Audit exemption for company with no revenues or profit? - Unique situation -

[Trebor]

Yes--- we did that and IRD did provide such a letter....and we will never make a profit....so do we still need an audit every year?

Yes you do. Every single HK Company requires an audit with NO exceptions unless it is in Dormant status.

The Audit and the Tax return are two completely separate matters albeit you are required to submit one with the other when the IRD do start asking for your tax returns again (which can be randomly any year).

[shri]

Think about it - Would be nice if the IRD just took my word for it - "no profit" and said "ok lah we trust you, no need for audit".

The whole purpose of the audit is to verify your books etc. Can turn into quite a task if you have staff, expense accounts, leases, utility bills, petty cash etc - surely these flow through the HK company / HK banks.

A large number of SMEs in HK do not make a profit for IRD to tax them.

[dynamco]

numerous companies in Hong Kong will soon find themselves without banking facilities
The significant controllers register and AEOI are now operational here
If your bank has not contacted you yet for a mass of vetting information and you have a company account you could be under investigation
The whole idea behind these initiatives is to clamp down on money laundering and the evasion of tax in the co-signatory AEOI countries
You have to show the bank and confirm your tax domicile in writing, certified by a local lawyer or accountancy company
Banks have to start reporting your account data etc to your domiciled country o/s HKG

Let's see how long before the Mainland starts impounding overpriced black money property and other assets here

[packy_crusher]

The Entire US works like that. Audits are only required if the IRS has reason to suspect things are not right....and they do them themselves. The Hong Kong system serves to keep accountants gainfully employed.

[packy_crusher]

Cant anybody refer an audit from they have used? Although I still believe its a racket, if you know of a good firm that is reasonable, please let me know.

Thanks in advance!

[Trebor]

Ive referred a couple here in the past.

KTC Prima in TST are very reasonable, or Philip Poon CPA in Wan Chai although I think the latter have a bit of a backlog at the moment

[hhservices]

Yes you do. Every single HK Company requires an audit with NO exceptions unless it is in Dormant status.

The Audit and the Tax return are two completely separate matters albeit you are required to submit one with the other when the IRD do start asking for your tax returns again (which can be randomly any year).

You can get a temporary pass without audits if your company has no activity. It doesn´t need to be in dormant status, but it cannot have any activity (money in or money out) to temporarily skip audit. However, the year in which the company starts having activity again, it will need to do audit for that year and for the inactive years as well. Good thing is that if the company never resumes activity, it will definitely be exempted from doing audits.

[techjunkee]

Does anyone have experience converting an HK company to a sole proprietorship or a partnership to get around this audit requirement?

[chobochobo]

No getting around it.

[shree711]

Hello All -

I need some advice, because I am getting conflicting information about auditing requirements for local company - and we are indeed in a un pique situation.

Background -
-We are a local private company with 3 shareholders
-We are the purchasing company for a larger US company - but not a subsidiary (totally separate entity but some common shareholders)
-We DO NOT have any sales, revenues or profits
-All funds to maintain office and pay employees and other bills is wired in from the USA.
-the employees basically help us to purchase parts in HJK, China, TW and elsewhere in the region.
-we DO NOT sell anything.
-expenses are only salaries, rent, phone, internet etc.
-we DO NOT do any trading whatsoever.

In the past I was told over and over again all HK companies need an audit - and thus we were paying $13K for a reprint of our bank statements on nice paper, because there is no business activity. One of our employees with an accounting background talked to IRD and they told her we would be exempt - until we start trading (anything) or have some profit, sales etc.

She is gone and now the accountants want to start this crap all over again - they are hounding me that I MUST have an AUDIT and a PROFITS and LOSS statement etc...I am confused, because an audit for a company like ours real does not make sense...we have no revenues, no profits, no losses etc. Everything, such as business registration etc is current.

Any advice, ideas or anything?

Thanks in advance!!

If money comes in and out of the company, your company will need an audit. This is how Hong Kong works. There are other places like Singapore which allow you to have an exemption if revenues are lower than a certain number.