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Q:
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How should I report the profits/loss of my sole proprietorship business to the Hong Kong Inland Revenue Department (“IRD”)?
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A:
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You should report your business results in the Tax Return – Individuals (BIR60).
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Q:
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Do I need to file the tax return together with accounts?
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A:
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If your gross business income is over HK$2,000,000 for the year of assessment concerned, then the profit and loss account and balance sheet must be submitted with your tax return. However, if your gross business income is HK$2,000,000 or less, then you are not required to attached those to your tax return. However, if the IRD requests for those subsequently, then you must furnish those for their inspection.
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Q:
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Do I need to engage a professional accountant to prepare the accounts?
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A:
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There is no requirement under the law for engaging any professional service for the preparation of accounts for sole proprietorships.
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Q:
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How do I calculate the assessable profits?
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A:
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To arrive at the assessable profits for tax purpose, certain adjustments are required to be made to the net profit of the business account. Some of the common adjustments are set out in IRD’s Proforma Profits Tax Computation. You may visit the IRD’s website to make use of the relevant form to compute the assessable profits of your business.
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Q:
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What are the consequences if I do not keep sufficient business records?
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A:
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This may result in a court fine of up to HK$100,000 and estimated assessments being raised on your business.
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