Hong Kong is a free port with few taxes and low tax rates. The management methods of companies in Hong Kong differ significantly from those of the mainland government, especially in terms of taxation, leading to many new registered Hong Kong companies having numerous questions about accounting and tax reporting. Today, I will share the differences between mainland taxation and Hong Kong taxation, which you can save if you find it useful.

Due to historical reasons, Hong Kong's legal system is very similar to that of the UK, requiring taxpayers to file tax returns annually. At the same time, the types of taxes involved for Hong Kong companies are very few; mainland entrepreneurs registering Hong Kong companies will basically only deal with Hong Kong profits tax. Therefore, there are significant differences in taxation compared to mainland companies, mainly reflected in the following aspects:

Different accounting periods
 

Hong Kong companies:
Hong Kong companies conduct accounting on an annual basis, with the first tax return due in the 18th month after company registration, and thereafter every 12 months.
 

Mainland companies:
Domestic companies are required to keep accounts and file returns monthly.

Different accounting and tax reporting processes

Hong Kong companies:
Hong Kong companies require clients to provide business documents (contracts or invoices are acceptable) for accounting, which is done based on these documents and audited by a licensed accountant in Hong Kong. After the audit is completed, the shareholders sign the audit report, and the accountant submits the audit report and tax return to the government, while returning the relevant documents to the client for retention.
 

Mainland companies:
In the mainland, accounting requires the review of various original vouchers (one of which is the invoice). After verification, accounting vouchers are prepared, and various detailed ledgers are registered based on these vouchers. At the end of each month, accruals, amortizations, and transfers of accounting vouchers are made, and all accounting vouchers are summarized to prepare a summary table of accounting vouchers. Based on this summary table, a general ledger is formed, and after closing and reconciling, accurate and complete financial statements are prepared and analyzed, followed by binding the accounting vouchers into a book for proper storage.