Many people think that the services of a tax advisor are for the rich people only and in general you don’t need one. Yet majority of the time, it is advisable for you to consult or get the service of a tax consultant or advisor.
Hong Kong’s tax system is straightforward, but not to the point that it is simple. Sometimes filing a correct, compliant and optimized tax return or creating the proper financial structure is a daunting task.
You can save more money by paying less in taxes than you would if you hired a tax consultant. Get to know about who should seek tax advisory, the advantages of tax advisory, and the type of taxation services you can get in Hong Kong.
Content Outline
Is a Tax Advisor Necessary?
Businesses (Profits tax)
As a HK business, you should pay profits tax if you are profitable. You’d want to have careful monitoring of your tax affairs for several reasons, such as:
Using tax advisory services for your business will help you to:
- ensure that your are tax compliant with the law.
- stop paying too much taxes
- be in constant touch with the latest tax laws for your business.
It is difficult to list all the reasons but tax advisory services are needed at the different stages of your company’s growth.
It is advisable to seek the services of a tax advisor if you are venturing into the business world for the first time. You can manage your start-up in a tax-optimized way from the beginning. It is a good way to avoid any issues and you can make the company fit for upcoming funding.
Is your organization involved in dealing with external funders? A professional fiscal structure needs to be in place then, as this is typically a condition for the session sponsors.
It is a must having a tax advisor who will help you solve your time-consuming and complicated fiscal problems to make you be free of unnecessary worries in order to concentrate more on your business’s core activities.
Related Article: 2024 Tax Filing Season: Tax Deadline 2024 in Hong Kong You Need To Know About
Individuals (Salaries tax)
When the tax filing season comes, tax advisory companies are the most searched for on the Internet. Of course, there are tax preparation services among those. However, there are more types of people who would need a tax advisor for various reasons.
For some people, filing their taxes is not something they anticipate, which causes them to make mistakes, or delayed when they fill their taxes. In that situation, you can outsource the filing of your tax so that you can be sure you will get the best preparation. This may save you from incurring costly penalties or being over taxed.
Say you have a more complicated tax life, e.g., from rental properties, part-time business income, stock options in companies, et cetera. When it is so, a tax advisor will be of great help. If you have assets or income in other countries, a tax advisory firm can assist you in preparing and filing all your tax documents in a manner that is legally acceptable yet tax-efficient.
It’s not top of mind of most people, but it’s wise to consult a tax advisory when you experience a major life event, such as:
- Getting married or divorced: They can help with the filing jointly or separately, paying alimony or changing the dependent status.
- Having a child: They can tell about the child tax credits, dependent deductions, and education savings plans, etc.
- Receiving an inheritance: They will assist you in the matter of estate taxes, income taxes on distributions and charitable giving planning.
- Buying or selling a home: They can detail mortgages interest deductions, capital gain taxes, and property tax implications.
- Moving to another country: They may be equipped to advise you on international tax treaties, foreign income reporting, and tax liabilities you may incur in your adopted country.
Our tax advisor is always in touch with the most recent regulations. They provide you with information and advice and can also give you some clever taxes savings tips.
5 Advantages of a Tax Advisor
1. Avoiding inaccurate tax reporting
The Hong Kong law has very strict legal consequences in case of making a mistake in filing the tax returns, for instance, large fines and prison will be applied for such an offense. Unawareness that something was taxable, carelessness or inability, factors like these doesn’t count as reasonable excuses.
2. Making the best use of incentives, allowances, and deductions
The Hong Kong IRD has many deductibles available such as several deductions, allowances and incentives. Do you know which one you get? Are you eligible? Or it could be a different combo which is more efficient. Tax advisor can explain to you how to benefit from all available deductions and so on.
3. Consistently punctual and compliant
The tax consultancy that is worthwhile should always be up to date regarding the latest rules and regulations. You will know that your tax matters are always compliant and filed and paid in the allocated due date, thus avoid incurring any penalties.
4. Conserve time and money
It’s your time that is the most precious, whether it’s your working hours or your non-working hours.
Whether you are a business person or an employee, you have a paying rate for the hours you work. Say your hourly rate is HK$1,000 and it takes you 10 hours to do your taxes: So, that even takes your HK$10,000 to pay for your taxes – with a chance that you maybe made mistakes.
Well, you hate the thought of paying taxes, and you don’t like the idea of spending your free time working out your tax returns. The use of tax advisory services will help you to develop more money saving.
5. Maintain a financial framework that works best for your company
An expert in tax matters can assist you in sitting up a tax-optimized fiscal plan for your company. You will not only benefit from a reduced corporate tax rate but you will also pay tax at a lower personal rate. Another factor is that it secures your business on the whole from investigations or audits from tax authorities.
Having an optimised fiscal structure:
- generates opposite value in the cases of buy-out or merger.
- will spend or spend less time doing tax reviews.
- funds the investment fund creation process when setting up capital.
Hong Kong tax advisory services
Tax filing
The financial year of Hong Kong is from 1 April to the 31st of March of the next year. It is not easy to carry out the income tax reporting for your business (profits tax) as it may be too tiring and overwhelming. As an individual, maybe you do not know the best way in which to file your taxes and how your tax situation is.
When tax filing is done with the help of tax advisor you are confident that you have done it right, it is optimized and it is done on time.
Tax planning
Both individuals or a company with tax planning able to reduce tax liabilities and also plan ahead on how much tax it pays. Tax planning is in addition a major part of estate planning. Tax advisor can provide tax planning service, which is good when you are looking at ways to maximize tax credits.
Advice on taxation agreements
Hong Kong has now around 40 DTA tax agreement(s) (DTAs) in place. These tax agreements curb double taxation and tax avoidance between Hong Kong and the jurisdictions with a DTA.
Have you ever been a citizen of another country? Do you own assets, run a business or have any inheritance outside Hong Kong? Do you have a local store or online presence? Or do you run an international business? In many cases, the DTAs can benefit you which means that you are exempted from paying tax twice – or you can decide to have your tax liability decided by Hong Kong.
Tax advisory company is aware of details of all the treaties. They render services to individuals and foreign companies who are either based in Hong Kong or transacting through it.
Tax audit
Hong Kong uses territorial source of taxation principle, which is the only profits or income sourced in Hong Kong are taxable in the territory. The principle is so clear, but there are exceptions at times, such as when there is more than one or international sources.
The problem of where income and profits come from is one of the most controversial tax topics in Hong Kong. The number of cases of tax disputes on this subject are frequently reviewed under tax audit and investigations annually
Other reasons for being selected for an audit or investigation may include:
- Not submitting the Profits tax return promptly
- A notable drop in profits
- A substantial amount of domestic and international transactions between a company and its affiliated entities
Tax knowledge alone is not enough, good negotiation and presentation skills are also required if you want a good tax advisor to assist during your tax audit.
Planning for stamp duty, offshore taxes, and intellectual property taxes
Apart from some other taxes you are to pay in Hong Kong, there is also offshore tax and stamp duty. Also, your company can be dealing with intellectual property issues that require professional tax help.
Partial offshore tax
Only income or profits derived from Hong Kong sources are taxable by the Hong Kong Inland Revenue Department (IRD). The taxation of ‘Offshore’ income or profits are not applicable in general in Hong Kong. However, a company or an individual, physically resident in the state, can make multiple tax payments both at home and abroad. In that scenario, a half-offshore tax status is applicable.
Since the tax claim for 100% offshore is difficult to prove, a taxpayer would probably find it more challenging to prove a case with partial offshore claim. You should have the answer ready for the questions that you will receive from the IRD which are long and complex in length.
Stamp duty
Stamp duty is a tax that is usually charged on legal documents or instruments, mostly in land transactions or asset transfers or other dealings. All parties who are duty bound to effect transfers or transactions qualify for the payment of stamp duty.
In certain areas, there are stamp duty relief schemes available in groups. A tax advisor helps you:
- in order to put your taxation and duty requirements under control
- to provide a guarantee of legality for documents or instruments used
- to avoid any penalties
Tax strategies for intellectual property
IP protection, creation and development are the areas that now companies spend the most time on. These cover such spheres of intellectual property as trademarks, patents, trade secrets, copyrights, and designs.
It is not too rare for the commercial transfer of IPs to occur as well. The IP-related transactions can, in turn, translate into tax risks and challenges. Proper intellectual property taxes are being conducted by a tax advisory firm which prevents these risks.
With FastLane Group as your Tax Consultant
It is a painful and time-consuming task to file your Hong Kong tax returns while keeping them according to the law, efficient, and in a professional manner. A professional tax advisory company like FastLane Group is ready to provide the necessary assistance.
At FastLane Group we have plenty of experienced tax professionals including tax return filing, taxes planning, assisting with the tax audits and many more. We have comprehensive expertise in Hong Kong tax jurisdiction, cross-border tax, and Mainland China tax. Moreover, FastLane Group gives a range of services that suits businesses’ needs which include bookkeeping, accounting, audit and advisory. So you can focus on your bigger goal: Scalable business growth.