Annual Financial Reporting Obligations for New Founders in Hong Kong

Setting up a company in Hong Kong is a popular choice for entrepreneurs thanks to its streamlined incorporation process, simple tax regime, and strong legal framework. However, new founders often underestimate the importance of post-incorporation compliance—particularly around annual financial reporting obligations. Failing to meet these responsibilities can lead to penalties, legal complications, and reputational damage.

This guide outlines the key financial reporting duties all Hong Kong companies must fulfil to remain compliant with local regulations.

1. Maintain Proper Accounting Records

According to the Hong Kong Companies Ordinance, every company is required to maintain proper books of accounts that accurately reflect its financial transactions. These records must be retained for at least seven years from the transaction date and should include documentation such as invoices, receipts, payroll records, and bank statements.

2. Prepare Annual Financial Statements

All Hong Kong-incorporated companies must prepare financial statements at the end of each financial year. These must comply with the Hong Kong Financial Reporting Standards (HKFRS) and provide a true and fair view of the company’s financial position.

These statements typically include:

• Balance Sheet

• Profit and Loss Account

• Cash Flow Statement

• Statement of Changes in Equity

• Notes to the Accounts

For small private companies that meet certain criteria, simplified reporting standards may be available under the SME-FRF and SME-FRS frameworks.

3. Audit Requirements

Except for dormant companies or those exempt under specific conditions, Hong Kong companies are required to appoint a certified public accountant (CPA) to conduct an annual statutory audit. This audit must be performed by a Hong Kong-registered CPA firm.

The audited financial statements must be submitted alongside the company’s Profits Tax Return (PTR) to the Inland Revenue Department (IRD).

4. Filing the Profits Tax Return (PTR)

The IRD issues the PTR annually, usually in the first or second week of April. Newly incorporated companies typically receive their first PTR about 18 months after incorporation.

Companies must file the PTR within one month of its issuance, along with:

• A tax computation

• Audited financial statements

• Any other supporting schedules required by the IRD
  

5. Annual Return Filing

In addition to financial reporting obligations, every Hong Kong company must file an Annual Return with the Companies Registry. This is a separate requirement and includes key corporate details such as share structure, director and shareholder information, and the company’s registered address.

6. Penalties for Non-Compliance

Failing to comply with annual reporting obligations can result in:

• Late filing penalties

• Prosecution and fines

• Striking off of the company

• Personal liability for directors in certain cases

Compliance is not just a regulatory box to tick—it’s essential for building trust with stakeholders, accessing banking services, and attracting investors.

How Woodburn Accountants & Advisors Can Help

At Woodburn Accountants & Advisors, we specialise in guiding new founders through the intricacies of financial reporting in Hong Kong. From bookkeeping and audit preparation to tax filings and regulatory submissions, we provide a full suite of services tailored to your business needs. Our team ensures you stay compliant from day one, allowing you to focus on what you do best—growing your business.

---

Woodburn Accountants & Advisors is one of China and Hong Kong’s most trusted business setup advisory firms.

Woodburn Accountants & Advisors is specialized in inbound investment to China and Hong Kong. We focus on eliminating the complexities of corporate services and compliance administration. We help clients with services ranging from trademark registration and company incorporation to the full outsourcing solution for accounting, tax, and human resource services. Our advisory services can be tailor-made based on the companies’ objectives, goals and needs which vary depending on the stage they are at on their journey.

Contact us