. You just need to press a few buttons and follow below steps:

1. Log in your Xero
2. Go to “Accounting” from the top bar
3. Select “Profit and Loss”
4. Choose “Date Range” for example 1 April 2020 to 31 Mar 2021
5. Select “Compare with 1 period”
6. Click “Update” on the left
7. Updated Profit and Loss statement will pop up

For further information, please contact us.

You may want to read: HOW CLOUD ACCOUNTING CAN HELP STARTUP BUSINESSES?

In order to attract global investment and expat genius to Hong Kong. Hong Kong not only offers an attractive tax regime for corporation and entrepreneurs.  Moreover, it also has a competitive low taxation scheme for personal income tax on Hong Kong Salary tax. Correspondingly, salaries Tax referred to Personal Income Tax as well.

Firstly, what is assessment year?

Hong Kong set a year of assessment runs from 1 April to 31 March of the following year. For example, 1 April 2020 to 31 March 2021 

Secondly, what is Provisional Salaries Tax?

Provisional Salaries Tax for a year is usually based on the income less the allowances of the preceding year. 

Thirdly, how to calculate your Salary Tax?

Personal Income can be assessed by Progressive Rate on your net chargeable income. Or at Standard Rate on your Net Income, whichever is lower.

Progressive Rate

Net Chargeable Income = Total Income – Deductions – Allowances

Standard Rate

Net Income = Total Income – Deductions

 

1. Allowances Table:

Allowances	2020/21 Onwards $
Basic Allowance	132,000
Married Person’s Allowance	264,000
Child Allowance (Each)	120,000
Dependent Brother or Sister (Each)	37,500
Dependent Parent & Grandparent Allowance (Each)
Ø   Aged 60 or over	50,000
Ø   Aged 55 and below 60	25,000
Single Parent Allowance	132,000
Personal Disability Allowance	75,000
Disable Dependent Allowance (Each)	75,000

 

2. Deductions Table:

Deductions	2020/21 Onwards $
Expenses of Self-Education	100,000
Elderly Residential Care Expenses	100,000
Home Loan Interest	100,000
Mandatory Contributions to Recognized Retirement Schemes	18,000
Qualifying Premiums Paid under Voluntary Health Insurance Scheme (VHIS) Policy (For each insured person)	8,000
Qualifying Annuity Premiums and Tax Deductible MPF Voluntary Contributions	60,000
Approved Charitable Donations	35%

 

3. Calculation of Tax Payable:

	Net Chargeable	Rate
On the First	$50,000	2%
On the Next	$50,000	6%
On the Next	$50,000	10%
On the Next	$50,000	14%
Remainder		17%
Standard Rates of Tax		15%

For further information, please contact us. 

You may want to read: HONG KONG PERSONAL TAX ALLOWANCE FOR 2020/2021

QUESTION 1:

My company in the UK paid a medical plan for a Hong Kong Employee, does it help to claim deductions on tax purpose under a Hong Kong Limited Company?

ANSWER 1:

No, insurance plan in the UK is not a deductible expense under Hong Kong Profit Tax. Firstly, the expense is not paying for trading purposes. Secondly, it is difficult to explain the relationship between Healthcare in the UK and the profit generated in Hong Kong.

QUESTION 2:

How can I book the insurance expense under a Hong Kong Limited Company?

ANSWER 2:

Yes, the simplest way is booking the insurance expense as the company’s expense if the amount is small.

 

For further information, please contact us.

You may want to read: WHAT TO DO WHEN I RECEIVE A PROFIT TAX RETURN?