| Newsletter
> COMMON PROBLEMS FOR HONG KONG BUSINESS STARTERS
| Due
to the structural change of the economy, there are more and more people
start their businesses in Hong Kong. Apart from facing various challenges
in running their businesses, the business starters should also pay
attention to some affairs for avoiding any possible offences and penalties. |
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Business
Registration (BR)
To start a
business in Hong Kong, there have three operation modes, namely
Sole Proprietor, Partnership and Private Company Limited.
Under the Business
Registration Ordinance, no matter which type of businesses, a business
must be registered with Business Registration Office within 1 month
since commencement and displays the BR(s) in each operation site
clearly.
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First Time
Taxpayer - for Businessmen
If you consider yourself liable to Profits Tax for any year of assessment
and have not yet received tax return within 4 months after the end
of the basis period for the year of assessment concerned, you should
notify the Inland Revenue Department (IRD) in writing. For example,
Miss Lee commenced her slimming centre business on October 1, 2003
with the accounting year-end date close at March 31. Although the
center is only a 6-month operation, she has derived profit for the
assessment year ended at March 31, 2004. IRD normally issues Profits
Tax Return to the taxpayer after 18 months from the incorporation
date. In this case, Miss Lee should notify the IRD no later than
July 31, 2004 for the requisition of a tax return in writing.
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Keeping
Proper Business Records
Section 51C
of the Inland Revenue Ordinance (IRO) requires every person carries
on a business in Hong Kong to keep sufficient records (either in
the English or Chinese) of his/her income and expenditure to enable
the assessable profits to be readily ascertained. Such records shall
be retained for a period of not less than 7 years. Failure to comply
without reasonable ground may be liable to a maximum fine of $100,000.
The records
prescribed in the Ordinance include: -
| a.
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books
of accounts recording receipts and payments, or income and expenditure; |
| b.
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vouchers,
bank statements, invoices, receipts; |
| c.
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records of the assets and liabilities of the person in relation
to that trade, profession or business; |
| d.
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records
of all entries from day to day of all sums of money received
and expended in relation to that trade, profession or business; |
| e.
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where
that trade, profession or business involves dealing in goods:
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| (i)
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a
record of all goods purchased, and all goods sold in the carrying
on of that trade, profession or business showing the goods, and the
sellers and buyers in sufficient detail to enable the Commissioner
to readily verify the quantities and values of the goods and the identities
of the sellers and buyers, and all invoices relating thereto; |
| (ii)
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statements
of trading stock held by the person at the end of the accounting period
and all records of stocktakings from which any such statement of trading
stock has been prepared; |
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| f.
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where
that trade, profession or business involves the provision of services,
records of the services provided should be in sufficient detail to
enable the Commissioner to readily verify the entries. |
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Book Keeping
And The Accounting Documents
There is no
particular rule on the accounting standards to be adopted by the
sole proprietors or partnership businesses. The appointment of certified
public accountant to audit their accounting records is not an obligation.
Nevertheless, the accuracy is relative low for some causal bookkeeping,
such as using cash basis in calculating the profit or loss for the
business, that IRD may suggest some adjustments on the assessable
profits.
On the other
hand, limited company is required to conduct the audit by an independent
certified public accountant in accordance with Statements of Auditing
Standards issued by the Hong Kong Institute of Certified Public
Accountants. When filing the tax return, an audit report is always
required.
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