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Hong Kong Private Limited Company Annual Renewal and Maintenance Requirements and Costs

Unless otherwise advised, the Hong Kong company in this article refers to a private company limited by shares incorporated/registered in accordance with the Hong Kong Companies Ordinance.

Once after incorporation, a Hong Kong incorporated company is required by the Hong Kong Companies Ordinance and Inland Revenue Ordinance to update its books of accounts, prepare financial statements, engage a Hong Kong licenced accounting firm to audit its annual financial statements and file certain returns with both the Hong Kong Companies Registry (company registration authority) and Inland Revenue Department (tax authority). This article aims to explain briefly those compliance requirements and the related costs.

In any case that a Hong Kong company also holds licences issued by other government departments or any other authorized organisations, then in addition to complying with the requirements of the Companies Ordinance, such company also needs to comply with the regulations issued by those government departments or authorized organisations. For example, if a company holds a licence issued by the Hong Kong Securities and Futures Commission, then it is also required to comply with the requirements of Securities and Futures Ordinance. 

The annual costs to be expected to maintain a private company limited by shares registered in Hong Kong in good standing could be divided into two parts. The first part is fixed and considered to be the basic or minimum costs required and is fixed and the second part is varied and determined by the nature of the business, volume of transaction and amount of turnover and a few other factors.

1.      Annual Maintenance and Compliance Requirements

(1)    Renewal of Registered Office and Company Secretary

All companies registered in Hong Kong must always maintain a registered office in Hong Kong and appoint a Hong Kong resident or a Hong Kong company to be the Company Secretary of the company.

If Kaizen is already providing registered office for and acting as company secretary of your Hong Kong company, our Company Secretary and Registered Office services will be renewed automatically on every anniversary date. We will issue an invoice for these services together with the Annual Return statutory filing fee and business registration fee and email the invoice to you to your settlement two months before the anniversary date. Our invoice issued in this manner is to be settled upon presentation.

(2)    Filing of Annual Return

An Annual Return is required to be filed within 42 days after the anniversary of incorporation.  The purpose of the annual return is to report all changes in the particulars of the company with the Companies Registry and therefore make known to the general public the up-to-date registration details of the company.

At the time of filing of the annual return, the company also need to make a payment of a statutory filing fee of HKD105 (USD15) to the Companies Registry.

Companies have to pay higher registration fees for filing Annual Returns late. For a local private company having a share capital, the registration fee payable for the late delivery of an Annual Return is:

In addition, companies which fail to file annual returns or file annual returns late may be liable to prosecution and, if convicted, pay the fines imposed by the court. The maximum level of fine for a company which failed to comply with the requirements for completing and filing annual return is a fixed penalty of HK$50,000 and a daily default fine of HK$700.

 (3)   Renewal of Business Registration Certificate

The Business Registration Certificate is also the tax registration certificate of a Hong Kong company, as the business registration number is also the tax file number of a company. A company can apply to have business registration certificate with a one year or three year validity period.

A company is required to renew its business registration every year, unless its business registration certificate has a validity period of three years. The business registration certificate can normally be renewed one month before or after its expiration date.

The current business registration fee is HKD250 (USD35) per annum. Late renewal will attract a penalty of HKD300 (USD40). Further delay will result in court proceeding and extra fine.

In fact, the business registration fee consists of two parts, one is business registration fee itself of HKD2,000 and another is Business Registration Certificate levy which finances the Protection of Wages on Insolvency Fund, of HKD250. The Hong Kong Government exempted business registration fee during the year from 1 April 2013 to 31 March 2014. It is likely that the Government may not exempt the business registration for year 2014/15. Should that be the case, then the business registration fee will be re-adjusted back to HKD2,250 starting from 1 April 2014.

Same as the filing of Annual Return, renewal of Business Registration Certificate and Registered Office and Company Secretary services are due at the same time. Therefore, we normally send out notice of the annual renewal for all these items two months before they fall due and payment is expected upon presentation of invoice so as to allow us time to process the annual renewal.

Please note that our primary means of communication is email so please make sure we are being notified immediately should you change your email address.

(4)    Book-keeping and Annual Statutory Audit

All companies registered in Hong Kong are required to maintain proper books of accounts and prepare annual financial statements. The financial statements include balance sheet, profits and loss statement, cash flow statement and notes to the accounts. If the company concerned is a holding company, the law further requires it to prepare consolidated financial statements,

In addition, the Companies Ordinance requires a Hong Kong registered company to engage a Hong Kong licenced local accounting firm to perform an audit of the financial statements and issue an auditors’ report. Normally, the fees for auditing of financial statements vary depending on the nature of business, amount of turnover and volume of transaction etc.

Kaizen is a Hong Kong registered company and licenced to practice auditing in Hong Kong. Kaizen can provide accounting, auditing, tax filing and planning services. An indication of our auditing fees is listed in the table in Section 2.

(5)     Filing of Profits Tax Return

All companies registered in Hong Kong must file with the tax authority a profits tax return every year. This to report the operating results of the company to the tax authority so as to enable the tax authority to assess if the company is chargeable to profits tax and if yes, the amount of profits tax payable.

At the time when a company files its profits tax return, it must also file a tax computation and a copy of audited financial statements as supporting. Although the tax authority allows small companies, that is, companies with a turnover less than HKD2.5 million, not to submit the supporting audited financial statements, it reserve all its right to request the submission of the financial statements any time it consider necessary. Therefore, a Hong Kong company should still engage a local accounting firm to audit its financial statements every year and retain the audited financial statements for not less than 7 years and submit to the tax authority when required to do so.

The deadline for filing profits tax return depend on the date of accounting year end. If a company choose to have its accounting year ended on 31 March, it is required to have its financial statements audited and the profits tax return filed with the Inland Revenue Department (Hong Kong Tax Authority) on or before 15 November the same year.

Late filing of Profits Tax Return will initially result in a fine of HKD1,200 (USD155) and further delay may result in court proceeding and extra fines.

(6)    Filing Employer's Return for your employees

A Hong Kong registered company is required to report to the tax authority, by filling out a designated form titled Employer’s Return, the amount of remunerations it paid to each of its employees within one month after the end of the previous tax year. Even in the case that a company hired no employee in the previous tax year, it is still required to report that fact to the tax authority.

The Employer’s Return is to report to the Hong Kong tax authority (Inland Revenue Department) the amount of remuneration the company paid to each of its employees (including directors), including salaries, wages, commissions, bonus and provision of quarters, so as to enable the tax authority to assess and charge individual income tax on the employees. 

Please note, however, the reporting and payment of individual income tax are the responsibilities of the employees themselves. These are not the responsibilities of the company.

In addition, in accordance with the requirements of Hong Kong Inland Revenue Ordinance, when a company hires employees or when its employees resign, it should report the personal particulars of those employees hired or those employees resigned to the tax authority.

(7)     Annual General Meeting

In accordance with the Companies Ordinance, every company has to hold a general meeting as its annual general meeting every year, and not more than 15 months shall elapse between the date of one annual general meeting of the company and the next. Any other shareholders’ meeting are normally called Extraordinary General Meeting (or EGM).

However, if the company holds its first annual general meeting within 18 months of its incorporation, then it need not hold it in the year of its incorporation or in the following year. For example, if a company is incorporated on 28 December 2012, it does not need to hold an AGM on or before 31 December 2012.  It’s got 18 months’ time from 28 December 2012 to hold its first AGM. In other words, the company can hold its first AGM on or before 28 June 2014.

A company is not required to hold an annual general meeting if:-

(a)     everything that is required or intended to be done at the meeting is done by a resolution; or

(b)    resolutions signed by or on behalf of all the members of the company who at the date of the resolution would be entitled to attend and vote at such meeting and a copy of each document (including any accounts or records) is provided to each member of the company.

For example, if the company has only one shareholder, there is no meeting to be held! Instead, what the company needs to do is to have the shareholder signed a resolution.  If the company has three shareholders and it’s not possible for them to have a meeting together, then it’s fine not to have a meeting if they all sign a resolution to approve what they would have approved if they all had a meeting.

(8)     Other Compliance Requirements

In accordance with the requirements of Companies Ordinance, a Hong Kong registered company is required to:-

(a)     Report to the Companies Registry of change of director or change of particulars of a director;

(b)     Report to the Companies Registry of change of company secretary or change of particulars of the company secretary;

(c)    Report to the Companies Registry of any increase in its authorized or issued and paid up capital;

(d)    Update its Register of Members in a timely manner, Register of Directors, Register of Secretary, Register of Transfers and any other statutory registers in a timely manner;

(e)     Maintain records of minutes and accounting records.

2.      Annual Maintenance Costs

After a company is officially registered in Hong Kong, it is required to comply with the maintenance requirements listed in Section 1 above. Fox example, a company is required by the Hong Kong Companies Ordinance to prepare an annual financial statements, to engage a Hong Kong local licenced accounting firm to audit its annual financial statements, to hold an Annual General Meeting. It is also required by the Inland Revenue Ordinance to file a profits tax return and an Employer’s Return once a year.

These compliance requirements could be divided into two categories, one with fixed fees and another with variable fees, as listed in the table below. The total amount represents the minimum costs to maintain a trading company (with minimal operation) in good standing in Hong Kong. In order to provide our existing and potential clients with a clearer picture of what they should budget to maintain their Hong Kong companies in good standing, we have prepared the below table detailing the related compliance and maintenance costs for their reference.

The annual maintenance/compliance fees are expected to be incurred once a year in the second year and thereafter and the variable fees are for general reference only and represent the minimum you should budget for the purpose of maintaining a Hong Kong company in good standing.

Note:

(1)     Kaizen’s charge for accounting (book-keeping) varies from case to case. In particular, Kaizen’s book-keeping service fee will depend on the volume of accounting transactions. Accounting transaction includes number of sales invoices, purchase bills, checks, bank remittances, and bank receipts etc. The number of transactions, the nature of business/transactions and tidiness of record keeping all will have an impact on the fees charged by Kaizen.

(2)     The fees for auditing of financial statements are mainly determined by the nature of business and turnover and the types of assets held by the company.  In general, fees for auditing of the financial statements of a company which is engaged in trading business and at the same time holds investment in property and security will definitely higher than that for a company with trading business only.

(3)     This fee covers preparation of tax computation, preparation and filing of profits tax return only. We can also assist clients to apply for exemption from profits tax. Fees for application for exemption from profits tax will be negotiated and charged separately.

(4)     This fee covers preparation and filing of employer’s return for companies without employees. If there are employees, an extra fee of HKD600 per employee will be charged. For example, Company A Limited hired two employees during the year, then the total fees for handling employer’s return will be HKD1,800.

(5)     In accordance with the requirements of Hong Kong Company Ordinance, a company is required to hold an Annual General Meeting every year. In any case that all shareholders agree to not holding the AGM, written resolution should still prepared to carry out the business that should be carried out in the annual general meeting. This fee covers preparation of written resolution and related documents only.

(6)     The fees listed in the table above are for reference only. The actual costs will vary in accordance with the nature of business or scale of operation of the company and some other factors. In most cases, the actual costs will be more than that stated in the table above.

Kaizen’s Services:

Hong Kong company registration, accounting, auditing, tax filing and tax planning

Hong Kong serviced offices and virtual office

China company registration, accounting, tax filing and tax planning

Singapore company registration, accounting, tax filing and tax planning

Offshore company registration

China, Hong Kong and Singapore working visas application

Worldwide trademark registration

If you wish to obtain more information or assistance, please visit the official website of Kaizen CPA Limited at www.kaizencpa.com or contact us through the following and talk to our professionals:

Tel: +852 2341 1444

Mobile: +852 5616 4140, +86 152 1943 4614

WhatsApp/ Line/ Wechat: +852 5616 4140

Skype: kaizencpa

Email: info@kaizencpa.com