By using our website you consent to all cookies in accordance with our Privacy Policy.

    financial-year-end-hong-kong

If you plan to set up a Hong Kong company, then preparing financial statements is a must. This is one of some compliance requirements that every company in this city must follow on an annual basis. Before conducting, it is crucial for a company to know about Hong Kong financial year and how to choose it.

1. An overview of Hong Kong financial year end

1.1. What is a financial year?

what-is-financial-year-end

A Hong Kong fiscal year or financial year refers to a period of 12 months used for accounting purposes of the company. To simply put, companies will base on the financial year to calculate their profits and losses and prepare their financial reporting.

Under the new Companies Ordinance, the first financial year of one company would commence on the first date of its accounting reference period and closes on the final date of that period. The accounting reference period is simply understood as the reporting period covered by the financial statements.

1.2. What is a financial year end?

A financial year end (FYE) is the closing date of the company’s financial year.

Remarkably, Hong Kong allows companies to self pick the date on which they end their financial year. It is directors of your company who would have the ability to decide the FYE date for the company.

Furthermore, there is no obligation that the FYE of a Hong Kong company must follow its date of incorporation. Note, however, that the first financial year end of that company cannot exceed 18 months since its incorporation.

1.3. Benefits of choosing the right financial year end in Hong Kong

Hong Kong financial year end dates have a strong linkage with the filing of the bookkeeping and account records by a business. Choosing a suitable FYE is actually very crucial since it can considerably influence the company operation, along with its tax benefits.

benefits-of-choosing-FYE-hong-kong

Particularly, a wise choice of financial year end date can bring a Hong Kong company various benefits, keys of which are:

  • Lower accounting fee and auditing fee
  • Extend due date for tax reporting

To give an example, the FYE date your company has determined will also decide the due date when your company is required to pay tax. The due date of paying tax often falls into a few months since your filing of profits tax return.

The company A determined its FYE date falling onto 30 June 2018. According to Hong Kong reporting rules, the standard filling date in respect of this Accounting Date Code “N” shall be no later than 2 May 2019, and there is no extension allowed for profits tax return in such case. As a consequence, company A can be required to pay profits tax in around August 2019. If this payment deadline, unfortunately, fights with the company A’s peak season or happens in the period it is dealing with some cash flow problems, then it can increase the heavy burden of accounting on the company. This is why it is very crucial to pick an appropriate financial year in Hong Kong.

Profits tax return filing is one of the key annual compliance duties for any Hong Kong companies. For more details on what compliance requirements in Hong Kong are, you can find out more here: Hong Kong Company Annual Compliance Requirements

2. How to determine a right financial year in Hong Kong

When it comes to the determination of the financial year end for a Hong Kong company, there are some parameters that should be taken into account. Below are 3 main factors for your reference:

how-to-determine-hong-kong-FYE

Accounting factor. Choosing a right FYE for your Hong Kong company can lead to a less complicated accounting process for your business. Suppose you incorporate a holding company in Hong Kong. By consolidating the FYE date with subsidiary companies, accountants of both sides can effectively complete the financial statements. The auditing process is also easier to be done. As a result, your company can save a large amount of money incurred from accounting and auditing tasks.

You can give BBCIncorp’s Accounting Tool a try to find out the total yearly estimated cost for accounting of your Hong Kong company!

Taxation factor. Filing profits tax returns is required to comply with most Hong Kong based companies. And it is a must to declare your company’s FYE before filing. Fiscal year end determination will impact the deadline for your Hong Kong company’s profits tax return.

Hong Kong government typically offers further extensions for Hong Kong companies which determine their FYE on 31 March or 31 December. Most companies in Hong Kong tend to choose this point of time as their financial year end to match with the government’s fiscal year. This means they can have more time to prepare the financial statements of the company.

For financial year endedStandard Filing Date for unrepresented/ represented casesDue Date for Profits Tax Return Extended
Between 1 April and 30 November (Accounting Date Code “N”)2 MayNo further extension

Normally end of April

Between 1 December and 31 December (Accounting Date Code “D”)2 May/ 15 AugustExtended to 30 September
Between 1 January and 31 March (Accounting Date Code “M”)2 May/ 15 NovemberExtended to 30 November

* Normal Issue Date: The first working day in April of the following year of assessment

Business nature factor. This is another worth-mentioning aspect to consider. Typically, most companies tend to choose a fiscal year end as the completion of any quarter, March 31, 30 September or December 31 for example, to match their business cycle.

Reason for this can be explained by the fact that some businesses feel easier because of their seasonal business nature which may have some differences in sales and activities until the end of the quarter. For example, some big sales over the holiday and seasons of a retail business may lead it to decide 31 December as its FYE date. A company with its core business in the summer, on the other hand, is likely to pick a 30 September year end.

3. Can a Hong Kong company change its financial year end?

change-FYE-in-hong-kong

The answer is YES. A Hong Kong company is free to determine its own fiscal year end date and allowed to change it, providing that it has good reasons.

Below are some common cases from which a Hong Kong company may want to change its current fiscal year end:

  • It is a newly established company in Hong Kong, and it has missed out the chance to pick its own FYE. The fixed date is determined as the final date of the month of the first anniversary from the company incorporation, as automatically determined by Hong Kong authority.
  • It is an existing company with its annual profits tax return to coincide with the company’s high season.
  • It is a subsidiary company, and it wishes to consolidate its FYE with its parent company to make the accounting process easier.

While Hong Kong environment is very friendly to allow the company to change its financial year end, there are still some notes before adjustments. Particularly, the Hong Kong company may be required to ask for the approval of its shareholders for the first change. In case of a company limited by guarantee, the change of its FYE must be notified to the Companies Registries during 15 days.

The interval between the first change of the financial year end date of your company and the next one must not be less than 5 years, except the adjustment with convincing reasons.

4. Conclusion

A wise Hong Kong financial year determination is very important to help your company with an easier accounting process and save money. There are certain factors to consider before choosing your ideal financial year end in Hong Kong, among which accounting aspect, tax aspect and business nature are key things. As a Hong Kong based company, you are allowed to change your company’s FYE with good reasons.

Feel free to contact BBCIncorp if you need more practical advice on how to choose a right financial year end for your Hong Kong company!

Recent Posts

doing-business-in-hong-kong-the-ultimate-guide-for-foreigners
2 Dec 2020

Doing Business In Hong Kong: The Ultimate Guide For Foreigners

Here is a guide to doing business in Hong Kong for foreigners! The blog covers all you need to know about the benefits of forming a business in Hong Kong and how to start it.

Read more
transfer-pricing-in-hong-kong-10-questions
30 Oct 2020

Transfer Pricing in Hong Kong: 10 questions that help you uncover it

Hong Kong transfer pricing legislation requires all relevant companies to file transfer pricing documentation. Below are 10 questions to enable you to uncover this rule!

Read more
checking-tool-for-hong-kong-company-registration
25 Nov 2020

Useful checking tools for your Hong Kong company registration

There are some tools to help you check your company status and what licenses you need to prepare before registering a Hong Kong company. Check out the guide to those useful tools!

Read more
hong-kong-tax-haven-what-can-be-revealed
25 Nov 2020

Hong Kong Tax Haven: What Can Be Revealed?

Beyond Hong Kong tax haven, like the way many people still think of this city, there are more of Hong Kong that you should know. Find out what they are!

Read more
hong-kong-business-trends-new-updates-infographic
25 Nov 2020

Hong Kong Business Trends After Mid-2020: New Updates [Infographic]

Check it out! Below infographic helps you to capture Hong Kong situations and update top five business trends to be worth expected in a post Covid-19 outbreak

Read more
reasons-why-hong-kong-banks-may-reject-your-application
20 Nov 2020

3 Reasons why Hong Kong banks may reject your application

Nationality, business activities or supporting documents can be reasons why Hong Kong banks may reject your application for opening a bank account. Learn more with Lyli, Relationship Manager from BBCIncorp!

Read more
best-banks-in-hong-kong
25 Nov 2020

Best banks in Hong Kong that you must know in 2020

Which is the best bank in Hong Kong for expats? Let BBCIncorp help you find out the answer with top 5 banks: DBS, HSBC, Bank of China, Standard Chartered and Citibank.

Read more
a-general-guide-to-winding-up-of-hong-kong-companies
19 Nov 2020

A General Guide to Winding Up of Hong Kong Companies

A Hong Kong company may be wound up by either voluntary or compulsory winding up by the court. Below guide clarifies the procedure for winding up a company through these two types!

Read more
hong-kong-company-annual-compliance-requirements
17 Nov 2020

Hong Kong Company Annual Compliance Requirements

Learn more about annual compliance and filing requirement of a Hong Kong private limited company.

Read more
tax-in-hong-kong-a-general-guide-for-entrepreneurs
5 Nov 2020

Tax in Hong Kong: A General Guide For Entrepreneurs

Hong Kong adopted a territorial tax basis with a low tax regime for businesses. This guide will give you an overview of tax in Hong Kong.

Read more
benefits-of-setting-up-a-company-in-hong-kong
3 Nov 2020

06 Benefits of setting up a company in Hong Kong

Setting up a business in Hong Kong yields many advantages such as pro-business environment, attractive tax regime, strategic location and much more.

Read more
how-to-set-up-a-company-in-hong-kong
25 Nov 2020

How to Set Up a company in Hong Kong: a Step-by-Step Guide

A general guide including steps and key notes for entrepreneurs who wish to know how to set up a company in Hong Kong.

Read more