Hong Kong Annual Return vs. Profits Tax Return: The Complete 2025 Guide

Your Annual Return is a yearly update on your company's structure (directors, shareholders) for the public record at the Companies Registry, due strictly 42 days after your incorporation anniversary. Your Profits Tax Return is a confidential financial declaration to the Inland Revenue Department to calculate your tax bill, requiring a professional audit and having a flexible deadline dependent on your financial year.

For any entrepreneur running a business in Hong Kong, juggling compliance duties can feel like a full-time job. Two of the most critical—and most commonly confused—tasks on your annual to-do list are filing the Annual Return and the Profits Tax Return.

While they both sound official and arrive every year, they are completely different. Mixing them up, missing a deadline, or misunderstanding their purpose can lead to steep penalties and serious operational headaches.

Think of it this way:

• The Annual Return answers the question: "Who are you?" It's a public health check on your company's structure.

• The Profits Tax Return answers the question: "How did you perform financially?" It's a confidential report to determine your tax bill.

This guide will break down everything you need to know about these two essential filings. We’ll cover who you file with, what’s required, when the deadlines are, and how to stay compliant, so you can focus on what you do best—running your business.

All About the Annual Return (NAR1): Your Company's Public ID Card

The Annual Return is a fundamental piece of Hong Kong's corporate governance. It has nothing to do with your profits or taxes; its sole purpose is to ensure the public record of your company is accurate and up-to-date.

Who’s in Charge? The Companies Registry (CR)

Your Annual Return is filed with the Companies Registry (CR), the government body that handles all company incorporations and registrations. The legal requirement comes from the Companies Ordinance (Cap. 622), Hong Kong’s main rulebook for corporate law.

This filing is mandatory for almost all incorporated entities, including private limited companies, public companies, and companies limited by guarantee. The obligation doesn't go away if your company is dormant or has stopped trading. As long as your company officially exists, you must file.

Why It's More Than Just a Form

The Annual Return is your company’s official snapshot for the world to see. But its importance goes far beyond simple compliance.

This single document is essential for:

• Opening a Bank Account: Banks will always ask for your latest Annual Return to verify your directors and shareholders.

• Securing Loans: Financial institutions use it as a key due diligence document.

• Applying for Grants & Licenses: Government bodies and regulators need it to confirm your company’s good standing.

• Building Trust: Partners, investors, and even major customers may check your company's record at the CR to ensure you are a legitimate and well-managed entity.

Failing to file on time can bring your business operations to a grinding halt. It’s not just a legal filing; it’s an active enabler of your commercial activities.

What’s on the Form (NAR1)?

For a private limited company, the filing is done on Form NAR1. It’s a declaration of your company’s key structural details as of its incorporation anniversary date.

This includes:

• Company Particulars: Your registered company name and number.

• Registered Office Address: Your official address in Hong Kong.

• Share Capital: The number and class of shares issued.

• Directors: A current list of all company directors.

• Company Secretary: Details of your appointed Company Secretary.

• Shareholders: A current list of all members (shareholders) and their holdings.

A critical point to remember: you must file the Annual Return even if nothing has changed since your last filing.

The Golden Rule: The 42-Day Deadline

The deadline for the Annual Return is non-negotiable. You must file Form NAR1 within 42 days after the anniversary of your company's incorporation date.

There are no extensions. The Registrar of Companies has no power to grant one. To make sure you get it right, the CR provides a helpful Annual Return Filing Calculator online.

A major trap to avoid: if your 42-day deadline falls on a Saturday, the due date is not extended to the next working day. You are expected to file on or before that Saturday, making the 24/7 e-Services Portal the safest option.

How to File

You have two options for submitting your Annual Return:

1. Electronic Filing (Recommended): Use the CR’s 24-hour “e-Services Portal.” It’s fast, efficient, and you can pay the fee instantly by credit card.

2. Paper Filing: Download and complete Form NAR1, have it signed by a director or the company secretary, and mail it or deliver it in person with a cheque for the fee.

The Cost of Being Late: Don't Do It!

If you file within the 42-day window, the fee is a modest HK$105.

If you are even one day late, the penalties are severe and escalate quickly. The Registrar has no discretion to waive these higher fees.

Table 1: Annual Return (Form NAR1) Late Filing Penalties

Period of Delay (After 42-day deadline)	Higher Registration Fee Payable
More than 42 days but within 3 months	HK$870
More than 3 months but within 6 months	HK$1,740
More than 6 months but within 9 months	HK$2,610
More than 9 months	HK$3,480

Beyond these fees, failing to file is a criminal offense. The company and its responsible officers (including directors and the company secretary) can be prosecuted and face significant fines.

Your Secret Weapon: The Company Secretary

Every Hong Kong limited company must appoint a Company Secretary. This role is the linchpin of your corporate compliance. A key part of their job is to ensure the Annual Return is prepared correctly and filed on time, every single time.

Decoding the Profits Tax Return (PTR): Reporting Your Financials

The Profits Tax Return (PTR) is a completely different beast. It’s a confidential financial declaration made to Hong Kong’s tax authority, the Inland Revenue Department (IRD). Its sole purpose is to report your company’s financial performance so the IRD can calculate how much tax you owe.

Who’s in Charge? The Inland Revenue Department (IRD)

The legal basis for the PTR is the Inland Revenue Ordinance (IRO), which governs all tax matters in Hong Kong. The return is filed with the IRD, the only government body concerned with your company’s profits.

If the IRD issues a PTR to your company, you are legally required to complete and file it, even if your company made a loss or had no business activity (a "NIL" return).

The #1 Rule of HK Tax: The Territorial Principle

Hong Kong’s tax system is built on the territorial source principle. This means you only pay tax on profits that "arise in or are derived from" Hong Kong. Profits generated from activities conducted entirely outside Hong Kong (offshore profits) are generally not taxed in Hong Kong.

However, be aware of the new Foreign-Sourced Income Exemption (FSIE) regime. This recent change means certain types of foreign passive income (like interest and dividends) received in Hong Kong by a multinational group may now be taxable unless your company can prove it has sufficient "economic substance" (real operations, employees, and expenditure) in Hong Kong.

The Audit Requirement: The Biggest Hurdle

This is the single biggest difference between the two returns. For a limited company, your Profits Tax Return must be submitted with a full set of audited financial statements.

These statements must be prepared and signed off by a Hong Kong Certified Public Accountant (CPA). The annual audit is a mandatory, often time-consuming, and costly process that is an absolute prerequisite for filing your taxes correctly.

How is Your Tax Calculated?

The journey from your accounting profit to your taxable profit involves a few key steps:

1. Start with Accounting Profit: Begin with the net profit shown in your audited financial statements.

2. Add Back Non-Deductible Expenses: Add back costs that aren't allowed for tax purposes, such as capital expenditures, private expenses, or fines.

3. Subtract Non-Taxable Income: Deduct income that isn't taxable, like profits from selling capital assets or most bank interest.

4. Claim Capital Allowances: Instead of accounting depreciation, you claim "capital allowances" on certain assets like computers and machinery.

The final figure is your "assessable profit," which is what you pay tax on.

What Are the Tax Rates?

Hong Kong uses a two-tiered system to help SMEs:

Table 2: Profits Tax Rates for Corporations

Assessable Profits	Tax Rate
First HK$2,000,000	8.25%
Remainder of profits	16.5%

To prevent companies from splitting their business to take advantage of the lower rate, only one company within a group of "connected entities" can use the two-tiered system each year.

The Deadline Maze: Why Your Accounting Year-End Matters

Unlike the Annual Return's fixed deadline, the due date for your Profits Tax Return is variable.

• First PTR: A new company usually gets its first PTR about 18 months after incorporation and has three months to file it.

• Annual PTR: The IRD usually issues annual returns on the first working day of April, with a default deadline of one month.

However, nearly every business uses a tax representative to take advantage of the Block Extension Scheme. This scheme grants an automatic extension, and the exact date depends on your company's accounting year-end. This system makes professional representation almost essential for a manageable filing timeline.

Table 3: Profits Tax Return Filing Deadlines under Block Extension (2024/25)

Accounting Year-End	Extended Due Date
1 Apr – 30 Nov (N Code)	2 May 2025
1 Dec – 31 Dec (D Code)	15 August 2025
1 Jan – 31 Mar (M Code)	17 November 2025

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What Happens if You Mess Up?

The IRD imposes heavy penalties for non-compliance. Filing late can lead to a fine of HK$10,000 plus a further penalty of up to three times the tax undercharged. The IRD can also issue an estimated assessment based on their judgment and may prosecute the company's officers.

Annual Return vs. Profits Tax Return: The Ultimate Cheat Sheet

Here’s a side-by-side comparison to make the differences crystal clear.

Table 4: At-a-Glance Comparison

Aspect	Annual Return (AR)	Profits Tax Return (PTR)
Purpose	Corporate Governance & Transparency	Fiscal Assessment & Tax Collection
Governing Body	Companies Registry (CR)	Inland Revenue Department (IRD)
Key Form	Form NAR1	Form BIR51 (for corporations)
Data Required	Company Structure (Directors, Shareholders)	Financial Performance (Profits, Losses)
Key Document	None (Just the signed form)	Audited Financial Statements by a CPA
Deadline	Fixed: 42 days after incorporation anniversary	Variable: Based on accounting year-end
Extension?	No	Yes (with a tax representative)
Penalties	Escalating fees (HK870−HK3,480)	Fines + up to 3x tax undercharged
Public?	Yes, it's a public record	No, it's confidential

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Your Action Plan for Stress-Free Compliance

Feeling overwhelmed? Don't be. With a solid system, managing these two filings can be straightforward.

Master Your Calendar

Create an annual compliance calendar with these key dates:

• Your company's incorporation anniversary.

• The 42-day deadline for your Annual Return that follows.

• Your company's financial year-end.

• The relevant Block Extension Scheme deadline for your Profits Tax Return.

Lean on the Pros

View your Company Secretary and Auditor/Tax Representative as strategic partners, not just costs.

• A good Company Secretary will ensure your Annual Return is filed flawlessly and on time.

• A qualified Tax Representative gives you access to the deadline extension and ensures your tax calculations are accurate.

• An experienced Auditor is mandatory for signing off on the financial statements your PTR requires.

Record Keeping

Meticulous record-keeping is the foundation of good compliance.

• Keep your statutory registers (of members, directors, etc.) updated with your Company Secretary.

• Preserve all financial records—invoices, bank statements, receipts, contracts—for at least seven years. Cloud accounting software can be a lifesaver here.

Checklist for New Companies

• [ ] Appoint a qualified Company Secretary immediately upon incorporation.

• [ ] Decide on your company's financial year-end.

• [ ] Mark your first incorporation anniversary on the calendar and the 42-day AR deadline after it.

• [ ] Mark 18 months from your incorporation date—this is when your first PTR is likely to arrive.

• [ ] Engage an auditor and tax representative well before your first PTR is due.

Annual Checklist for Established Companies

• [ ] After your incorporation anniversary, confirm the 42-day deadline for the Annual Return.

• [ ] Send any updates on directors or shareholders to your Company Secretary.

• [ ] Ensure your Company Secretary files Form NAR1 on time.

• [ ] After your financial year-end, kick off the annual audit process with your CPA.

• [ ] When the PTR arrives (usually in April), forward it to your tax representative.

• [ ] Provide your signed, audited financial statements to your tax representative for filing.

• [ ] Confirm the PTR has been filed before the Block Extension deadline.

By understanding the distinct roles of the Annual Return and the Profits Tax Return, and by putting a clear system in place, you can turn compliance from a source of stress into a seamless part of running a successful and credible Hong Kong business.