E. Taxation, accounting and Government funding
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 (Cap.622) (“the CO”), every limited company must appoint an auditor for each financial year of the company (section 394 of the CO) to handle the taxation matters of the company (section 436).
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 “Arrangement Between the Mainland of China and the HKSAR for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income” tries to allocate the right to tax between the two jurisdictions on a reasonable basis to avoid double taxation of income. 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 without limitation 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.
According to Government statistics, there are about 340,000 small and medium enterprises (SMEs) in Hong Kong, which constitute over 98% of the business establishments and employ about 45% of the workforce in the private sector. In order to uphold the development of SMEs and to enhance their competitiveness, the Trade and Industry Department has set up a few fund schemes, including:
- The SME Export Marketing Fund (EMF): The EMF is a fund which focuses primarily on marketing/promotion activities. It strives to provide financial assistance to SMEs for participation in export promotion activities, hoping to encourage them to expand their markets outside Hong Kong. For details, please refer to this website: https://www.smefund.tid.gov.hk/english/emf/emf_update.html
- The Trade and Industrial Organisation Support Fund (TSF): The TSF provides financial support to non-profit-distributing organisations to implement projects which aim at enhancing the competitiveness of non-listed Hong Kong enterprises in general or in specific sectors. While the TSF does not provide direct subsidy to a SME, the beneficiaries will utilize the fund to conduct and prepare seminars, workshops, conferences, exhibitions, research studies, award schemes, codes of best practices, databases, service centres, support facilities and technology demonstrations, etc. which ultimately will benefit SMEs in Hong Kong. For details, please refer to this website: https://www.smefund.tid.gov.hk/english/tsf/tsf_objective.html
- The SME Loan Guarantee Scheme (SGS): The SGS is not exactly a fund scheme. Instead of providing fund/loan directly to a SME, the Government will act as a guarantor to provide loan guarantee to SMEs to help them secure loans from participating lending institutions for acquiring business installations and equipment or meeting working capital needs of general business uses. For details, please refer to this website: https://www.hkmc.com.hk/eng/our_business/sme_financing_guarantee_scheme.html