Running an unlimited company (a sole proprietorship or partnership) in Hong Kong doesn't require an annual audit, but you still need to file profits tax returns on time, every year, without an accountant reminding you. This guide walks through the filing timeline, the documents you'll need, and the two-tiered tax rates that apply, so you don't get caught out by a late-filing penalty.
None of this is complicated once you know the calendar and the paperwork — the risk is simply forgetting a deadline because there's no auditor in the loop to remind you.
Profits Tax Rates for Unlimited Companies
An unlimited company doesn't need an annual audit the way a limited company does, but it is still taxed under the two-tiered profits tax regime. The first HK$2 million of assessable profits is taxed at 7.5%, with anything above that taxed at 15%. A limited company, by comparison, pays 8.25% on the first HK$2 million and 16.5% on the remainder. Here's how the two compare side by side:
| Assessable profits | Unlimited company | Limited company |
|---|---|---|
| First HK$2 million | 7.5% | 8.25% |
| Remaining profits | 15% | 16.5% |
One thing worth keeping in mind: an unlimited company's proprietor cannot deduct their own personal expenses, including their own salary, when calculating taxable profit — a limited company's directors' remuneration, by contrast, is a deductible company expense. That single difference is often what tips the total tax bill in favor of one structure over the other, even before you factor in audit costs. If you're still weighing which structure to run your business under, our comparison of limited vs unlimited companies covers liability and setup cost as well.
The Filing Timeline
Knowing these dates in advance is half the battle — the other half is simply keeping your bookkeeping current enough that filing isn't a scramble.
For a newly registered business, the Inland Revenue Department typically issues the first profits tax return around 18 months after incorporation, and you have 3 months from receiving it to file. After that, annual returns are usually issued around 1 April, with 1 month to file — though an extension can be requested if you need more time, and how long you get usually depends on your accounting year-end date. Even if your business made no profit, or actually lost money, you're still required to file the return on time; missing the deadline can result in a penalty or prosecution.
Documents You'll Need to File
Filing typically requires:
- Your business accounts covering the full assessment period
- The profits tax return itself
- A certified balance sheet and profit and loss statement, prepared by a Certified Public Accountant, if your annual profit exceeds HK$2 million
Keeping clean, up-to-date bookkeeping throughout the year makes this process far less stressful — if you'd rather not handle it yourself, our accounting and tax team can take it off your hands.
Sole Proprietorship vs Partnership: Which Form Do You File?
An unlimited company can be run as a sole proprietorship, with one owner, or as a partnership of 2 to 20 people. The tax return you file differs slightly between the two: a sole proprietor generally reports business profits through the profits tax section of the Tax Return – Individuals (BIR60), while a partnership files the Profits Tax Return – Partnerships (BIR52). Whichever form your business takes, accurately reporting income, expenses and profit is what matters most — StartupCow can help if you're unsure which form applies to you.
Common Filing Mistakes to Avoid
The most common issues we see are incomplete income records, miscalculated deductible expenses, and simply missing the filing deadline. Since an unlimited company's return relies entirely on the proprietor's own bookkeeping — there's no independent audit to catch errors before submission — it's worth double-checking your figures, or having a professional review them, before you file.
What If the Business Has Stopped Trading?
If your business never actually commenced operations, you can declare it as "not yet commenced business" to the Inland Revenue Department. But once a return has been issued and the business has traded, you must file it on time regardless of profit or loss. If you're closing the business for good, you can apply to cancel the business registration within one month of ceasing operations, provided there are no outstanding debts — our company secretarial team can help with that process.
And if your business has grown to the point where the audit requirement and higher tax rate of a limited company start to look like a fair trade for limited liability, our guide on converting an unlimited company to a limited company covers the timing and the exact steps involved, including what happens to your existing business registration along the way.
