There’s A Strong And Excellent Foundation For Accounting Services in Hong Kong
People all over the world view Hong Kong differently. Some regard it as a sovereign nation, while others think it’s a province of China. In fact, there have been political and personal debates and disputes regarding this matter. Nevertheless, its economy is undeniably one of the frontrunners in Asia. Accounting services in Hong Kong are also top of the line, mainly due to its low level of corruption.
You could see corruption anywhere, and it’s a sad reality that it starts at home. Thankfully during the ’70s, the government has enforced a multitude of anti-corruption laws. Also, educators inculcate ethical values from daycare centers to universities and colleges. Combining the two factors, we can surmise that Hong Kong citizens are mostly morally upright.
Certified Public Accountants have been becoming more relevant nowadays. Various accounting services in Hong Kong revolve on objectivity and transparency. As “warriors against corruption”, Hong Kong CPA’s are responsible to report businesses who don’t comply with prevailing accounting practices. Their statements are powerful enough to impact a business, as to its:
- Ability to secure a loan from banks
- Trust and confidence from vendors, clients, and other third parties
- Association with the government
- Legitimacy of conducting financial operations
- Tax exemption for offshore revenue
An Overview of Accounting Services in Hong Kong
In 2016, auditing, book-keeping, tax consulting, and accounting services in Hong Kong’s amounted to US$239 million in 2016. This is an increase of 15.2% from 2015. Such progress allows for financial firms to carry out accounting services in Hong Kong with a high chance of success. However, there are certain practices you need to follow. Under the Company Ordinance in Hong Kong, service providers must preserve proper accounting books and conduct mandatory auditing annually.
There are things you need to be familiar with when you’re planning to provide accounting services in Hong Kong. You must be aware of the Hong Kong Institute of Certified Public Accountants (HKICPA) which oversees the city’s financial operations. Since April 2010, HKICPA has been issuing Hong Kong Financial Reporting Standards (HKFRS), a framework based on the International Financial Reporting Standards (IFRS).
The HKICPA is a self-regulating body that has the power to supervise companies with no public responsibility. It can abolish some accounting conducts like disclosures irrelevant to private entities. This control extends over certain small and medium enterprises as well.
In January of 2017, the HKICPA has set a new Qualification Program in motion. This helps accountants to further improve their skills and expertise. It also upholds their integrity when supporting Hong Kong as an international business and financial center.
As of July 2018, HKICPA members amount to 42,801, which includes 4,805 practicing members. Internationally, HKICPA has entered into agreements with chartered accountant institutions for other nations. Some of these include:
- England and Wales
- New Zealand
- South Africa
Chinese Regulations Over Audit and Accounting Services in Hong Kong
As of April 2014, the Ministry of Finance (MOF) of China has planned new regulations for foreign accounting firms. One of these rules requires firms to accomplish audits for mainland enterprises opting to list offshore. Such action may affect Hong Kong accounting companies as well. Fortunately, it was decided soon after that there will be exemptions for Hong Kong audit firms. However, they must fall under certain categories or meet specific qualifications.
For one, the exception would apply to companies listed under HKEx or even those who are planning to apply. These entities must have at least 50% share ownership from Hong Kong investors.
In addition, there are other limitations for Hong Kong audit companies, such as:
- Taking audit working papers out of the Chinese mainland
- Sending over their personnel to audit mainland corporations under a provisional license
New Agreements Between Hong Kong and Mainland China
Asia continually competes with other regions with its globalized accounting practices and intensifying business opportunities. There’s a multitude of accounting firms being set up every year, especially in Hong Kong. But why this jurisdiction? Financial experts state that Hong Kong possesses three core competencies, namely:
- Strong, yet flexible regulatory framework
- Availability of top-grade CPA’s
- Proximity to a powerhouse like China, as well as to other ASEAN countries
Not only are these firms multiplying, but also expanding because the demand continues to upsurge.
Hong Kong maintains its strong relationship with the Chinese mainland. In fact, they drafted two new agreements on June 28, 2017. These are the Investment Agreement and the Economic Technical Cooperation Agreement (Ecotech Agreement). Both of these aims to further simplify trade and investment between the two jurisdictions. The Ecotech Agreement has three chief points:
- China will support Hong Kong’s involvement in the Belt and Road Initiative by creating a communication platform.
- The agreement expands economic cooperation within the Pan-Pearl River Delta Region, particularly the Guangdong-Hong Kong-Macau Bay Area. It also promotes liberalization for Hong Kong industries, including transport and shipping, finance, commerce and trade, and technology. With this, Hong Kong can now do business within the Pilot Free Trade Zones, as well as in Qinghai, Nansha, and Hengqin.
- In addition to the above industries, there will be new openings for Hong Kong’s professional services providers. Overall, the Ecotech Agreement lists 12 areas of cooperative activities which include accounting services in Hong Kong.