Grow Your Global Business Fast

The costs incurred in operating a business and making sales are known as business expenses. The tax commissioner does not offer a comprehensive list of legitimate startup and small-business deductions due to the scope of their mandate. An expense is deductible if it is “ordinary and necessary” to operate a business in your sector.

For this reason, it is well worth the time to arrange your expenses so that your company can make use of all allowable write-offs, develop a sound financial plan, filing the correct amount in yearly net profits taxes, and doesn’t need to sweat an annual audit.

What Are Business Expense Categories?

Business expense categories are organized groups of expenses that a company incurs while operating. The categories act as a framework for allocating spending, which facilitates tracking where money is spent and enables financial performance analysis. Businesses can acquire a better understanding of their spending patterns and make well-informed decisions about budgeting and resource allocation by classifying related expenses together, such as office supplies, marketing expenditures, or employee salaries.

business expense categories:

1.Advertising and marketing

2.Continuing education

3.Credit and collection fees

4.Bank fees

5.Dues and subscriptions

6.Employee benefit

7.Insurance

8.Maintenance and repairs

9.Legal and professional expenses

10.Office expenses and supplies

11.Telephone

12.Utilities

13.Postage and shipping

14.Printing

15.Rent

16.Salaries and other compensation

17.Travel

18.Business meals

19.Business use of your car

20.Moving expenses

21.Depreciation

22.Charitable contributions

23.Mortgage interest

24.Software

25.Books and magazine subscriptions

26.Medical expenses

27.Licenses and permits

28.Manufacturing or raw materials

29.Retirement contributions

30.Real estate taxes

31.Client gifts

Business owners frequently give themselves a salary, which functions in the same manner as a traditional job. The owner pays personal income tax on the salary, which is recorded as an expense in the company’s books.

How much to pay yourself ?

The tax regulation states that entrepreneurs are permitted to give themselves a “reasonable salary.” However, how can one ascertain what is reasonable?

One of the entrepreneurs said, “I advise paying yourself a modest salary, as modest as you can afford.“

Here are two common methods for figuring out your pay:

• Make your pay based on your own spending.
• Distribute profits as a salary.

When can you start paying yourself?

An owner’s salary is frequently the last item on the small business budget when times are tight. Paying yourself, however, becomes possible as your business’s revenue stabilizes.

To decide if you’re ready to begin paying yourself a salary, posing the following three questions to yourself:

• Do I make a consistent cash flow?
• Do my projected earnings remain consistent?
• Is my company profitable?

You can afford to pay yourself if you can say “yes” to all above three questions.

Other payroll obligations for a Hong Kong company

In contrast to the majority of other nations, the employer in Hong Kong does not withhold individual income tax, or salaries tax. Individuals must pay their taxes on their own instead.

As such, employers in Hong Kong are subject to just two administrative requirements.

1. Keeping payroll records

The following details about their employees must be maintained on file by the company/employers:

• Particulars of the employee;
• Type of work: either full- or part-time;
• Working place;
• The total amount of compensation, including non-cash and other fringe benefits;
• Contributions to the Mandatory Provident Fund or its equivalent;
• The employment contract; and
• Duration of employment.

2. Reporting remuneration paid to an employee

Every year, companies will receive the Employer’s Return from the Hong Kong tax department. Even if the company does not hire any employees, the business has not started, or the business has ceased, it still needs to complete the Employer’s Return and file it with the tax department within a month of receiving it.

Useful link: https://www.gov.hk/en/residents/taxes/salaries/

To promote the export of goods, in China there is no VAT applicable to exported goods. When a company sources/buys products from the supplier, the supplier VAT invoice (Fapiao) includes VAT (input VAT). Normally, the input VAT could be deducted from the output VAT, but for exported goods there is no output VAT. Therefore, the government has set up a system for the refund of export-related VAT. Companies can claim back the input VAT paid for export goods through the monthly export VAT refund claim.

Who is eligible for export VAT refund?

Generally, to be eligible for export VAT refund, the export enterprise must:

Which industries are eligible for VAT rebates?

As stipulated in the STA Announcement (2022), the VAT rebate policy has been extended to include all eligible companies in the following six industries:

The tax rebate procedure

In order to enjoy tax rebate policies, exporters should provide Chinese authorities with several documents:

Value Added Tax (VAT) in China