Tax Health Check – Are You Tax Ready?
HKWJ Tax Law & Partners Limited offers a tax health check to all its new potential clients. Upon engaging us, we will set-out in a memo, which is based on the information you provide to us about yourself or your company, the potential tax issues you or your company will be facing and the potential solutions you or your company may want to consider.
What is a Tax Health Check-up?
A tax health check-up is a review of the tax affairs of a business entity, which is intended to highlight potential weaknesses or risks arising from errors or omissions in the business records and accounting systems, as well as identifying potential tax liabilities. Individual tax risks can also be evaluated.
How Does it Work?
A tax review report will serve as a tool to identify major errors or non-compliance with tax regulations which could result in significant tax penalties or unnecessary tax liabilities for businesses and individuals.
A health check review with us would normally focus on the following types of Mainland China, Hong Kong and Asia region taxes:
- Corporate income / Profits tax
- Withholding tax
- Consumption / Business / Value Added tax
- Customs duty
- Real Estate / Property tax
- Deed tax / Stamp duty
- Individual income / salaries tax
- Land appreciation tax
- Wealth tax
- International tax
This list basically covers the major types of taxes that a company (including a foreign investment company, sole proprietorship, partnership and a representative office) or an individual would be subject to. Depending on the needs of the entity or individual concerned, this list could be shortened or lengthened to include the review on the compliance status with respect to the relevant tax laws and regulations or by-laws.
Purpose of a Tax Health Check-up
A tax review can be a key tool to analyse and highlight areas for concern along with providing worthwhile suggestions to enable the business or individual to mitigate any potential tax liabilities such as:
- To identify any risks in relation to the collation or recording and reporting of data produced for a revenue department / tax authority
- To implement tax saving opportunities for the business entity / individual
- To avoid predictable/hidden costs and time
- To provide the business entity or individual with a reasonable level of comfort in affirming that the tax return will not contain any inappropriate statements and/or estimations before filing of the tax return
- To reduce the risk of a revenue department tax audit, examination or investigation
- Indicating and quantifying possible, risks and hidden tax exposures
- Providing recommendations to mitigate the tax risks
- Forming a good picture towards the tax authority with respect to the clients’ tax compliance status
Who Needs a Tax Health Check-up?
Taxpayers need to meet their tax obligations as prescribed by the tax laws and related regulations / by-laws. Even though you may believe that you are a good taxpayer, the complexity of the tax laws may leave you at risk to unaccounted for tax exposures. Consequently, a business or individual should regularly review its compliance with the relevant laws. Non-compliance may result in penalties or even prosecution.
What is a Tax Due Diligence?
A tax due diligence has similar objectives to a tax check-up for businesses but provides a different perspective of a company. Whilst a tax check-up can be used to minimise risks of tax exposure for existing business owners, a tax due diligence is essential for a new investor wishing to acquire a business.
A tax due diligence provides a tax profile of the target entity. It determines potential past, present and future tax – liabilities, including disclosed, undisclosed, and realised tax liabilities and assists in the establishment of a purchase price, determination of tax warranties and indemnities to be included in the sale & purchase agreement, and helps to develop an appropriate acquisition and funding structure.
Benefits of a Tax Due Diligence
The tax due diligence report will reveal/provide:
- potential risks and opportunities, tax contingencies and aggressive positions that may impact pricing and need to be addressed in the documentation and implementation of the deal
- issues in respect of the business and the financial structure from a tax perspective as well as the legal perspective
- appropriate tax planning scenarios for the deal
- appropriate tax warranties and indemnities
- A proper tax due diligence should be undertaken in conjunction with financial and legal due diligence reviews to ensure that the key issues and risks are appropriately identified and assessed. Tax due diligence advice may help to protect both financial management and legal privileges.
Tax Review Package
We can conduct a written tax health check for a company/an individual which will provide initial and general advice including the following:
- Review the current tax position of the Company/individual [e.g. whether an offshore non-taxable claim in Hong Kong is (still) eligible and the amount of tax losses available];
- Identify the potential tax risks of the Company/individual (e.g. permanent establishment risks and tax exposures in foreign jurisdictions), if any;
- Offer recommendations on how to achieve tax efficiencies (e.g. whether the current shareholding structure is tax beneficial and whether one is eligible to double tax treaty benefits); and
- We can conduct a complete and thorough tax review for the company/individual.
Tax Due Diligence Package
We can assist clients with a tax due diligence in respect of their anticipated take-over of a business as part of a holistic organizational health check. As these take-overs are, however, very case specific, please contact us for the relevant packages.