Many people assume that the services of a tax advisor are only for the rich or that you just don’t need one. But most of the time, you would be better off when using a tax consultant or advisor.

The tax system in Hong Kong is simple but not straightforward. It can be challenging to file a correct, compliant, and optimised tax form or set up a good fiscal structure.

A tax consultant can save you more money than it costs. Read more about who needs tax advisory, the benefits of tax advisory, and which tax services you can find in Hong Kong.

Who Needs a Tax Advisor

Businesses (Profits tax)

As a business in Hong Kong, you are liable to profits tax. 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:

• make sure that you are tax compliant with the law
• prevent paying too much tax
• keep your company up to date with the newest tax laws

There are multiple reasons to use tax advisory services at different stages of your company’s growth.

When you’re launching a new business, it is highly recommended to get a tax advisor. As a start-up, you can structure your business in a tax optimised way right from the beginning, which is ideal. It’s a proactive way to prevent any problems and you can prepare the company for future investments.

Does your company deal with external funders? Then there should be a professional fiscal structure in place – this is usually a requirement for these types of sponsors.

At all times, having a tax advisor taking care of time-consuming and complicated fiscal matters frees up your time to focus on your business’s core activities.

Individuals (Salaries tax)

During tax filing season, tax advisory firms are a popular online search term. Tax filing services are certainly one of the services offered. But there are more reasons why individuals would need a tax advisor.

For some people, filing their taxes is not something they look forward to, leading to delays or mistakes in their tax filing. In that case, you can outsource your tax filing to make sure it is taken care of properly. This can save you costly fines and/or paying too much tax.

Suppose you have a more complicated tax life, for example with income from rental properties, partial self-employment income, company share options, and so on. In that case, a tax advisor can be very helpful. Do you have assets or income in other countries? A tax advisory firm supports you in filing all your tax obligations in a compliant and tax-efficient way.

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
• having a child
• receiving an inheritance
• buying or selling a home
• moving to another country

A good tax advisor is always up-to-date with the latest regulation. They can answer your questions and offer advice and money-saving tax strategies.

5 Benefits of a Tax Advisor

1.    Preventing incorrect tax filing

The Hong Kong law has strict legal consequences in case of incorrect tax return filings, including hefty fines and imprisonment. Not knowing something was taxable, oversight or inability are no reasonable excuses.

2.    Optimal use of deductions, allowances and incentives

The Hong Kong IRD has many several deductions, allowances and incentives available. Do you know whether you’re eligible for any? Or perhaps a different combination is more efficient. A tax advisor can help you take advantage of all available deductions etc.

3.    Always compliant and on time

A good tax advisory firm is always staying current with the latest rules and regulations. You can have peace of mind that your tax affairs are always compliant and filed and paid on time – which will help avoid any penalties.

4.    Save time and money

Your time is valuable, both your working hours and your free time.

Whether you’re an entrepreneur or an employee, your working hours have a rate. Say your hourly rate is HK$1,000 and it takes you 10 hours to do your taxes: that’s a cost of HK$10,000 to do your taxes – with a risk that you made errors.

And you probably don’t look forward to spending your free time working out taxes. You can save time and money with the help of a tax advisory firm.

5.    Have an optimised fiscal structure for your business

A tax advisor can help you set up an optimised fiscal structure for your business. This should not only reduce your overall corporate tax burden but also your individual tax burden. Besides, it protects your business in general against enquiries or audits from tax authorities.

Having an optimised fiscal structure:

• creates an additional value when your business is subject to a take-over or a merger
• will avoid or reduce tax due diligence reviews
• supports raising capital when setting up investment fund structures

Tax advisory services in Hong Kong

Tax filing

The Hong Kong fiscal year runs from 1 April to 31 March of the following year. Tax filing for your business (profits tax) can be overwhelming and tedious. As an individual, you may not know how to best file your taxes or have an elaborate tax life.

You can be sure that your tax filing is correct, optimised and filed on time when you get the help of a tax advisor.

Tax planning

Whether you’re an individual or have a company, with tax planning you can mitigate tax liabilities – as well as plan ahead for its payment. Tax planning is also a key part of estate planning. A tax advisor can help you with proper tax planning, which is beneficial to optimise your tax liabilities.

Advice on taxation agreements

Hong Kong has over 40 double taxation agreements (DTAs) in place at the moment. These tax treaties prevent double taxation and tax evasion between Hong Kong and the jurisdictions with a DTA.

Are you a citizen of another country? Do you have assets, income or inheritance outside of Hong Kong? Or do you operate an international business? In many cases you can benefit from the DTAs, so you don’t have to pay the same tax twice – or you can move your tax liability to Hong Kong.

A tax advisory firm knows all the ins and outs of these tax treaties. They help individuals and international businesses with operations in or through Hong Kong.

Tax audit

Hong Kong has a territorial source principle of taxation, which means only profits or incomes sourced in Hong Kong are taxable here. The principle is very clear, but in some cases there may be multiple or overseas sources.

The source of income or profits is one of the most controversial tax issues in Hong Kong. A number of tax dispute cases regarding this issue are reviewed under tax audit and investigations each year.

Other reasons for being selected for an audit or investigation may include:

• Failure to submit the Profits tax return on time
• Significant reduction in profit
• A high number of domestic and cross-border transactions between a company and its associated companies
• And more

Apart from tax knowledge, good negotiation and presentation skills are also important to look for in a tax advisor supporting your tax audit.

Offshore tax, stamp duty and intellectual property tax planning

Some other types of taxes you might be subject to in Hong Kong are offshore tax and stamp duty. In addition, your company could be working with intellectual property, which calls for proper tax planning and advice.

Partial offshore tax

Only income or profits sourced in Hong Kong are subject to taxation by the Hong Kong Inland Revenue Department (IRD). ‘Offshore’ income or profits are in general not liable to Hong Kong tax. However, it is not rare that a company or individual has both onshore and offshore tax liability. In that case, you can claim a partial offshore tax status.

Compared to a 100% offshore tax claim, sometimes it is more difficult for a taxpayer to prove a partial offshore claim. Be prepared to receive lengthy and complicated enquiries from the IRD.

Stamp duty

Stamp duty is a tax placed on legal documents or instruments, usually in the transfer of property or assets or other types of transactions. All parties executing the transfer or transaction are liable to stamp duty.

There are group relief arrangements available for stamp duty in certain areas. A tax advisor helps you:

• to better manage your tax and duty obligations
• to ensure the legality of the documents or instruments used
• to avoid any penalties

Tax planning towards intellectual property

Companies are spending more and more time on protecting, creating, and developing their intellectual property (IP). These include trademarks, patents, trade secrets, copyrights, and designs.

It’s not uncommon for commercial transfers of IPs to happen. IP-related transactions can potentially raise tax risks and challenges. With proper intellectual property tax planning by a tax advisory firm, these risks can be avoided.

HKWJ Tax Law & Partners as your Tax Advisor

Doing your Hong Kong taxes in a compliant, efficient, and professional way can be challenging and time-consuming. A professional tax advisory firm like HKWJ Tax Law & Partners Limited is here to support you.

At HKWJ Tax Law, we have skilled tax consultants with more than 45 years of combined experience. Our tax services include tax filing, tax planning, supporting tax audits, and more. We have extensive know-how in Hong Kong tax, international tax, and Mainland China tax.

Furthermore, HKWJ Tax Law provides one-stop services for businesses, including bookkeeping, accounting, audit, and advisory services. So you can focus on your bigger goal: Your business growth.