Dormant Company in Hong Kong

Key Takeaways:

• Companies usually declare as a Dormant Company in Hong Kong when it is believed to have zero business activities and minimal accounting transactions for a period of time.
• Dormancy is a legal status you apply for, not a description of a company that has simply stopped trading. A company that quietly stops trading without filing the special resolution remains fully liable for audit, NAR1 and tax filings.
• Companies are exempted from its obligation to submit annual financial statements and auditor appointments as a dormany company.
• Dormant Company in Hong Kong can be reactivated as dormancy status ceases, by passing a special resolution.
• If you will never restart, dormancy is the wrong move. Only deregistration ends the annual cost permanently.

A dormant company in Hong Kong is a qualified private company that has passed a special resolution under section 5 of the Companies Ordinance (Cap. 622) and delivered it to the Companies Registry, declaring that it will have no relevant accounting transactions. Once registered, the company is exempt from preparing and auditing financial statements (s.447), from delivering the annual return Form NAR1 (s.663), and from holding AGMs (s.611) — but it must still renew its Business Registration Certificate every year, keep a director, shareholder, company secretary and registered office, report officer and address changes, and file a Profits Tax Return whenever the IRD issues one.

Are You Eligible?

1. You’re a private company limited by shares. Only a “qualified private company” can go dormant. If we incorporated your company, you are one — you pass this check automatically. A guarantee company isn’t a private company under the Companies Ordinance, so the dormancy rules never reach it. It can still deregister. It just can’t go dormant.
2. 75% of your shareholders agree. You need a special resolution. Either all members sign it in writing, or 75% of the votes approve it at a general meeting. Sole-shareholder companies pass easily. 50/50 joint ventures often don’t. This is where most dormancy plans stall.
3. Nothing will move in or out. Pause every bank account, payment gateway, e-wallet and crypto account. No invoices, salaries, subscriptions or intercompany balances left to settle. One thing is safe: the business registration fee. Fees you’re legally required to pay don’t count as transactions.
4. Your filings are up to date. Clear every late audit, Profits Tax Return, Employer’s Return and NAR1 first. Dormancy doesn’t wipe a backlog. It freezes it. Everything will still be waiting, with penalties added, when you reactivate or close the company.

Dormant vs Inactive vs Deregistered: Which Fits Your Hong Kong Company?

	Dormant	Inactive (not declared)	Deregistered
Company still exists?	Yes	Yes	No
Audit	Exempt	Required	Yes, before the company is successfully closed dow
BR renewal	Yes	Yes	No
Best for	You may restart later / protect the name	Temporary pause only	Never using the company again

How to Declare as a Dormant Company in Hong Kong?

There are times when investors do businesses for some years but may wish for a rest after hectic trading. The company can consider pause the business activities and declare dormant status with Company Registry and Inland Revenue Department. This way, the company maintenance can be at lower cost while keeping and protecting the company name for intellectual property purpose.

Dormant at the Companies Registry ≠ Dormant at the IRD

This is the single most expensive misunderstanding about dormancy. “Dormant” is a Companies Ordinance concept. The Inland Revenue Ordinance doesn’t use the word at all. Going dormant changes what you file with the Companies Registry. It changes almost nothing about what you file with the IRD.

There are two regulators in Hong Kong. Only one of them agreed to leave you alone.

What does dormancy actually save you at the IRD?

Dormancy does buy you something on the tax side, and it’s worth knowing precisely what.

Normally a company must submit audited financial statements with its Profits Tax Return. The IRD’s own guidance lists the exceptions, and the first one is:

“For corporations, audited financial statements should be submitted with the returns in all cases except: (a) dormant companies (within the terms of the Companies Ordinance (Cap. 622))”

The IRD confirms this again in its Profits Tax FAQ: because a dormant company is exempt from preparing audited financial statements under s.447 of the Companies Ordinance, “the Department is prepared to accept Profits Tax Returns filed by dormant companies (within the terms of the CO) without the submission of the audited financial statements.”

So, no audit attached to the return. That’s the concession. Note what it is not — it is not an exemption from the return itself.

When a Profits Tax Return arrives

Treat it as live. A return issued to a dormant company is a notice under s.51(1) of the Inland Revenue Ordinance, and it carries the same force as one issued to a trading company.

• Deadline: generally one month from the date of issue. The exact compliance date is printed on page 1.
• Extensions: available through the Block Extension Scheme if you file via a tax representative. Ask us — don’t assume.
• Ignoring it is not an option, and “we’re dormant” is not a reasonable excuse.

Effect of Dormancy Company

The dormancy procedure only has about 25-year history in Hong Kong. Section 5 of the Companies Ordinance governs dormancy procedure and it only enables certain qualified Hong Kong companies to become dormant (i.e. inactive). A limited company in Hong Kong is considered as a dormant company when it has no significant accounting transactions. That being said, the business must have absolutely no entry during its accounting period. The company must also pass a special resolution authorising its directors to make and deliver to the Registrar of Companies a statutory declaration to the effect that the company will be treated as a dormant company. Once the Hong Kong Company Registry acknowledges the receipt of special resolution, the company is then exempt from its obligation to prepare financial statements, appointing auditor, and publishing financial records and statement.

Reactivating a Dormany Company in Hong Kong

If the company wants to cease its dormant status one day, the company has to pass a special resolution to declare its intention to enter into accounting transaction and the resolution has to be delivered for registration in time. You may ask what is an accounting transaction. Section 2 of Companies Ordinance addresses that a transaction that is required by Section 373 to be entered in the company’s accounting records, excluding a transaction arising from the payment of any fee that the company is required by an Ordinance to pay, i.e. business registration fee.

Do’s & Don’ts on Compliance of a Dormant company in Hong Kong that you should still pay attention to

(a) Business Registration License Renewal:
Yes. A dormant company is required to renew its business registration license every year and file profit tax return when the Inland Revenue Department issues one. A dormant company is also required to maintain 1 shareholder, 1 director, 1 company secretary and a valid registered office address.

(b) Delivering Form NAR1 (Annual Return)
The requirement to deliver Form NAR1 (Annual Return) for registration does not apply to a dormant company. However, if a dormant company declares itself to be dormant after the 42^nd day after the anniversary date of incorporation, it is required to deliver the Form NAR1 to Company Registry for registration.

What can I do when I no longer require a Dormant Company in Hong Kong?

If you decide that you no longer want your dormant company, it is important to arrange the deregistration formally. The deregistration application involves with two government departments and a close down notice must be published in the Gazette. Please refer to Deregistration in Hong Kong, or to contact us so our experienced staff will guide you through the process to avoid further complications.

---

As an important reminder, even a company can be inactive, a dormant Hong Kong company still has to comply with some minimal formalities and regulations. If you need any assistance, please contact our Hong Kong company formation specialists at info@getstarted.hk for a free consultation.