Software development refers to the process of building a software system or software part of a system according to user requirements. And if you are engaged in this industry, registered Hong Kong company in this industry generally has two roles.
- 01: Using Hong Kong companies as an intermediary platformOn the one hand, we solicit software development projects overseas, accept relevant commissions from overseas companies, and use the income from such commissions as software development income of Hong Kong company. At the same time, we entrust domestic companies to develop relevant software and pay relevant development expenses of domestic companies as the service cost of software development.
- 02: Use Hong Kong company as a distribution platformOn the one hand, the Hong Kong company entrusts the domestic company to carry out software development and related software follow-up services, and pays the domestic company as the software development cost. At the same time, it will be listed on overseas software platforms and pay relevant promotion expenses as the expenses of Hong Kong company. The revenue from platform sharing belongs to the Hong Kong company.
According to the different roles of Hong Kong companies, the information provided by Hong Kong companies in the audit will also be different.
- When Hong Kong companies as software development intermediary platformIf it is revenue, the corresponding software development revenue contract and invoice for revenue recognition are needed, and the development cost of the domestic company also needs the software development cost contract and invoice. It should be noted that if the software development cycle is not completed within an accounting period, the cost should be determined according to the software development completion rate, and the corresponding revenue should be determined. And not in accordance with the contract amount of the full cost of revenue.
- And if the Hong Kong company as a software distribution platformRevenue comes from sharing payments with the major platforms. The cost is the corresponding cost of software development and related software follow-up services of domestic companies. Platform collection is generally based on the current share receivable as revenue. The cost is based on the actual payment to the domestic company as the cost (if the service exceeds one accounting period, the cost for the period should also be recognized on a pro rata basis). In addition, there are related promotion expenses. The Hong Kong company should take the actual promotion expenses as the calculation of expenses and deduct the profits tax of the year in full (the domestic promotion and publicity expenses exceed the income of the year15%Part of the next year's profit, need to make tax adjustment).
Since Hong Kong profits tax is a territorial tax, if the company's profits do not come from Hong Kong (do not occupy Hong Kong resources), the relevant profits can not be subject to profits tax in Hong Kong. However, due to the different roles of Hong Kong companies, the judgment of whether the profits come from Hong Kong will be very different, which requires special attention.
The difference can be made according to the development project. If part of the project in the current year is related to Hong Kong, the profits generated by the project will be subject to profits tax in Hong Kong. The remaining part of the project has nothing to do with Hong Kong, and the profits from this part can not be subject to profits tax in Hong Kong.(Reason: In this mode, the revenue and cost of Hong Kong companies can be clearly matched, and the onshore profit and offshore profit can be clearly distinguished)
2.If the Hong Kong company is a software distribution platform:If issued and promoted in Hong Kong, all profits of the company in the current year shall be deemed to have occupied Hong Kong resources and shall be subject to profits tax in Hong Kong. This is because the revenue of the Hong Kong company comes from the sharing of the platform, which cannot accurately match the costs and promotion expenses related to Hong Kong. Therefore, as long as the Hong Kong company is related to Hong Kong this year, all the profits must be paid in Hong Kong profits tax. However, if the annual revenue, costs and expenses of the Hong Kong company have nothing to do with Hong Kong, all the profits can be regarded as overseas profits and may not be subject to profits tax in Hong Kong.(Reason: Under this model, the revenue of Hong Kong companies cannot be clearly matched with the costs and promotion fees, which means that the profits of Hong Kong companies cannot be clearly differentiated between onshore profits and offshore profits. So these companies have to either make all of their profits offshore for the year or make all of their profits onshore for the year. Offshore and onshore distinctions cannot be made.)
To sum up, if you are engaged in the software development industry, if you have overseas companies, it is recommended to follow the process described above and choose your own type according to the business model of overseas companies.
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Experience in auditing Hong Kong companies in various industries,
Has served many private enterprises, listed companies, multinational groups, state-owned enterprises
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keywords Software development industry audit
