Guide to Filing Annual Returns in Hong Kong

Guide to Filing Annual Returns in Hong Kong

Guide to Filing Annual Returns in Hong Kong

Filing annual returns in Hong Kong is a mandatory and regulatory obligation for businesses. From gathering the right documents to understanding the significance of timely submissions, this guide offers a clear pathway through the process, ensuring that you meet all necessary requirements while maintaining the efficiency and integrity of your business operations.

Introduction to Annual Returns in Hong Kong

In Hong Kong, operating a business requires adherence to certain regulatory requirements. One key requirement is filing an annual return with the Hong Kong Companies Registry. This submission provides a yearly snapshot of your company’s fundamental information, promoting transparency and keeping the authorities updated.

What Are Annual Returns?

An annual return (Form NAR1) is a compulsory document that all registered companies in Hong Kong must submit except for certain exempted businesses. It provides a comprehensive overview of your company’s details at a given time.

Why Is Timely Filing of Annual Returns Essential?

Timely filing of annual returns is vital for compliance, credibility, and the smooth operation of your business in Hong Kong. It’s not just a legal formality; it impacts your company’s standing and operations.

Maintaining Compliance and Avoiding Penalties
Late filing breaches the Companies Ordinance, and it may result in fines. In severe cases, it may lead to deregistration, affecting business continuity and reputation.
Preserving Business Credibility
Demonstrating commitment to transparency is crucial for attracting investments, forming partnerships and gaining clients’ trust.
Ensuring Accurate Records
Aligning internal records and the Companies Registry information helps support shareholder communication and maintain legal clarity for your company.
Streamlining Future Processes
Ensure uninterrupted business operations by avoiding delays in business licensing due to pending filings.
Filing of Annual Returns

What Information do I need for my Annual Returns Filing Process?

The NAR1 form itself is a straightforward document designed to capture essential details about your company.

The following is a breakdown of the key information you will require when filling in the NAR1 form:

  • Company Particulars: This section includes basic company information.
  • Share Capital: Details about the total authorised share capital of the company and share types.
  • Directors and Company Secretary: Information about all current directors and the individual appointed as the company secretary, including their full names, residential addresses, nationalities, and HKID (if applicable).
  • Shareholders: A breakdown of your company’s shareholders, including their names and the number of shares they hold.
  • Changes since Last Return: This section is for you to specify any changes in your company’s information since the last annual return filing.
  • Declarations: The form concludes with declarations to be signed by a company director or the company secretary.

What are the Documents Required?

It is important to assemble the essential documents to ensure an accurate filing process, which include:

  • Company Incorporation Certificate: Proof of company registration issued by the Companies Registry upon incorporation.
  • Hong Kong Identity Cards (HKID) or Passports: For directors and shareholders who are Hong Kong residents, you’ll need copies of their HKIDs. For non-resident directors and shareholders, copies of their passport ID pages will suffice.
  • Shareholder Register: This internal document maintains a record of your company’s shareholders.
  • Minutes of the Latest Annual General Meeting (AGM): While not always mandatory, having a copy of the most recent AGM minutes is helpful for reference while completing the form.
  • Updated Company Information: While optional, providing proof of changes to your company, such as a new director’s appointment, is important for the record.

Understanding Your Annual Return Filing Requirements

Navigating the requirements for filing annual returns is crucial for businesses in Hong Kong, to ensure compliance and avoid penalties. Here’s a breakdown of the annual filing deadline, annual filing fees and late filing penalties.

What is the deadline to file Annual Return for Hong Kong companies?

Local private companies are required to submit their annual returns within 42 days after the anniversary of their incorporation date. This means that if a private company was incorporated on 6 May 2023, it is required to file its annual return on 17 June 2024. You can use the Annual Return Filing Calculator to calculate your annual filing due date.

For public companies, if your financial year begins before 3 March 2014, you must file your annual return within 42 days after the date of the company’s Annual General Meeting (the prescribed time period). If your financial year begins on or after 3 March 2014, you must file your annual return within 42 days after the company’s return date. The return date is the date that is 6 months after the end of the company’s accounting reference period. Accounting reference period is the period by reference to which the company’s annual financial statements are to be prepared.

For companies limited by guarantee, if your financial year begins before 3 March 2014, you must file your annual return within 42 days after the date of the company’s Annual General Meeting (the prescribed time period). If your financial year begins on or after 3 March 2014, you must file your annual return within 42 days after the company’s return date. The return date is the date for a guarantee company is 9 months after the end of the company’s accounting reference period. Accounting reference period is the period by reference to which the company’s annual financial statements are to be prepared.

What are the annual filing fees?

For a local private company, an annual registration fee of HK$105 is payable if the annual return is filed within the stipulated deadline.

For a local public company, an annual registration fee of HK$140 is payable if the annual return is filed within the stipulated deadline.

For a local company limited by guarantee, an annual registration fee of HK$105 is payable if the annual return is filed within the stipulated deadline.

Annual Return Filing Calculator

What are the penalties for late filing?

It is important to submit your annual return within the stipulated deadline to avoid the hefty penalties, and in serious cases, the company and its officers (directors, company secretary) can be prosecuted and fined upon conviction. Below is a table of the registration fee payable for the late delivery of an Annual Return.


If the Annual Return is delivered:Private Company (HK$)Local Public Company (HK$)Company limited by Guarantee (HK$)
More than 42 days after but within 3 months after the company’s return date8701,200870
More than 3 months after but within 6 months after the company’s return date17402,4001740
More than 6 months after but within 9 months after the company’s return date2,6103,6002,610
More than 9 months after the company’s return date3,4804,8003,480

Pro Tips for Efficient Filing

Ensuring a smooth filing process can be significantly streamlined with these expert tips:

  • Digital Preparation: Organise documents digitally for quicker online submission.
  • Guidance Resources: Utilise the on the NAR1 form from the Companies Registry for detailed instructions.
  • Reminder Systems: Set early reminders to allocate sufficient time for document preparation, form completion, and submission.
  • Professional Assistance: For companies with complex structures, leveraging services from professionals like accountants or corporate secretarial service providers, such as BoardRoom, can ensure precise filing and compliance.

Common Misconceptions About Annual Returns

Filing an annual return can be a daunting task. Thus it is vital to clarify some common misconceptions ahead of time so you can complete the process smoothly.

The Purpose of Annual Returns
Contrary to popular belief, annual returns do not measure a company’s financial performance. Their primary purpose is to keep the Companies Registry updated with current details about your company’s key information.
Frequency of Filing
A common error among newcomers is the assumption that annual returns are a one-off requirement. In reality, these are yearly obligations. Filing is not required in the year the company was incorporated.
Who Needs to File
The assumption that only public companies are obligated to file annual returns is wrong. All registered entities in Hong Kong, barring certain exemptions, must fulfil this requirement, regardless of their status as private or public companies.
Complexity of Filing
The perception that filing an annual return is a burdensome process laden with paperwork is outdated. With the advent of online platforms like the e-Services Portal, submitting your NAR1 form has become a streamlined process.
Reporting Company Changes
Overlooking the need to report minor updates is a misstep. Every alteration, be it a change in directorship or company address, needs accurate representation in your next annual return to avoid legal and compliance complications.

Your Checklist for a Hassle-Free Filing

To streamline your annual returns filing process, here’s a comprehensive checklist to guide you from preparation to post-submission.


    Preparation Phase

    Start these preparations at least a month before your filing deadline:

    • Gather Documents: Assemble all necessary documentation, including your company’s incorporation certificate, directors’ or shareholders’ ID copies, the shareholder register, and the latest AGM minutes, if they’re relevant.

    • Review Company Information: Verify any recent changes, such as new director appointments or address updates.

    • Familiarise Yourself with the Form: Obtain the NAR1 form and review the guide provided by the Companies Registry to ensure accurate completion.

    Filing Process

    Follow this step-by-step guide two weeks prior to the deadline to ensure timely filing:

    • Step 1 – Prepare Soft Copies: Ensure you have digital versions of all required documents.

    • Step 2 – Access the e-Services Portal: Navigate to the Companies Registry’s e-Services Portal.

    • Step 3 – Complete the NAR1 Form Electronically: Fill in the form carefully with the necessary details.

    • Step 4 – Review and Submit: Double-check the information for accuracy, then proceed to submit and pay the filing fee through the portal’s payment options.


    Within one week after the filing, you should finish the following tasks:

    • Verify Submission: Check your email for the receipt and confirmation from the Companies Registry acknowledging your successful submission.

    • Retain Records: Keep digital or physical copies of the submitted NAR1 form, payment receipt, and other pertinent documentation for future reference.


    How Can We Help with Your Annual Returns Filing?

    At BoardRoom Hong Kong, we offer professional corporate secretarial services with a dedicated team of specialists to simplify your annual returns filing process. We handle all aspects of filing, from gathering documents to meeting deadlines, guaranteeing your company’s compliance with regulations. This allows you to focus your valuable time and resources on core business activities.

    Looking to streamline your annual returns filing process today? Let us guide you through every step with our tailored advice.

    Frequently Asked Questions (FAQs)

    Are foreign companies operating in Hong Kong required to submit annual returns?

    Yes. Foreign companies with operations in Hong Kong, such as branch offices, are generally obligated to submit annual returns. Nonetheless, their requirements may vary slightly compared to domestic businesses.

    What companies are exempt from filing annual returns in Hong Kong?

    Sole proprietorships in Hong Kong are usually exempt from filing annual returns. Owned and run by a single individual with unlimited liability, they are not subject to the formal registration process typically demanded of other business types.

    Can I file an annual return by mail or fax?

    The Hong Kong Companies Registry prioritises submissions through its e-Services Portal for efficiency and compliance. While paper filings may have been possible in the past, it’s advisable to confirm directly with the Registry to ensure a compliant filing process.

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    How to take a strategic approach to regulatory compliance in Hong Kong

    How to take a strategic approach to regulatory compliance in Hong Kong

    How to take a strategic approach to regulatory compliance in Hong Kong

    For long-term business success and credibility, regulatory compliance is crucial. But shifting regulatory landscapes pose a significant challenge to Asia-Pacific (APAC) businesses looking to grow throughout the region. Modern multi-country companies must ensure their compliance frameworks address the specific mandates and expectations of each jurisdiction in which they operate.

    In this article, BoardRoom’s Group Director, Legal & Compliance Ai Min Lim and Hong Kong Compliance Director Davis Lau explain how businesses can take strategic action to ensure their compliance practices are aligned with the expectations of regulators, clients and partners. We will also explore the importance of building an internal compliance culture and choosing business partners that share your vision for strong compliance.

    Regulatory requirements in the Asia-Pacific region

    Following recent high-profile financial crime cases and the economic disruption of COVID-19, regulators across APAC are under mounting pressure to promote good governance and fair competition in their respective economies. Compliance requirements continue to change, making adaptability crucial for businesses operating across borders.

    “The regulatory landscape is evolving, with companies now facing escalating regulatory demands,” says Davis Lau.

    The main types of compliance

    In the Hong Kong business world, compliance can be broken down into the following three categories:

    Statutory compliance

    The local laws or ‘ordinances’ that companies must fulfil to operate their businesses (eg. anti-money laundering laws)

    Regulatory compliance

    The standards and rules that govern how laws are enforced (these are enforced by administrative bodies and often have the same force as laws)

    Corporate compliance

    Good governance practices that are strongly encouraged by regulators but not required under law or regulation.

    To continue operating and avoid penalisation, companies must comply with all relevant statutory and regulatory compliance requirements. However, the Hong Kong compliance agenda is now evolving beyond basic compliance to incorporate broader strategic issues, prevalent within the third category – corporate compliance.

    Companies that take a holistic approach to compliance by pursuing all of the above categories with equal dedication will earn increased trust from their stakeholders, leading to greater competitive advantage.

    Strategic compliance starts at the top

    Strategic compliance

    Taking a strategic approach to regulatory compliance will ensure your business not only meets but exceeds its governance goals. According to Ai Min Lim, one key strategy is to make sure your company’s compliance efforts start from the top.

    “Management must recognise that they have to put resources into compliance and invest in it, because it’s not just ‘good to have’ — it’s absolutely crucial to protect the business,” she says.

    Compliance cannot be driven by the Compliance Department (or equivalent) alone. It is the responsibility of the management team to set the tone and ensure that compliance is part of the company culture. The importance of compliance and the messaging around it must cascade down to staff across all levels to ensure uniform practice across the organisation.

    Every member of an organisation, from the mailroom to the boardroom, needs to work together to achieve compliance. It is not just a process or policy on paper, but something that is operationalised and its importance understood at all levels of the organisation.

    Build a culture of compliance

    To create a compliance program that goes beyond ‘checking the boxes’, leaders need to start dismantling outdated perceptions of compliance as a burden.

    Corporate workers are generally very busy with competing priorities. So with changes to regulations having a direct impact on day-to-day processes, it can be challenging for people to see compliance as a valuable part of business.

    Key ways to cultivate an appreciation of regulatory compliance include:

    Showing workers how compliance fundamentally makes their jobs easier
    Appointing compliance champions in each business unit
    Fostering two-way dialogue between employees and compliance officers/champions (eg. via support channels and Q&A sessions)

    Once you have secured buy-in from all staff, your company’s risk of misconduct and subsequent penalisation will dramatically reduce.

    Common challenges of compliance

    All businesses in Hong Kong, no matter their size or industry, face similar obstacles in the pursuit of regulatory compliance. As the first step towards your compliance vision, it is important to identify these common challenges and explore how they might impact your organisation.

    Keeping up with evolving requirements

    According to a 2022 Regulatory Outlook report by Deloitte, the changeable nature of corporate rules across APAC means it will be increasingly difficult for organisations to maintain standard internal controls and processes. Relying on regulatory compliance management software alone is no longer an option.

    For example, a new inspection regime is coming into effect under the Companies Ordinance for Protecting Personal Information. The mandatory regime applies to Hong Kong companies and registered non-Hong Kong companies (including listed companies) that must now take a number of time-sensitive actions to meet the new requirements.

    To maintain ongoing compliance, companies must predict how emerging regulations may impact not only their compliance processes but also their business models and strategic direction. On top of this, they must correctly interpret the meaning of new laws, which are often expressed in complicated legal speak.

    There is no one-size-fits-all approach

    With local requirements varying greatly depending on the size, industry and location of your business, compliance is usually not a straightforward task.

    “Compliance for a startup and compliance for a multinational corporation are very different concepts,” says Davis. This means there’s no single framework, roadmap or workflow tool available to make compliance easier. Its nuanced nature requires a tailored solution.

    Fortunately, Hong Kong recognises that companies require some flexibility to implement the best governance practices to suit their circumstances. For example, while publicly listed companies are expected to comply with the Corporate Governance Code, they are allowed to deviate as long as they can provide considered reasoning in their annual report.

    One-size-fits-all approach

    How to stay across regulatory changes

    Stay across regulatory changes

    From setting the vision, devising the strategies, providing relevant training and then reporting on results, regulatory compliance requires significant resources to be effective.

    Partnering with experienced providers across all business endeavours takes the guesswork out of responding to complex rules and regulations. Ultimately helping your staff understand their directive and potential implications. Plus, they can help you make strategic compliance decisions that align with changes in corporate governance and other regional-level activities.

    Start implementing strategic regulatory compliance today

    Strategic regulatory compliance benefits your business in several crucial ways. It protects you from reputational damage and hefty fines and promotes positive relationships with key stakeholders (including customers, staff and regulators) that will propel your business towards its goals.

    Contact us to speak with a local expert about regulatory compliance in your organisation.

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    Why multinationals are consolidating their taxes with one provider

    Why multinationals are consolidating their taxes with one provider

    Why multinationals are consolidating their taxes with one provider

    When it comes to business operations, tax and accounting are two of the most vital and complicated responsibilities. Mistakes in these areas can have serious legal repercussions, so they need to be handled with a high level of accuracy. On top of this, companies that conduct business in multiple Asia-Pacific jurisdictions need to comply with all applicable local legislation – a complex task.

    In Deloitte’s 2021 Asia Pacific Tax Complexity Survey, 80% of respondents said the region’s tax systems are more intricate now than they were in 2018.

    Many tax and accounting professionals aspire to engage a full-service business tax advisory firm in Hong Kong, China, Malaysia or Singapore to coordinate all their accounts in each region. However, not all businesses take this option, especially if they have expanded rapidly or are new to the region.

    In many cases, organisations begin a new tax management partnership each time they branch into a new country. It is a common occurrence, with service providers offering thorough knowledge of local tax rules and regulations. But managing multiple tax advisors can be difficult.

    It is not unusual for tax professionals in multi-country businesses to come up against:

    • Complicated cross-border tax implications and treaties: different statutory and regulatory compliance requirements can cause delays, confusion and penalty.
    • Communication problems: variations in language and culture can make it hard to harmonise the activities of multiple tax partners.
    • Staff attrition: staff turnover is increasing due to the great resignation.
    • Technology differences: cross-border operations can be difficult due to regional differences in technology and communication.

    Is your business facing these challenges? You may benefit from consolidating your tax management with a business tax advisory service in Hong Kong, China, Malaysia or Singapore. Wherever your company is based, an experienced tax services firm will provide you with a single point of contact, making multi-country tax coordination simple.

    Read on to discover the benefits of consolidating your taxes with one provider as well as tips on choosing an appropriate partner for your business.

    Local expertise is invaluable

    Asia-Pacific governments regularly enact new corporate rules and regulations, and companies must stay across the changing tax regimes of each country they operate in.

    An experienced tax advisor can help you satisfy all local obligations while successfully managing multi-country operations. The tax rules in Hong Kong can be particularly tricky to navigate, so the advice of a knowledgeable service provider is invaluable.

    Tax breaks and exemptions can easily go unnoticed if you lack access to local expertise. Outsourcing your accounting and compliance functions to a third party professional will ensure your company applies for all tax benefits and incentives it is entitled to.

    Seeking a reputable tax firm in Hong Kong that has solid connections in neighbouring regions will ensure your cross-border operations are executed with professionalism and accuracy, while meeting all statutory obligations.

    Effective communication

    Prior to selecting a tax partner, find out whether you will have one point of contact or need to communicate with multiple individuals in different regional offices. The second arrangement is undesirable, as you would need to navigate all the same issues that come with in-house tax administration.

    The best business tax advisory firms connect clients with a network of tax experts via one contact point. This scenario provides you with access to quality tax advice and services without the problems that come with coordinating multiple teams.


    The advantages of working with one unified team can also have significant financial rewards. Tax benefits and incentives are maximised across your business while errors, discrepancies and miscommunication amongst suppliers are reduced. Having one point of contact will also help you align your company goals on a global level, keeping consistency and reliability throughout your business.

    When handling tax across several countries, you also need to be mindful of cultural differences. The Asia-Pacific region encompasses a variety of cultures, traditions, religions and languages, so it is important to engage a trusted tax firm that can guide you through cross-border business with sensitivity and success.

    A highly trained international tax advisor in Hong Kong, China, Malaysia or Singapore will be able to help you adapt your working styles to suit specific Asia-Pacific locations.

    What is the meaning of tax compliance?

    Authorities across the Asia-Pacific region are paying closer attention to corporate tax activities as rules and regulations tighten. No business wishes for a tax compliance audit, so understanding tax compliance meaning is imperative. Finance and account staff are required to work harder with fewer resources as budgets and employee numbers decline. This adds pressure to your internal teams as they navigate Hong Kong tax compliance.

    A changing global workforce presents an additional challenge for businesses: teams and resources are frequently pushed thin as employees hunt for new jobs that offer better salaries or wellbeing programs.

    Regardless, legal obligations must be followed. Companies must strive to comply with Hong Kong’s strict statutory requirements by keeping up with all tax payments. Non-compliance can have severe legal consequences.

    Failure to comply can be due to a small mistake, such as overlooking a detail in statutory documents or miscalculating debts.

    Ensuring adherence to changing requirements can be extra difficult if your company has business partners across the Asia-Pacific region and the world.


    When you partner with an established third-party provider that understands local tax requirements in Hong Kong and throughout the wider Asia-Pacific region, your key decision-makers will have more availability to focus on company expansion. You can enjoy peace of mind, knowing that your tax administration is compliant with evolving local laws, as well as being reported correctly and on time.

    If any compliance concerns emerge, your tax partner will be able to respond quickly and capably.

    Top-tier service providers undertake a comprehensive analysis of your business structure, prior to giving advice on tax administration and future planning. This approach enables your teams to take advantage of tax benefits for your business in the long term.

    Selecting a premium tax advisor

    Handing over your tax administration to a reputable third-party provider will save you time and money: the efficiency of your teams will improve, increasing your profitability as a result.

    When it comes to taxes, cost considerations are crucial, but selecting the cheapest service provider is rarely a good move. A firm’s track record will provide a good indication of the kind of service you would receive.

    It is important to ask potential tax advisors questions like:

      How large is your client base?
      How long have you been running?
      What have you achieved in the years since you opened?
      What results have you delivered for clients?
      Do you operate in multiple regions?
      Can you support my business as it grows across borders?
      What is your staff retention like?
      Do you have many long-term employees?

      If the tax services firm you are considering provides confident, positive answers to these questions, it is a good sign their performance standards are high. You can have faith they will coordinate your taxes with skill, efficiency and professionalism.

      With sought-after providers like BoardRoom, you will enjoy:

      • High accuracy: BoardRoom has a strong 50-year history of reliable service and a reputation for quality.
      • Personalised service: due to low personnel turnover rates, we always have experts on hand to promptly and properly service your needs.
      • Superior knowledge: our highly trained professionals have an in-depth understanding of local legislative landscapes across the Asia-Pacific region.

      Branch out with confidence

      It is important to ensure your present tax activities are in check, but looking ahead to your business’s tax management in the years to come is just as crucial.

      Are you already operating in multiple countries across the Asia-Pacific region? If so, you may be planning to expand into additional regions. As part of your planning, be sure to factor in the extra statutory requirements and cultural nuances you will face.

      This is why global expertise is so important when it comes to selecting a specialist tax services provider.

      As an example, BoardRoom partners with Andersen Global, a network of tax and legal professionals operating in 315 locations worldwide. Our international relationships strengthen our knowledge of cross-border corporate taxation issues.

      Entrusting your taxes to an international provider guarantees you will have the specialised legal counsel you need to expand and prosper.

      The advantages of outsourcing multiple functions

      When comparing potential advisory firms, find out whether they are able to handle several business functions alongside tax.

      Company incorporation and corporate secretarial services are closely connected to tax management, and professional administration of these functions is necessary for successful expansion. Opting for a full-service firm will save you money and time, which allows you to channel more resources into growing your business and achieving your main goals.

      As businesses expand, efficiency becomes all the more important.


      Outsourcing several responsibilities to one service provider is a wise move because they already have a strong grasp of the way your business operates. They will be able to provide assistance in a range of capacities with very little hassle.

      Enhance productivity through consolidation

      Consolidating several corporate responsibilities with a single tax advisory firm has many benefits – particularly when you think about the money and time required to liaise with multiple firms throughout the region. You will enjoy significant yearly savings, especially if your partner can identify and apply for all the local tax breaks and incentives your company is entitled to.

      Premium tax outsourcing will lead to faster and smoother processes in many areas of your business.

      The task of tax administration only grows more complex. That is why engaging a skilled tax services provider is important to support your growth and ensure compliance with local statutory requirements as they evolve.

      Interested in consolidating your company’s tax functions with one service provider? Reach out to our tax team today.

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      Hong Kong 2022-23 Budget – Key Highlights on Tax and Business-Related Measures

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      Delivered by the Financial Secretary, Mr Paul Chan, the Hong Kong 2022-23 Budget was announced on 23 February 2022. The expansionary budget was curated to provide immediate Covid-19 support to its people and businesses and to achieve future economic growth as the country battles with its fifth wave of COVID-19 outbreak.

      Some of the key highlights from this year’s budget includes new and extended personal and corporate tax incentives, business relief measures and long-term tax planning initiatives. As businesses make adjustments to their tax planning, BoardRoom has identified key highlights from the Hong Kong budget to help businesses minimise their tax charges and optimize their earnings.

      Download our Hong Kong Budget 2022-23 Report for a concise summary about how these implications might affect your corporate tax planning.

      If you have any questions relating to the information contained in this report or require tax advisory services, please contact our tax advisors via email or call us at +852-2598 5234

      Profit Tax
      Other Business Relief Measures
      Stamp Duty Wavier
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      On 24th February 2021, Finance Secretary Paul Chan announced the Hong Kong Budget 2021.

      The budget suggests a targeted approach as the authorities focus on investing in infrastructure and promoting the development of industries in their bid to optimise strategies.

      There is also a significant focus on digitalisation in this year’s Budget, further emphasising the importance of being digitally ready in today’s environment.

      If you have any questions relating to any of the information contained in this report, please contact our tax advisors via email or call us at + 852-2598 5234.

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      Does your business survival depend on sustainable cost-cutting strategies?

      cost-cutting strategies

      Does your business survival depend on sustainable cost-cutting strategies?

      Which costs to cut to secure your business’ future

      Key insights

      • Cost-cuttingdemands strategies that adopt a sustainable approach to operational efficiency and employee wellbeing
      • Efficient management of working capital supports a renewed focus onthe immediate, medium, and long-term impact
      • Smart outsourcing with trusted partners sharpens expertise across critical operations


      After experiencing a slowdown in recent years, both the US and European economies have had an impact on the Asian export market, contributing to its export decline in 2023. This is the type of economic downturn that traditionally results in retrenching employees as an immediate cost-cutting measure.

      However, the global trend has driven a people-first approach to managing through this unprecedented downturn; every business has customers and stakeholders watching how they respond to market challenges to balance people and profit.

      Leaders ready to do things differently can look to sustainable cost-cutting strategies for guiding their companies through change with reduced risk in 2024:

      1. Smart management of working capital
      2. Outsourcing payroll or improving processes
      3. Outsourcing finance, tax,and accounting services
      4. Administering Employee stock option plans
      5. Leverage industry grants and economic stimulus

      By prioritising what drives value for your organisation in the long-term, sustainable cost-cutting strategies focus on positioning the company to survive now and thrive through an economic recovery.

      01 Smart management of working capital

      Cash flow is critical in a crisis, and minimising investment in working capital — what we spend to get the job done and keep the business running — is vital.

      In 2023, there has been a shift in focus towards operational efficiencies, and effective working capital management. Growth and development may be temporarily on the back burner, but this is the time to get the business-critical functions of your organisation right. Containing costs to minimise reliance on lenders will position your business to recover strongly as economic conditions bounce back from a slowdown in 2023.

      A renewed interest in working capital demands a critical assessment of the entire sales pipeline; inventory levels, distribution points, and product viability are all on the table.

      Smart leaders are looking at strategies for cost-cutting, including:

      • Proactive Invoicing — offering customer incentives like early payment discounts
      • Cash Management — paying suppliers when they’re due, not before
      • Inventory — lowering stock thresholds to reduce risk butmaintain agreed customer service levels
      • Reducing overheads by outsourcing backend services

      Next steps: Assess your working capital costs and financial forecasts to confirm what you can bring inhouse and which backend services are smarter to outsource.

      02 Outsource your payroll or improve your processes

      Outsourcing backend services like payroll has a poor reputation as being the inevitable result of retrenchment or a sign of instability. However, payroll processes are crucial to managing through an economic downturn or slowdown. Having a smooth payroll process drives employee satisfaction, increases employee morale and reduces the risks of payroll legislative penalties,

      There are two ways to outsource payroll to streamline operations:

      • Completely outsourcing the payroll function and services to an external provider
      • Using a cloud-based SaaS HR management system (“HRMS”) — this freesup HR from administrative tasks by empowering automatic and self-service tasks.

      Outsourcing your full payroll function reduces HR management intervention, granting flexibility for other in-house duties such as growing the team and business. It is especially advantageous for global expansion, ensuring lean and effective payroll operations team that is in compliance with local regulations.

      As payroll requires numerous tasks relating to the calculation and processing of employee salaries, benefits and deductions, having a cloud-based SaaS HR system further enhances the efficiency of payroll outsourcing. Your payroll tasks can now be executed remotely while your service provider handles the maintenance, technical support, and data backup. Additionally, outsourcing your payroll with a SaaS HR management system can often be more cost-effective compared to employing a dedicated HR professional to handle the same tasks.

      Overall, these two approaches can also unlock unexpected benefits and expose the significant opportunity cost of not outsourcing key functions, boosting visibility, streamlining internal processes, and staying compliant across multi-country payroll and tax conditions.

      Each model can benefit their corporate objectives while managing costs, cross-border functionality, and the personal data privacy of employees.

      Next steps: Find Boardroom’s payroll outsourcing services or SAAS solutions to streamline your payroll management according to your business needs.

      03 Outsource backend financial support across accounting and tax planning

      In an economic downturn, every organisation focuses on the very core of the business: the what and the why. It’s never been more important to have experts aligning your financial processes and procedures with your organisational goals. One core consideration in cost reduction is to consider outsourcing your accounting and bookkeeping services to ensure the business runs smoothly, while internal staff focuses on business survival and generating revenue.

      By choosing a financial services partner equipped to manage your operational and strategic finances and accounting, businesses bring external expertise and new perspectives on long-term accounting and tax planning.

      Support for accounting functions may include:

      • Ensuring your bookkeeping and accounting comply with local standards in Hong Kong
      • Providing detailed insight into your business by performing thorough analysis on your P&L (Profit and Loss), EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortisation) ratios
      • Streamlining your operations by sorting accounting reports, consolidating group accounts, and offering payment support facilities for correct fund distribution and administration

      Support for tax planning may include:

      • Location planning for tax offset maximisation
      • Streamlining cross-border transactions to simplify complex deals
      • Minimising and deferring payments while staying fully compliant
      • Strategic planning to leverage falling asset values

      An additional unexpected benefit of external support across accounting, tax, and financial reporting is the establishment of effective data reporting, analysis, and forecasting. This data helps to inform planning, working capital decisions, and support for your enterprise to apply for eligible economic grants and stimulus packages and ensure the governance is in place to stay compliant with funding conditions.

      Next steps: Put all your financial operations on the table for expert review. Focus internal skills on long-term planning and get external support for tax, accounting and reporting.

      04 Empower the team with employee stock option plans for talent retention

      The business landscape of Hong Kong is highly competitive with intense demand for talented individuals. To thrive in this environment and achieve sustainable growth in a business, attracting and retaining talent have become the key. However, traditional methods of employee compensation may not always be feasible, especially when your cash flow is limited. If you don’t have cash on hand but want to reward and retain employees, consider an Employee Stock Options Plans (“ESOPs”).

      As companies like Slack and Atlassian have led the way in remote-first workforces, competition for skilled employees demands a different way of approaching the employee experience. Unlocking benefits of employee equity plans have been increasingly popular in recent years as companies look for a different approach to boost employee engagement and maintain productivity.

      Create a purpose-built plan to fit your organisation’s and employee’s needs and create a sense of ownership to keep the best and brightest employed in the long term. Your new stock plan — or updates to your current plan should:

      • Keep liquidity by creating long-term incentives to replace short-term cash bonusesor salary increase expectations
      • Reward high-performance and employees who increase operational efficiency during an economic downturn
      • Use performance metrics relevant to your organisation — look at total shareholder returns (“TSR”), client retention, and return on equity (“ROE”) and adapt goals to conditions
      • Drive growth by incentivising staff towards a common business goal

      Next steps: Contact BoardRoom to help you manage your Hong Kong-based or global ESOP and keep the workforce focused on revenue-generating initiatives.

      05 Access government and industry grants and economic stimulus

      Going through the economic slowdown in 2023, Asian markets have seen a new range of government and industry grants and other economic stimulus packages. These initiatives include the Funding Scheme for Youth Entrepreneurship in the Guangdong-Hong Kong-Macao Greater Bay Area, which provides entrepreneurial support and incubation programmes to young entrepreneurs in Hong Kong, along with capital subsidies. Additionally, the SME Financing Guarantee Scheme enables smaller-sized enterprises to secure financing from lenders to meet their business requirements, while the Information Technology Development Matching Fund Scheme supports travel agents in implementing upgrades within the sector.

      If your organisation operates across borders or is open to funding to expand operations, you may be eligible for funding support.

      Support from government or industry grants demands stringent corporate governance; you may need a guide to accessing, implementing, and leveraging new opportunities across borders.

      Next steps: Get expert help to find Hong Kong support for enterprise and cross-border funding opportunities, apply for funding, and stay compliant across jurisdictions.

      How sustainable is your cost-cutting in 2024?

      Cost-cutting strategies to manage through an economic slowdown look different today from the Global Financial Crisis or the crash; leaders must balance short-term needs with long-term business survival.

      It is no longer enough to rely on reducing headcounts, freezing salaries, and scrambling to maintain productivity to achieve cost-cutting goals. Smart organisations are taking new strategies and approaches to old problems: keeping employees committed with stock options over pay rises, looking for market and industry support, and getting smarter about the benefits of outsourcing.

      The right outsourcing partnerships are key; who you choose to support your business can define your organisation and your leadership. Look for providers that support your workforce with administrative and financial expertise that drives business recovery.

      Talk to BoardRoom about support for sustainable cost-cutting strategies.

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