E. Taxation and accounting matters
The main taxation items in Hong Kong include profits tax, salaries tax, property tax, stamp duty and customs duties (click the link for information about duties connected with the import of goods).
Profits tax is charged for each year of assessment on persons or companies that carry on a trade, profession or business in Hong Kong on assessable profits that have been generated in or derived from Hong Kong for that year. More information about taxation for sole proprietorships and partnerships can be found in the Taxation topic.
If you are running a limited company, you should clarify with your auditor or accountant on any taxation matters. Under the Companies Ordinance, every limited company must appoint an auditor at the company's annual general meeting ( section 131 of the Companies Ordinance) to handle the taxation matters of the company (section 129C).
If you have business dealings in Hong Kong and Mainland China , you should note the special policies in relation to the avoidance of double taxation on income. The new Arrangement for the Avoidance of Double Taxation on Income and Prevention of Fiscal Evasion, which will become effective in Hong Kong on 1 April 2007, extends the scope of the original agreement on business profits and income from personal services to cover direct income (such as operating rights and employment income) and indirect income (such as dividends, interest and royalties). More details about this Arrangement can be found on the website of Inland Revenue Department.
Regardless of whether you are running a small business or a big corporation, you are obliged to keep proper records of all documents that are related to the business, including the following:
- Transaction records: order forms, cash register records, delivery dockets, invoices, credit notes, cheque stubs and deposit slips.
- Accounting records: petty cash, accounts receivable, accounts payable.
- Employment records: copies of identity cards and resumes (these records must be strictly controlled for protection of personal data privacy).
- Stock records: stock location, levels, suppliers and delivery information, cost price, selling price and possible substitute products.
- Supplier records: reliability, quality, service, delivery times and price of potential and existing suppliers.
- Customer records: contact information, credit terms, arranged payment terms and special delivery instructions.
If you have further questions on taxation or record-keeping matters, you should seek advice from a professional accountant or tax lawyer.