Abolishment of exemption for submission of audited accounts

Starting from the year of assessment 2022/23 onwards, all corporations and businesses, regardless of the amount of their gross income and the mode of return filing, must submit profits tax returns together with all supporting documents (including financial statements and tax computation). This previous exemption granted to small corporations and businesses with gross income not exceeding HK$2 million is no longer available.

In other words, for an inactive company, unless it has obtained the formal “dormant” status by complying with Section 5 of the Companies Ordinance, i.e. passed and delivered to the Registrar of Companies for registration a special resolution declaring that the company will become dormant, the IRD will not accept a “Nil” return without an audited accounts. Also penalty will be imposed for non-compliance.

In addition, we would like to draw your attention in regard to the director’s obligations under the Companies Ordinance:

1. A company’s directors must, in respect of each financial year, lay before the company in annual general meeting, or in any other general meeting directed by the Court, a copy of the reporting documents for the financial year within the period specified in Section 431.
2. A director of a company who fails to take all reasonable steps to secure compliance commits an offence and is liable to a fine of $300,000.
3. A director of a company who wilfully fails to take all reasonable steps to secure compliancecommits an offence and is liable to a fine of $300,000 and to imprisonment for 12 months.

If your company wants to declare dormant according to Section 5 of the Companies Ordinance, we can assist to prepare and filing the necessary documents.

Should you require more information, please contact Ms. Amie Cheung at amie.cheung@lccpa.com.hk