Hong Kong Compliance Matrix: Significant Controllers Register, Annual Returns & Audit Exemptions Explained

Hong Kong’s corporate compliance framework has evolved rapidly following major legislative reforms introduced over recent years. As businesses operate in 2025 and beyond, companies incorporated or conducting operations in Hong Kong must navigate a more advanced regulatory ecosystem designed to improve transparency, prevent financial crimes, and align with international best practices. This detailed guide explains the most critical corporate compliance obligations, focusing on the Significant Controllers Register (SCR), annual return filings, audit exemptions, and the broader statutory environment affecting Hong Kong companies.

 1. Significant Controllers Register (SCR): Transparency Obligations Explained

The Significant Controllers Register represents one of Hong Kong’s most important transparency initiatives and was introduced under the Companies (Amendment) Ordinance 2018. Every Hong Kong-incorporated company is required to maintain an SCR at its registered office or company secretary’s address, identifying individuals or entities that ultimately control or own the company.

Who is classified as a significant controller?

A person or legal entity is considered a significant controller if they:

 1. Own more than 25% of the company’s issued share capital

 2. Control more than 25% of voting rights

 3. Have the authority to appoint or remove a majority of directors

 4. Exercise, or have the right to exercise, significant influence or control over the company

 5. Exercise influence or control over a trust or partnership that satisfies any of the above criteria

Companies must take reasonable steps to identify such persons, maintain accurate SCR records in the prescribed format, and keep the register readily accessible at their registered office or company secretary’s premises. The register must be produced upon request to law enforcement agencies.

Penalties for non-compliance

Failure to comply with SCR requirements constitutes a criminal offense. Upon conviction, both the company and responsible officers may be fined, with individual penalties reaching up to HK$25,000. Continued non-compliance attracts daily penalties of HK$700. Beyond monetary sanctions, breaches can result in director prosecution, reputational damage, and operational challenges, particularly with banks and commercial counterparties.

 2. Annual Return Filing: Form NAR1 and Regulatory Updates

Every Hong Kong company must submit an annual return to the Companies Registry within 42 days of its incorporation anniversary. This filing, submitted using Form NAR1, confirms key company information, including:

 1. Directors and company secretary details

 2. Registered office address

 3. Share capital structure

 4. Shareholder particulars

Changes affecting re-domiciled companies

Following the introduction of corporate re-domiciliation rules, companies transferring their place of incorporation to Hong Kong are subject to additional reporting requirements. Their first annual return must reflect the correct Hong Kong registration date and disclose their prior jurisdiction, date of re-domiciliation, and any corporate restructuring undertaken during the transition.

Filing fees and late penalties

Annual return filing fees typically start at HK$105 for companies with nominal share capital and increase for entities with higher capital levels. Late filings result in escalating penalties and potential prosecution of company officers. Persistent failure to file may lead to strike-off proceedings by the Registrar, resulting in company dissolution and severe legal consequences for directors and shareholders.

 3. Audit Exemptions for Dormant and Small Private Companies

To reduce regulatory burdens while maintaining oversight, Hong Kong law provides audit exemptions for qualifying dormant and small companies.

 3.1 Dormant company audit exemption

A company may qualify as dormant if it has conducted no significant accounting transactions during the financial year, except for:

 3.1.1 Issuance of shares to subscribers

 3.1.2 Appointment of auditors or company secretary

 3.1.3 Maintenance of registered office or secretarial services

 3.1.4 Payment of Companies Registry fees

 3.1.5 Business registration payments

Dormant companies must still prepare financial statements but may be exempt from statutory audit requirements if all prescribed conditions are satisfied.

Small private company audit exemption

Private companies may qualify for audit exemption if they meet at least two of the following criteria for two consecutive financial years:

 1. Annual revenue not exceeding HK$100 million

 2. Total assets not exceeding HK$100 million

 3. No more than 100 employees

Additionally, all shareholders must unanimously approve the exemption. Group companies and holding companies generally do not qualify unless specific statutory conditions are fulfilled.

 4. Company Secretary: Legal Role and Compliance Responsibilities

Every Hong Kong company must appoint a company secretary who ordinarily resides in Hong Kong. This position carries statutory accountability and is far more than an administrative appointment.

 4.1 Key responsibilities include:

 4.1.1 Maintaining statutory registers, including the SCR

 4.1.2 Filing annual returns and statutory forms

 4.1.3 Ensuring ongoing compliance with the Companies Ordinance

 4.1.4 Organizing board and shareholder meetings

 4.1.5 Maintaining corporate records and meeting minutes

Company secretaries face personal liability for compliance failures and may be subject to fines or prosecution for statutory breaches.

Qualification requirements

The company secretary must be:

 1. A solicitor, barrister, certified public accountant, or chartered secretary; or

 2. A person deemed capable by directors based on qualifications or experience

 5. Registered Office Requirements

Every Hong Kong company must maintain a registered office address in Hong Kong at all times. This address serves as:

 1. The official address for legal correspondence

 2. The location where statutory records must be kept (unless maintained by the company secretary)

 3. The address listed in the Companies Registry

The registered office must be a physical location post office boxes are not permitted. Any change in registered office must be notified to the Companies Registry within 15 days using Form NR1. Many companies outsource this requirement to corporate service providers offering mail handling, document storage, and compliance support services.

 6. Business Registration Certificate (BRC) Renewal

Under the Business Registration Ordinance, all Hong Kong companies must obtain and maintain a valid Business Registration Certificate (BRC).

Current fees are:

 1. HK$2,200 for a one-year certificate

 2. HK$5,950 for a three-year certificate

 3. Plus a levy of HK$250

The certificate must be renewed before expiry and displayed prominently at business premises. Operating without a valid BRC constitutes a criminal offense. While renewal reminders are generally issued by the Business Registration Office, ultimate responsibility for timely renewal rests with the company.

 7. Profits Tax Returns and Inland Revenue Compliance

Hong Kong companies must comply with Inland Revenue Department (IRD) profits tax filing requirements. Newly incorporated companies typically receive their first Profits Tax Return approximately 18 months after incorporation, while existing companies receive annual returns.

 7.1 Filing timelines

7.1.1 Paper filings: Due within one month of issue

 7.1.2 e-Filing submissions: Due within three months

Extensions are commonly granted, particularly for companies with audited accounts, often ranging from four to eight months depending on the financial year-end.

Tax system overview

Hong Kong applies a territorial tax regime, meaning only profits arising in or derived from Hong Kong are taxable. Current corporate tax rates under the two-tiered system are:

 1. 8.25% on the first HK$2 million of assessable profits

 2. 16.5% on profits exceeding HK$2 million

Companies must maintain clear documentation to substantiate the source of income and may require professional advice to correctly assess tax liabilities.

 8. Employer’s Returns and Mandatory Provident Fund (MPF) Compliance

Companies employing staff in Hong Kong must meet additional statutory obligations.

 1. Employer’s Return (Form BIR56A)

Employers must file annual remuneration returns reporting payments made to directors, employees, and consultants. These filings generally must be submitted within one month of issuance and form the basis for individual salaries tax assessments.

 2. Mandatory Provident Fund (MPF)

Employers are required to enroll eligible employees in an MPF scheme and contribute 5% of relevant income (subject to statutory caps), matched by employee contributions. Certain employee categories qualify for exemptions. Non-compliance may result in penalties, surcharges, and prosecution under the Mandatory Provident Fund Schemes Ordinance.

 9. FATCA and CRS Reporting Requirements

Hong Kong has implemented both the Common Reporting Standard (CRS) and the Foreign Account Tax Compliance Act (FATCA) frameworks to enhance international tax transparency.

While most operating companies are not directly subject to reporting obligations, entities classified as “financial institutions” including investment entities, custodians, and certain insurance businesses must:

 1. Conduct customer due diligence

 2. Identify tax residency and controlling persons

 3. Submit annual reports to the IRD

Even non-financial companies may be required to provide self-certification forms to financial institutions when opening accounts or conducting banking transactions.

 10. Economic Substance: Hong Kong vs Singapore

Unlike traditional offshore jurisdictions, Hong Kong does not currently impose standalone economic substance legislation. However, substance considerations remain critical for tax residency determinations, treaty benefit eligibility, and profit source analysis.

Singapore, by contrast, has introduced formal substance requirements for specific tax regimes, particularly following international scrutiny from the EU and OECD. Hong Kong’s framework instead relies on its territorial tax system and anti-avoidance provisions. Nevertheless, companies engaged in cross-border operations should maintain sufficient operational substance including management presence, decision-making activities, and genuine commercial functions to support their tax positions.

 11. Anti-Money Laundering (AML) Compliance under AMLO

The Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO) establishes extensive compliance requirements for designated professions and regulated entities, including company service providers, accountants, lawyers, and financial institutions.

Although not all operating companies are directly regulated under AMLO, best practices require:

 1. Robust customer due diligence procedures

 2. Verification of beneficial ownership

 3. Ongoing transaction monitoring

Proper record retention

Enhanced due diligence applies in higher-risk situations, and regulatory enforcement continues to intensify through expanded reporting obligations and stricter supervision.

 12. Connected Party and Related Party Transaction Disclosures

Hong Kong accounting standards require full disclosure of related party transactions in financial statements. Directors must declare any personal interests in company transactions, and material connected transactions may require shareholder approval under the Companies Ordinance.

Key disclosure obligations include:

 1. Reporting material transactions involving directors, substantial shareholders, or controlled entities

 2. Disclosure in directors’ reports and audited financial statements

Listed companies face additional compliance requirements under the Listing Rules, including independent shareholder approvals for certain transaction categories. Even private companies must ensure transparency to support proper governance and mitigate conflicts of interest.

 13. Enforcement Landscape and Penalty Trends

Hong Kong regulators have significantly strengthened enforcement mechanisms in recent years. The Companies Registry, IRD, and other regulatory bodies now demonstrate increased monitoring capabilities and a greater willingness to pursue prosecution for non-compliance.

Key enforcement trends include:

 1. Heightened scrutiny of beneficial ownership disclosures

 2. Increased prosecution of late or non-filing offenses

 3. Enhanced data-sharing between regulatory agencies

 4. Higher volumes of company strike-offs for persistent defaults

Directors and officers face personal liability for many compliance breaches, making proactive compliance management and professional advisory support essential.

Managing Compliance in Hong Kong’s Regulatory Environment

Successfully navigating Hong Kong’s modern compliance landscape requires disciplined attention to interconnected statutory obligations from maintaining the Significant Controllers Register and filing annual returns to managing audit exemptions, tax filings, employment compliance, and governance transparency. The consequences of non-compliance extend far beyond financial penalties and include personal liability for directors, reputational harm, and operational disruptions. By implementing structured compliance frameworks and engaging qualified professional advisors, companies can meet regulatory expectations effectively while focusing on sustainable business growth.

Partner with YKG Global for Seamless Operations

YKG Global eliminates compliance anxiety through comprehensive Hong Kong compliance services designed for international entrepreneurs.

What We Handle:

 1. Complete company secretarial services with proactive deadline management

 2. Year-round accounting ensuring continuous financial clarity

 3. Audit coordination or dormant status applications where applicable

 4. Tax return preparation with offshore exemption expertise

 5. Real-time compliance dashboard showing current status

 6. Dedicated support answering questions promptly

We operate on a simple principle: compliance should happen reliably in the background while you focus on the foreground work of building, selling, and growing your business.