Corporate Tax and audit

[Tandy]

Hi everyone, I really appreciate those of you who have helped in the past with dealing with the issues no one really tells you about. This is our first year filing our company profit tax. We hired a small accounting firm in December and used Dec 31 as our end of year date. The accounting firm suggested the Dec end of year with an application for an extension.

In late April/early May we received the govt tax demand notice with 90 days to deliver--but using the march 31 end of year date. I've been following up with the accounting firm but they just keep telling me the audit is in progress and no need to worry, however it's June 15 now and I am starting to stress that either I'm being scammed by the accounting firm (it was recommended by a friend but they are quite small) or just that everything is going to be severely late.

Not looking for official advice, just a calm of my nerves I guess. Is this normal to have 6 months for the audit to complete? Am I horribly late on filing or alternatively is there something I'm supposed to be doing? Or is this all normal and I just need to sit tight?

[shri]

For what its worth, out last year's audit (YE March 2020) just got completed and filed with the govt about two weeks ago.

According to the auditor the govt has toughened up the requirements (they questioned and required proof of every single time someone scratched their arse in our office) and they've also had to deal with social distancing related issues etc etc ...

[Tandy]

@shri you are always the best with this. That calms my soul immensely.

[fullmetaljacket]

If you're being audited by the accounting firm, that's usual timing, given they're a small/boutique firm. Although you could ask them to complete the audit asap.

If you've received the demand note from IRD - likely that they're OK with the numbers/projections. Unless the assessment came with a note "subject to query" - which is their way of saying - they might review and come back for more taxes. May or may not happen. They usually send the follow-up letter within 2-3 weeks of first letter, so if you haven't received any such additional letter, you're in the clear.

[tparker]

I've got a company that hasn't been audited for years, although I've been pushing my accounting firm to get through it. They're cheap yet trustworthy, but also clearly overworked.

Basically: no tax return received, they don't feel the pressure, prioritise other clients. Finally I get a tax return this year, and now they're prioritising me and dealing with four years of accounts in one go.

So if you're with a local cheap(ish) firm, I'd say yes this is normal. I'm told that deadline is +2 months if handled by the auditor, but this could have been a white lie whereas instead they requested an extension. Either way, it's been like this in the past for all the companies I deal with, and in the end it works out just fine.

[muzzdang]

For a 31 December 2020 year end, your tax fling deadline is 16 August 2021, so you have some time

https://www.gov.hk/en/residents/taxe...profitstax.htm

[Tandy]

Great, thank you everyone! Do I file even if the audit isn't complete?

[hkuk01]

I've got a company that hasn't been audited for years, although I've been pushing my accounting firm to get through it. They're cheap yet trustworthy, but also clearly overworked.

Basically: no tax return received, they don't feel the pressure, prioritise other clients. Finally I get a tax return this year, and now they're prioritising me and dealing with four years of accounts in one go.

So if you're with a local cheap(ish) firm, I'd say yes this is normal. I'm told that deadline is +2 months if handled by the auditor, but this could have been a white lie whereas instead they requested an extension. Either way, it's been like this in the past for all the companies I deal with, and in the end it works out just fine.

Just out of interest, in a similar position, when was the last year audited previously before the deafening silence from IRD for any more? Mine has gone 3 years now, was half expecting it through this year. Did it come recently or a while ago? Once went 4 years with nothing and then on the fifth year had to push all 5 years through in one go. No issues at all with this, accountants/audits fast but just wondering....but zilch again this year. Accountants actually called IRD the other year, they had 0 interest and said just do all the years when they come through one day.

[muzzdang]

That is the common practice of the IRD.

If you file a tax return with NIL profits or a tax loss, the IRD sometimes issue you with an exemption to file tax returns for 3 - 4 years, until they issue a tax return. However, if you have assessable profits, you should write to the IRD to request for a tax return for that year of assessment.

For Hong Kong companies, a yearly audit is required under the CO, regardless of whether or not a tax return is required to be filed.

As such, each year once the audit is completed, a tax computation should also be prepared and ready to go, as and when the IRD issues a tax return.

[tparker]

Just out of interest, in a similar position, when was the last year audited previously before the deafening silence from IRD for any more? Mine has gone 3 years now, was half expecting it through this year. Did it come recently or a while ago?

Received mid-April for year 2020-2021. Never received any demand beyond 2017, so that's four years for me. This company's FY ends 31st March, so the demand came pretty soon after that.