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Accounting
Accounting is the process of recording, categorizing, and documenting financial transactions of a company regarding tax laws.
Accountant
An accountant is a person who specializes in taking care of accounting (see accounting for more) in a company.
Annual Return
The annual return is the yearly renewal of a Hong Kong company by updating the information and paying the yearly fee.
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Annual Return Form
The annual return form (NAR1) is the form to update all the necessary company information, which is then handed over to the IRD.
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Audit
An Audit is a yearly process by an external entity to ensure that your company is acting within the laws and regulations of the jurisdictions of the country.
B
C
Certified Public Accountant
This is an accountant who is certified by law (of that country’s jurisdiction) to conduct accounting services for businesses.
Citizenship
A citizenship means that a person holds the passport of a country, e.g. he has the US citizenship is equivalent to him having the US passport.
Related articles:
- When is a Hong Kong company suitable for US citizens (without US residency)?
CPA
See Certified Public Accountant.
Company Tax
Company tax is the tax that a company has to pay yearly on its profit (also called profit tax).
Related articles:
- What is the company tax for an (offshore) Hong Kong company?
- How is the Hong Kong taxation system?
Company formation service
A company formation service helps business owners to open a company and handle all the legal matters.
Company Secretary Service
A company secretary service generally helps with service around the office.
In countries such as Hong Kong, a company secretary service is mandatory by law.
Company Type: Limited Liability Company
A limited liability company means that the stakeholders are only responsible for company debt until the capital investment.
Related articles:
- Which company type is suitable for me in Hong Kong?
Company Type: Private Company
Company Type: Public Company
The shares of a public company are available for anyone (the public) to buy. This is very common for very large enterprise companies that are on the stock market (e.g. Apple, Netflix etc.).
D
Digital Bank
A digital bank is a bank that conducts everything 100% online, e.g.
- verifying your identity
- asking further questions
- answering your questions etc.
The opposite is traditional banks that have mandatory on-site (in the bank branch) meetings, e.g. depending on the bank that can mean
- set up a bank account
- verifying identity.
Synonyms:
- Virtual bank
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Digital Nomad
A digital nomad is a person who works completely online and does not hold residency in any particular country.
Related articles:
- US LLC vs Hong Kong LLC: What to choose as a digital nomad?
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Dividend
Dividends are the part of the company profit paid to the company’s shareholders at the end of each fiscal year.
Related articles:
- How are dividends taxed in Hong Kong?
- How and how often per year can you pay out dividends each year?
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F
Flag Theory
Flag theory means that you are using different countries for different purposes (tax residency, nationality, investment, spending time, etc.) in order to optimize your life, e.g. you may have
- an EU passport: To have the freedom of traveling without visa restrictions
- a Malaysian tax residency: To not be taxed on your worldwide income
- an investment portfolio in Hong Kong: To have a good financial infrastructure to freely move and invest money
Form BIR56A
Form BIR56A is a tax form within the annual employer’s return.
It is submitted once every year by the company and contains information about the company’s name and address and information on that year’s employer’s return (number of IR56b forms submitted, etc.).
Form IR56b
Form IR56b is a tax form within the annual employer’s return.
It is submitted once every year by each employee of the company.
It contains employee’s details such as salary, position in the company, benefits, etc.
Form IR56e
Form IR56f is a tax form within the annual employer’s return.
It is only for new employees in the company.
Form IR56f
Form IR56f is a tax form within the annual employer’s return.
It is only for employees who
- leave the company but
- stay within Hong Kong.
Form IR56g
Form IR56g is a tax form within the annual employer’s return.
It is only for employees who
- leave the company and
- leave Hong Kong.
Form NAR1
NAR1 is the name of the form filled out each year for the annual return of a Hong Kong company.
Related articles:
Related videos:
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H
Hong Kong LLC
A Hong Kong LLC stands for Hong Kong Limited Liability Company.
Related articles:
- Different types of companies in Hong Kong
Hong Kong Offshore Company
A Hong Kong offshore company is a Hong Kong company that has successfully passed the offshore claim after the government inspection every three years.
Related articles:
I
Inland Revenue Department
The Inland Revenue Department (short: IRD) is the Hong Kong government entity responsible for collecting taxes from companies or the tax authorities.
Read more:
Incorporation
Incorporation is the legal term for “opening a company” in a country.
Other synonyms:
- Register a company
- Start a company
- Open a company
- Set up a company
Related articles:
IRD
See Inland Revenue Department (short: IRD).
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K
L
M
N
Nationality
See citizenship.
O
Offshore company
An offshore company can have two meanings.
The first meaning is to outsource the production of an item to a country with cheaper labor, e.g. when Apple outsource the production of MacBooks to China.
The second meaning is that a company that is based in a different country to the one where it does business (customers are based), mostly for tax reasons. An example is that bigger tech companies such as Google, Facebook and Microsoft are based in Ireland while they’re selling to customers in Germany and France. Many people also use a Hong Kong company to make use of better tax structures.
Offshore claim
The offshore claim is the process of a Hong Kong company being labelled an offshore company and be granted 0% on corporate tax.
P
Perpetual Traveler
A perpetual traveler uses different parts of his life in different countries (also known as Geo arbitrage) to use advantages of different countries, e.g.
- Income: Earning a high income from Germany
- Home base: Living in low-cost countries
- Citizenship: Having nationalities of different countries
- Bank accounts: Having banks in different countries etc.
It is also often referred to as flag theory.
Q
R
Residency
Residency means to be registered in a country at the local ward and become a tax resident of that country.
Note:
This is different from nationality/citizenship.
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T
Tax: Capital Gains Tax
Capital gains tax is the tax on profit that is made by investing in a company (e.g. stocks).
Tax: Corporate Tax
The corporate tax is the tax a company pays on the yearly profit (revenue – costs).
Tax: Dividend Tax
Dividend tax is the tax applied to the company profit paid out to the stakeholders.
Dividend tax can be applied both in the country of residency of the company and that of the stakeholder – that means, worst-case, it will be taxed twice.
Tax: Double taxation treaty
A double taxation treaty helps individuals to not be taxed twice by two countries, although legally speaking, individuals fall into both tax systems. In those cases, the treaty allows the individual to only pay tax to one of those countries.
Tax: Personal Income Tax
A personal income tax is the tax on you as an individual. It includes salary tax, tax on dividends, on capital gains etc.
Tax: Value Added Tax (VAT)
The VAT (short for Value Added Tax) is a tax that is added to invoices and consumer goods in many countries, e.g. Germany has a 19%-VAT
Related Articles:
- How much VAT do invoices from Hong Kong companies included? (coming soon)
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V
VAT
See Tax: Value Added Tax.
Virtual Office
A virtual office is an office that is not used physically (on-site).
It is primarily used to have a legally mandatory company address.
Virtual offices are common amongst digital nomads or fully remote companies, as they do not meet in a physical office.
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