Recently, when I was doing an audit in Hong Kong, I encountered various problems. Today, I would like to share with you the situation that some Hong Kong companies have both onshore and offshore trade. Clients who may be engaged in onshore trade are more experienced in auditing for several years. When they are asked to distinguish onshore and offshore at the end of auditing, they can clearly distinguish between them.

When we do the Hong Kong audit and tax declaration, we don't mean to arbitrarily divide onshore and offshore, but there is a mark in the division. 

A complete trade consists of income, costs, and so on. When doing the Hong Kong audit and tax declaration, it is necessary to check whether one or more of the revenues, costs and expenses are related to Hong Kong. If so, this trade is the onshore trade. The other thing that has nothing to do with Hong Kong is offshore trade.

The reason why onshore and offshore tax returns can be differentiated in Hong Kong audit is that Hong Kong taxation is based on the territorial principle. Only the onshore part needs to be taxed in Hong Kong, while the offshore part does not need to be taxed in Hong Kong. This distinction can reduce the tax cost of enterprises.

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