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  • 1 Post By mrgoodkat

Profit Tax - No PRT form & Audit dilema

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  1. #1

    Join Date
    Jun 2015
    Posts
    8

    Profit Tax - No PRT form & Audit dilema

    Hello,

    I had created a company in HK 19 months back. It does not have any business activities (so no expenses, sales, profits, losses etc - not even one single business transaction) but it hasn'nt been declared dormant either (as per the official Dormant declaration process by Hong Kong Authorities).

    So I understand that I should have obtained a PRT form after 18 months, that I could fill as 0 and submit it back. But I havent received such a form yet. When I called the IRD, they said sometimes they dont issue it if they think it is not needed.

    Soo what should I do about the following
    1) SHould I insist that they issue it to me and fill it as 0
    2) Do i get an audit done in any case, because they may ask at the end of next year about the audit for this year? Or is audit not needed at all. I just wat to retain the flexibility toeither use this company again if I need to or put it as dormant or shut it down without having much hassles in the future about the already elapsed year of the past.

    Thanks


  2. #2

    When you said "put it as dormant", it could mean (1) making a formal registration by filing a special resolution with the Companies Registry to declare that the company will no longer enter any accounting transactions (2) simply not using the company. If for (1), you can enjoy the exemption to file annually an annual return with the Companies Registry (saving you a few hundred bucks). However, the eligibility for making a company dormant is quite "stringent" because the only transaction that it can have is paying the business registration fee to the government. If the company has a bank account earning some interest income, sorry the company will lose the dormant status.

    Normally, if a company files a tax return, it also has file the audited financial statements. However, sometimes, if the company has no business transactions at all (I really mean at all), you can ask for exemption to file it.

    So, in your case, if the company engaged no business activities at all (even had no bank account earning some interest income), you can declare dormant to the Companies Registry. For tax return, if the IRD does not want to issue one to your company, leave it alone.


  3. #3

    One more thing - when you said "... no expenses, sales, profits, losses etc - not even one single business transaction", it could not be true because when you set up a company, it must have some setup costs (e.g. BR fee, incorporation fee, fees to professional firms, etc). So, the company would have some expenses. If the company had no income at all, it would have an operating loss.


  4. #4

    Join Date
    Jun 2015
    Posts
    8

    Hugeflyingcat, thanks for your replies.

    The company expenses were paid for me (while setup) by issuing a check from my personal account to the company secretary (they managed to open the company for me and all documentation etc and act as CS and charged me a fees). For the second year also, I issued them a check from my personal account.

    The only Xactions in company bank account were till now that is (i.e. I have not initiated the 'making the dormant' process yet) - 100 HKD deduction for every month for a period of 12 months by HSBC for below balance fees. Indeed, thus the company account is 1200 HKD below the original value of 10,000 HKD.

    The second transation was I had put a 'few thousand HKD' in company account in between in anticipation of a business opportunity, which did not materialise, so I removed the exact amount (this transaction was a loan between me as a person to my company and then reversed exactly for same amount within 3 months).

    Indeed, and thirdly, as you mentioned maybe there was a few odd cents added by HSBC in between over time as interest.

    But I understand broadly form your messages that it doesnt seem worth it to 'go through the formal process of making it dormant by applying to the CR as these odd cents and below balance fees might pop up again'.
    THe only thing this official process seems to save in terms of significant money is the cost of auditing which seems to be 6k-8k, even if company did not do anything (like mine). So, given that i do not have a conrete visible plan for this company it seems shutting it before the annual registration anniversary is the most economic way ahead.

    My CS said they can do for me but charge 3600 HKD (incl 600 Govt fees). WOuld you know if it is easy process to apply to the IRD for the needed clearance and shut down the company on ones own self without involving the CS?

    thanks

    Last edited by AJR1; 13-08-2015 at 08:31 PM.

  5. #5

    Join Date
    Jan 2010
    Posts
    6,452

    If you don't get a PRT form, don't worry. If you get the PRT just write 0 everywhere and write on the first page that the company hasn't done any businesses. That's what the IRD told me the first time and I never had a problem with that so far.

    shri likes this.

  6. #6

    Join Date
    Jun 2015
    Posts
    8

    MrGoodKat, thanks, in such a case, when I fill and submit it as 0, is it still possible that they ask for Audit? Or, as it is logical, they understand that there is no need and will not ask for audit therefore.

    THis aspect seems to be open to interpretation and ofcourse the service providers, external auditors and my CS (who also has an audit team), stress that the IRD can ask audit so it must be done.

    Last edited by AJR1; 13-08-2015 at 08:35 PM.