Table of contents
In the first year after a Hong Kong company is set up, it must open a bank account, set up an accounting system, file the annual return (NAR1), file profits tax and renew its business registration. Each has a clear statutory deadline, and missing it incurs a penalty.
Key takeaways
- The annual return must be filed within 42 days after the incorporation anniversary
- The profits tax return arrives about 18 months after incorporation and must be filed within 1 month of receipt
- Renew your Business Registration Certificate before it expires; do not just wait for an IRD notice
- Keep all business records for at least 7 years for the IRD to inspect
- The year-end date affects the filing deadline category and audit scheduling, so fix it as early as possible
3 things to handle immediately after the company is set up
Opening a corporate bank account: traditional bank vs virtual bank
Opening a corporate bank account is the top priority after incorporation. The documents needed include the certificate of incorporation, business registration certificate, articles of association, directors' and shareholders' identity documents and proof of residential address. Traditional banks usually take 4–8 weeks to approve, while virtual banks can complete account opening within a few days.
Companies with cross-border business should give priority to banks that support multiple currencies and international remittances. Some banks are stricter in vetting new companies, and preparing complete business explanation documents in advance can greatly improve your chances of success.
Further reading: “Can't open a company bank account? Hong Kong bank account requirements and the 4 main reasons for rejection explained”
Set up an accounting system
Under section 373 of the Companies Ordinance, all limited companies must keep proper accounting records covering income and expenditure, assets and liabilities, and sales and purchase details. The tools do not need to be perfect from the start: you can begin by recording in Excel and upgrade to professional software such as Xero or QuickBooks as the business grows. Whichever method you use, all original documents and invoices must be kept for at least 7 years for the IRD to inspect.
Outsourcing vs doing your own bookkeeping: how to choose
The question start-ups face most often is: when is outsourcing worthwhile? Here are some simple criteria:
- Fewer than 50 transactions a month and no employees – you can start by handling it yourself with Excel or basic software
- More than 50 transactions a month, or employee payroll – we recommend engaging an accountant or a secretarial firm, at a monthly fee of about HK$800–$2,500
- Cross-border transactions, multiple currencies or a complex shareholding structure – we recommend outsourcing early, to avoid reorganising everything from scratch at year-end
The earlier the records are set up the better; catching up only just before year-end is often the main reason fees double.
Get the company chop and business stationery ready
The Companies Ordinance has abolished the mandatory requirement for a common seal, but in practice some companies still keep one, using it for statutory documents such as share certificates, at a cost of a few hundred Hong Kong dollars. Company letterheads, under section 101 of the Companies Ordinance, must state the company name, registration number and address; this is a basic requirement and cannot be omitted.
12-month timetable of first-year statutory matters (with penalty reminders)
| time, | Required actions | Points to note |
|---|---|---|
| Month 1 | Open a bank account, set up an accounting system, confirm the company secretary and registered address | If hiring staff, apply for an employer's tax number at the same time |
| Months 3–6 | Update accounts regularly, keep business records, fix the financial year-end date | The year-end date affects later audit scheduling and the tax filing category |
| Months 9–12 | File the first NAR1, hold the annual general meeting, prepare the financial statements | A late NAR1 incurs a penalty immediately, with no grace period |
| Around month 18 | Receive the profits tax return (BIR51), which must be filed within 1 month | You can apply to the IRD for an extension of 2–3 months |
Month 1: bank account, accounting system and employer registration
Besides the bank and the accounting system, if the company plans to hire staff, this is the month to apply to the IRD for an employer's file number and to learn about MPF contribution rules. Arrangements for the company secretary and registered address should also be confirmed at this stage, to make sure government letters and legal documents are received properly.
Months 3–6: tidying the accounts and confirming the year-end date
The most important task at this stage is to fix the financial year-end date, because it directly determines the tax filing deadline category (N / D / M) and the starting point of audit work. You should also systematically organise the accounts and keep receipts, preparing for the audit later instead of searching for documents all at once at the end of the year.
How should you choose a year-end date?
There is no hard rule for the year-end date, but different dates have real consequences for the company:
- Choosing 31 March: falls under Category M, with the tax return deadline extended to 15 November of the same year, giving the longest preparation time; the most common choice for start-ups
- Choosing 31 December: falls under Category D, with a return deadline of 15 August of the following year; consistent with the calendar year, so bookkeeping is more intuitive
- Choosing a date around the incorporation anniversary: the NAR1 and the year-end fall in the same period, so compliance matters are handled together, though the workload is concentrated as well
Once the year-end date is set, changing it later requires notifying the IRD and may affect tax filing arrangements, so we recommend seeking your auditor's advice early on, soon after incorporation.
Months 9–12: annual return, financial statements and audit arrangements
The first NAR1 must be submitted within 42 days after the company's anniversary of incorporation. If the financial statements do not meet the small-company exemption conditions, they must be audited and presented at the annual general meeting. This stage has the heaviest workload, so we recommend starting to organise the relevant documents three months in advance, otherwise it is easy to be in a rush near the deadline.
What is the annual return (NAR1)?
Under section 662 of the Companies Ordinance, a private limited company must file with the Companies Registry an NAR1 every year, to update the registered particulars of directors, company secretary, shareholders and registered address and keep the records accurate.
The registration fee for a timely filing is HK$105. Once overdue, the penalty increases with time:
| Time overdue | Penalty amount |
|---|---|
| Over 42 days but not more than 3 months | HK$870 |
| Over 3 months but not more than 6 months | HK$1,740 |
| Over 6 months | HK$3,480 |
In serious cases, the company and its directors can be prosecuted, with a maximum fine of HK$50,000. Persistent lateness may also lead to the company being struck off and dissolved, a risk far greater than the fine itself. For the steps to complete the NAR1, points to note and common mistakes, please see the articles below.
Further reading:
“4 key points to note when filing the annual return”
Profits tax filing: what you need to know
Hong Kong companies' profits tax returns are issued by the IRD on its own initiative; they are not something the company applies for. A new company generally receives its first return (BIR51) about 18 months after incorporation, and has 1 month from receipt to submit it. If you cannot make it in time, you can apply for an extension, usually gaining a further 2–3 months, but you must request it before the original deadline.
No business income in the first year still requires a filing
Even if the company had no business income at all in its first year, it must still submit the return on time after receiving it. A company with no business activity at all may file a nil return; if there is business activity but no income yet (for example, it is still at the preparation stage), you must still declare the relevant expenses with a short explanation, and you cannot skip filing just because you've made no money.
Losses are also an important tax asset
No tax is payable for a loss-making year, but the tax return must still be submitted. The loss can be carried forward to the next year to offset future profits, so don't skip this step just because there was no profit.
For profits tax rates, how the two-tiered system is calculated, deductible items and the full filing process, please see the articles below.
Further reading: “Hong Kong profits tax basics: key tax points for first-time founders”
Business Registration Certificate about to expire: renewing proactively is safer than waiting for a notice
A Business Registration Certificate is valid for either 1 year or 3 years. Although the IRD sends out renewal notices, we recommend marking the expiry date in your calendar when the company is set up and renewing one month in advance, rather than waiting until you receive a notice.
| Type | Fee |
|---|---|
| 1-year certificate | HK$2,350 (2026/27, levy included) |
| 3-year certificate | HK$6,170 (levy included) |
You can renew on the IRD website, paying by credit card or PPS, after which the Business Registration Certificate is posted to the company's registered address. If it is lost, the replacement fee is HK$220, which you can apply for from the Business Registration Office of the IRD.
FAQ
What happens if I miss the annual return?
Penalties start from HK$870 and rise with the length of delay to a maximum of HK$3,480. In serious cases, directors may be prosecuted, with a maximum fine of HK$50,000, and continued breaches may even lead to the company being struck off and dissolved, a consequence far more serious than the fine.
Do I have to file profits tax in the first year?
Even if the company has no business income, the return must still be filed on time once received. A company with no business activity at all can file a “nil return”; if there is business activity but no income yet (for example, during the preparation stage), you must still declare the related expenses and attach a brief explanation.
Can I handle these compliance matters myself?
It is technically possible, but the annual return, tax filing and financial statements all involve clear statutory requirements, and an error in any detail can lead to a penalty or legal liability. Unless you are quite familiar with Hong Kong company law, it is safer and saves more time to have a professional company secretary or accountant handle them.
When does business registration need to be renewed?
The IRD does send out a notice, but mail is occasionally delayed. We recommend noting the expiry date of the Business Registration Certificate when the company is set up and renewing one month in advance, to avoid paying unnecessary penalties because of a momentary oversight.
Unsure about company compliance? Let SetupHK plan it all in one go
A Hong Kong company's compliance matters in its first year are closely linked, and a delay in one step often holds up all the work that follows. If you find it hard to track the matters above yourself, having a professional company secretary or accountant manage them all together is the approach many founders choose. If you need it, you can refer to SetupHK services.
Further reading: “Complete guide to forming a company in Hong Kong: process, costs and key points”
