My Hong Kong company claims its profits are offshore. Do I still need an audit?
Yes. An offshore claim is a tax position; it does not change the Companies Ordinance audit duty. IRD still expects audited accounts with the return, plus a statement of reasons and supporting details for the offshore claim.
Two separate things
- Audit: every Hong Kong company needs an audit unless it is dormant (ss.394, 447). Where profits arise has no effect.
- Offshore claim: a tax claim made in the profits tax return.
What IRD's notes require
- Any offshore claim must be accompanied by a statement of reasons that can be backed by evidence on request (Note C1).
- Details of profits or income claimed to have an offshore source, and the related direct and indirect expenses, must be provided (Part 1, Note 3(i)).
- The audited financial statements must be submitted with the return for companies with gross income, except dormant companies.
How the audit helps (and what it does not do) The audit tests revenue, costs and records. It does not decide whether profits are offshore; that is a tax determination. Auditors may ask for contracts and flow-of-work records because they affect revenue and disclosure.
Practical tips
- Keep contracts, correspondence, shipping and payment records showing where operations are carried out.
- Tell the auditor about the offshore position when the audit starts.
- Take tax advice before claiming; this answer does not cover how the claim is assessed.
Legal basis
- Companies Ordinance (Cap. 622), ss.394, 447
- Inland Revenue Ordinance (Cap. 112), s.14
Sources
Applies to 2026 · Last reviewed 29 October 2026
General information for business owners, not legal, tax or professional advice. Rules change, so check the sources or ask a licensed professional before you act.
Related questions
- Does every Hong Kong limited company need an audit?Yes. Every Hong Kong company must have an auditor for each financial year and its financial statements audited, whatever its size or whether it trades. The only company that escapes is a qualifying private company that has validly become dormant under s.5 and s.447 of the Companies Ordinance.
- Do I still need an audit if my company had no revenue or no business activity?Yes, unless the company has formally become dormant. Having no sales does not make a company dormant in law. If it had any expenses, bank charges or other recorded transactions, the audit duty continues for that year.
- My company is loss-making. Do I still need to audit it?Yes. Profit or loss has no bearing on the audit requirement. A loss-making company is audited every year, and the auditor will also look closely at going concern.
- How do I make my Hong Kong company dormant to avoid the audit?Check the company qualifies, pass a special resolution declaring it will become dormant from a stated date, and have the directors deliver that resolution to the Companies Registrar. Dormancy takes effect from the delivery date or the later date in the resolution.
- Does a dormant Hong Kong company still have to file a profits tax return?Dormancy under the Companies Ordinance relieves the company from audited accounts, and IRD accepts a profits tax return from it without the audited statements. It does not by itself cancel the duty to file a return when IRD issues one.