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What risks will Hong Kong companies face in non-compliance zero declaration


One belt, one road, is becoming more and more obvious as Hongkong's strategic planning for Guangdong, Hong Kong and Macau deepens. The number of registered companies in Hongkong will steadily increase in the future. Hong Kong companies' account audit and zero declaration are important parts of the company's operation. However, under the CRS environment, Hong Kong companies' zero declaration will face certain risks.

Zero reporting risk of Hong Kong companies

There are two ways of tax declaration for Hong Kong companies: Zero declaration and normal audit declaration. Zero reporting of Hong Kong companies refers to the fact that the company has no business dealings or bank accounts without any money in and out, and can directly make inactive business reports, which is applicable to non operating Hong Kong companies. Normal audit tax return refers to the tax audit and audit conducted in accordance with the requirements of the Hong Kong Tax Bureau.

According to the Hong Kong Companies Ordinance, zero declaration is required to meet certain conditions. If it does not meet the zero declaration conditions, it can only audit the tax declaration. Since zero declaration is faster and easier than normal audit declaration, many Hong Kong companies have been dealing with zero declaration for a long time in the past. However, in the context of CRS sweeping the world, non-compliance zero declaration will face great risks:

1. Suspected by the Hong Kong Tax Bureau of "money laundering"

To apply for zero declaration of Hong Kong companies, we need to strictly meet the conditions. If we do not meet the conditions and apply for zero declaration for a long time, it will be regarded as non-compliance tax avoidance. Once it is investigated by the tax bureau, and the Hong Kong company is unable to explain the source of wealth of the company, it is likely that the tax bureau suspects that the company is doing "money laundering" illegally. In particular, under the CRS environment, the spot check of zero declaration of Hong Kong companies will be more stringent. Although the spot check is not a census, please do not take chances. Even if the company is cancelled, the hkird has the right to check all the accounts of the company within 7 years.

2. Cancellation of bank account

Many companies will set up offshore banks to match their Hong Kong companies. Offshore account is an important tool for Hong Kong companies to file tax returns and trade receipts and payments. If a Hong Kong company has opened a bank account and the offshore bank account has a business record, it must make a normal account and file tax returns. When Hong Kong Tax Bureau draws such a company, it is still making zero declaration, which will affect the use of bank accounts in Hong Kong. The lighter one requires to make up the account again, the heavier one is forced to close the offshore account, resulting in the company's abnormal external operation.

3. Face high fines

Hong Kong companies with business dealings shall make audit tax returns in strict accordance with the Companies Ordinance, and the tax returns issued by the Hong Kong Government shall be processed immediately after 18 months of establishment. Hong Kong companies with business contacts still take the chance to do zero declaration processing. Naturally, they will be punished by the Hong Kong government. The company will also have a fine of 50000 HKD, up to 300000 HKD.

4. Blacklist of government

Every two or three years, the Hong Kong Tax Bureau will conduct a sample survey on a number of companies. If the companies fail to meet the zero declaration conditions and fail to make normal accounting and tax returns every year, Hong Kong may leave a stain on the Hong Kong government website or be blacklisted. What's more, the credit of important controllers of Hong Kong companies is affected, so that the re opening of accounts or the establishment of companies will be affected.

The Hong Kong company shall deal with the tax returns as soon as they are received 18 months after registration. Only qualified companies without business operation can apply for zero declaration. Hong Kong companies that have previously made zero returns but have not been spot checked should make up their accounts and pay taxes as soon as possible.

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