Is your company progressing yearly, how to analyse based on the accounting practices?
Understanding the end of Hong Kong’s financial year is crucial. For every overseas company its essential, gathering a presence in the thriving city and for local companies already incorporated here. Why consider doing business in this vibrant city? Hong Kong’s dynamic market offers diverse opportunities and significant growth potential, making it an ideal location for expanding your business.
A company’s financial year is the completion of 12 consecutive months. In which impacts financial accounting practices, tax obligations and business operations.
Dive deep into the vital accounting practices for Hong Kong businesses to enhance compliance and financial performance.
In this article, you will find the key facts related to the financial year in Hong Kong. Along with other related financial insights to help you make informed decisions.
What is the financial year in Hong Kong?
In Hong Kong, the financial year is either said as the fiscal year, which is known as the period of 12 consecutive months. During which a company finds time to prepare the financial statements and use them for accounting purposes.
Unlike the calendar year, the financial year can be set on any date that encompasses twelve consecutive months continuously.
Note : The FYE (Financial Year End) date will not coincide with the company formation day or anniversary day as it can be allotted by their own company management.
Understanding a company’s fiscal year can be commenced for businesses and investments. For individuals, it gives a clear picture that aids in analysing the financial health of an organisation.
Hong Kong’s fiscal year differs from the normal standard calendar year. Based on the Hong Kong government, the fiscal year runs from April 1st to March 31st. This arrangement means all government financial records are held for auditing and reporting in the same year (12-month cycle). Though companies can select independently, as said when aligning with the government cycle. Thus, they can ease tax obligations so the businesses can choose the end dates that suit their business needs.
Benefits of Accounting practices for Hong Kong
Hong Kong’s fiscal year is navigated with its economic activity. April is often marked as the beginning of a quarter. Thus, the economic activity is higher than the slow-down period of the Lunar New Year celebration.
Although it is not universally listed, April month is considered in many international countries or regions as the fiscal year.
This constancy simplifies international business transactions and financial procedures.
What is the Accounting system followed by Hong Kong?
Even though Hong Kong is a part of Mainland China, it differs in various accounting systems and taxes. Based on the Companies Ordinance Act in Hong Kong, the law states that the obligations of Hong Kong-registered companies are to have a record of all transactions and to prepare statutory audit reports by a certified public accountant.
Usually, the authority that updates and regulates the Financial Regulatory Standards (FRS) is the Hong Kong Institute of Certified Public Accountants (HKICPA), with international standards. Mostly one of the changes was adopted in 2005. Since the framework was merged with the International Financial Reporting Standards (IFRS).
Considering newly registered company in Hong Kong, the profit tax return is executed 18 months from the date of incorporation. During the first declaration, the report can comprehend 18 months of operation as an exception. Considering, the fiscal year must be mentioned with a 12-month report only. Normally, the company directors decide at the end of the year before the incorporation phase.
Keeping this in mind, let us discuss the accounting statements and audits planned by Hong Kong.
How do you choose a financial year-end date in Hong Kong, and what should you consider for the accounting practices?
During the period of the fiscal or financial year, the accounting records and transactions must follow Hong Kong’s accounting practices. To determine the financial year end, you need to manage different perspectives properly. They are accounting, tax, and other operational accounting practices in business.
Accounting
The significant aspect of choosing the fiscal year-end date in Hong Kong is the accounting practices. It streamline the efficient accounting process. If your company is holding any branches like any subsidiaries, then they can also attain the same day. Until they are not merged with solidarity entices. This alignment makes the accounting process much easier. Using modernised financial software can increase the workflow of the business time. It can also be used effectively in other business strategies that input productivity in your business.
Having the same fiscal year benefits with reduced costs and compresses the effort in accounting and other auditing tasks.
Tax
The company’s tax implications are the second factor when choosing the fiscal year-end date. Filing the Profit Tax Returns (PTR) during financial year-end directly impacts the timings and requirements. The deadlines set by the Inland Revenue Department (IRD) are to be carefully kept in mind.
The filing deadline for your PTR depends on whether you have appointed a tax representative by your company and a specific date. However, IRD taxpayers typically issue in early April. Like all auditing financial documents, the PTRs are filed together within the relevant period. i.e. prior to the issued month. e.g. early May. By excessively using bookkeeping practices with accounting software in Hong Kong, you can tackle all tax implications deliver them promptly.
Tax Filing Dates Based on IRD at 2024 in Hong Kong
The below table, mentioned will demonstrate if you have appointed a tax representative, the filing dates can be extended: –
| Financial Year End Date | Extended Filing Due Date (Note 1) |
| From 1 April to 30 November (Accounting Date Code “N”) | Early May next year (i.e. no extension will be granted) |
| From 1 December to 31 December (Accounting Date Code “D”) | Mid-August next year |
| From 1 January to 31 March (Accounting Date Code “M”) | Mid-November the same year (Note 2) |
And if you do not appoint a tax filing representative, to file the PTR. Then you can lodge an application with the IRD for the extension in filing the PTRs.
Typically, the IRD issues the profit tax return within 18 months of incorporation.
When deciding the financial year-end date, consider whether the day that coincides will impact the peak season of your industry. However, the company’s cash flow in the months when the tax payments get due.
To be noted: Meticulously check the tax implications, avoid tax penalties, and maintain smooth, effective tax compliance for your company in Hong Kong. One can change your company’s FYE date. However, the IRD checks consequences marked like tax implications and other categories. If it is for commercial reasons, they will approve it.
Business operations
Focus on checking your company’s revenue and expenses and aligning the FYE with the business cycle. Check along with the same tax year. Choosing the fiscal year date in a month with fewer busy days can reduce the accounting department’s workload. Thus, contribute to smoother financial calculations.
Companies mostly choose the fiscal year as the conclusion of any quarter, such as March 31st, September 30th, and December 31st. Thus, it ensures that businesses can adapt to any fluctuations in their revenue and activity until the end of the quarter. Therefore, acquiring a comprehensive financial picture.
Ending Notes
By analysing the article, we have concluded that the accounting process for Hong Kong companies is simple. But it should not be left until the last moment. It should be important to start preparing the documents and keep everything organised. With cloud accounting software, you can perform the activity systematically and organise it with an end-to-end encrypted format. The ultimate step of the accounting process is the company’s tax filing, which is an unavoidable process in accounting. Furthermore, it is advisable to appoint a financial accountant or auditor to handle in the annual accounting of your company.
Hope you received an informed insight!
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