Because of its low tax rate, narrow tax base and other characteristics, Hong Kong has been favored by international trade and international service providers, resulting in an increasing number of Hong Kong companies. Since Hong Kong companies need to be audited every year, we need to be extra careful when handling accounts.

In our work, we found that there is a problem in the audit of Hong Kong companies. In order to facilitate the audit, some auditors may ask clients to treat all types of income as sales income. At this time, we need to pay special attention to the fact that although there may be some convenience in the audit, there will be potential tax risks.

According to the international accounting standards, sales income refers to the income generated from the sale of self-purchased commodities, finished products, semi-finished products, etc., and the judgment condition of this type of income is the transfer of risk reward. The characteristic of labor income is that it mainly relies on non-physical activities such as enterprise facilities and brand to provide services for customers. Labor income is generally recognized according to the progress of service. If the New Year is over, it also needs to recognize related income according to the percentage of completion method. Therefore, if all the different types of income are included in the sales revenue, it will cause accounting errors, accounting data confusion, and there will be tax risks when dealing with the possible tax questions of the Hong Kong Tax Bureau in the future.

Therefore, the Hong Kong company needs to record the accounting items correctly when doing the accounting audit, avoid the confusion of the accounting data and reduce the tax risk of the Hong Kong company.

CycloseThe company is committed to providing domestic and foreign customers with corporate audit, tax declaration, registration, annual inspection, tax planning and other services in Hong Kong, Singapore, Dubai and other regions. Efficient, rigorous, intimate service has been favored by many private enterprises, listed companies and large state-owned enterprises.