Category Bookkeeping and Accounting

An inactive company in Hong Kong which does not have any accounting transaction is required to officially declare itself as dormant as it will not be automatically considered dormant.

To declare as a dormant company in Hong Kong, this includes filing a dormant company tax return, maintaining its records, and complying with changes in corporate law. To apply for dormancy, the company needs to pass a special resolution with at least 75% of the shareholders’ votes. Then the company directors must file the special resolution with the Companies Registry within 15 days of passing the special resolution.

“Dormant” is a legal term that applies to Hong Kong company. The company must have “no significant accounting transactions” during the financial year. The costs incurred for the company to keep its annual registration/incorporation do NOT count as signification accounting transactions, for example the registry office address, secretary services, business registration fee etc…

The directors/shareholders/owners are still responsible for handling and pay for the annual return, tax return (if any), and business registration renewal on time, and they must report any changes in its registration to the Companies Registry department.

The benefits of declaring a company dormant include reduced costs and formalities, preservation of the legal entity for future use, better assets protection. The inactive status also save the time and cost for filing an annual return, appointing auditors, preparing audited financial statements. (Audit Exemption and Reporting Exemption for Dormant Company in Hong Kong)

Annual compliance requirements for a dormant company

a dormant status remains a legal entity and is required to follow certain legal regulations.

A dormant company must:

Having a registered office and at least 1 director, 1 shareholder, and a company secretary
Reporting any changes in the company’s officers or registered office with the Companies Registry
Renewing business registration certificate
Filing Profit Tax Returns if required by the Inland Revenue Department
Pay for the above relevant service fees and government fees

Stop being dormant? Re-activate the company.

If you no longer want the dormancy status, you will need to re-activate the company.

You will have to pass a special resolution with the majority of the shareholders’ votes and notify the Companies Registry about the cessation of the dormant status and declare that the company intends to enter into an accounting transaction.

The company will be deemed to have ceased to be dormant by making an accounting transaction even without notifying the Registrar.

https://www.cr.gov.hk/en/faq/local-company/dormant-companies.htm

Accurate record keeping can help you to remain organized, compliant and gain insight into the financial position of your business. It also provides your bookkeeper with all of the information they require to effectively manage your finances and tax. But collecting and organizing these documents can be a daunting task. We have compiled a checklist of information to share with you:

1. Income Documents

• Sales invoices and customer receipts.
• Records of payments received (cash, checks, electronic transfers).
• Bank deposit slips or merchant account statements (e.g., PayPal, Stripe).
• Income summaries or sales reports.
• Refund/return records (if applicable).

2. Expense Documents

• Vendor bills, receipts, and purchase orders.
• Utility bills (electricity, water, internet, phone).
• Rent/lease payments and mortgage statements.
• Payroll records (salaries, wages, tax withholdings, benefits).
• Travel, meal, and mileage expense receipts.
• Office supplies, software licenses, and subscription receipts.
• Tax-deductible expenses (charitable donations, professional fees).

3. Bank & Credit Card Statements

• Monthly bank statements for all accounts.
• Credit card statements (business/personal if used for business).
• Loan or line of credit statements.
• Reconciliation reports (to match records with bank statements).

4. Tax Documents

Filed tax returns (income tax, sales VAT, payroll tax, etc…).

• Withholding tax paid in other countries / regions.
• Sales VAT tax records (collected and paid).
• Payroll tax filings (e.g., employer’s returns, individual income tax returns).
• Correspondence with tax authorities (notices, audit letters).

5. Payroll Records

• Employee details (full name, ID / passport copy, hire date, employment contract).
• Timesheets, pay stubs, and overtime records.
• Benefits documentation (health insurance, retirement contributions).
• Contractor agreements and payment records.
• Unemployment tax records (if applicable).

6. Assets & Liabilities

• Asset purchase receipts (equipment, vehicles, property).
• Depreciation and amortization schedules.
• Loan agreements (terms, payment schedules).
• Lease/rental contracts.
• Capital contribution records (owner investments).

7. Legal & Compliance Documents

• Business licenses and permits.
• Articles of Incorporation/LLC Operating Agreements.
• Insurance policies (liability, property, workers’ comp).
• Contracts (vendors, clients, partnerships).

8. Financial Statements

• Balance Sheets.
• Profit & Loss (Income) Statements.
• Cash Flow Statements.
• Budget vs. actual reports.

9. Other Records

• Petty cash logs.
• Inventory lists and valuation reports.
• Audit reports or internal review documents.
• Digital backups of all records (cloud storage, encrypted drives).

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Organization Tips

• Categorize: Use folders (physical/digital) for each category (e.g., “2023 Taxes,” “Q3 Expenses”).
• Label Clearly: Name files with dates and descriptions (e.g., “Invoice_AcmeCo_Oct2023.pdf”).
• Go Digital: Scan paper documents and use tools like QuickBooks, Xero, or Excel.
• Retention: Follow retention guidelines (e.g., 7 years for tax records, 3+ years for payroll).
• Security: Encrypt sensitive files and restrict access.
• Review Regularly: Update monthly and before tax deadlines.

By systematically collecting and organizing these documents, you’ll streamline bookkeeping, ensure compliance, and simplify tax preparation.