APR for Hong Kong Companies: Who Can Sign the Audit

If you ask a Hong Kong auditor whether your company needs an audit, the answer is almost always yes. If you ask an Indian CA the same question about the Annual Performance Report, you may hear that a certificate from them is enough. Both statements can't hold at once, and the gap between them causes most of the rejected filings on Hong Kong subsidiaries. This article explains who can sign, why, and how to line the Hong Kong audit up with your APR filing in India.

Why Hong Kong is different from other jurisdictions

Many owners arrive from the UK, Singapore or Australia expecting a small-company audit exemption. Hong Kong has none. Under the Companies Ordinance (Cap. 622), every company incorporated in Hong Kong has to have its accounts audited every year, whatever its turnover or headcount. The one real exception is a company that has formally declared itself dormant.

This matters for foreign investment reporting because RBI's APR rules lean on the host country's position. The unaudited-accounts route exists only where the Indian investor has no control, and the host jurisdiction does not require an audit. A trading company in Hong Kong fails the second test automatically, because the local law demands an audit. So for any active Hong Kong subsidiary, audited statements are the starting point, whatever your shareholding.

Who can legally sign the audit report?

The signature has to come from a Certified Public Accountant (Practising), registered with the Hong Kong Institute of Certified Public Accountants and holding a current practising certificate. A fully qualified Hong Kong CPA who does not hold a practising certificate cannot sign.

That leaves out several people Indian parent companies often assume are fine:

• An Indian chartered accountant. An ICAI membership carries no authority to give a statutory audit opinion on a Hong Kong company, and a special-purpose engagement does not change that.

• A US CPA, a UK ACA or a Singapore ISCA member. Excellent credentials, but not Hong Kong credentials.

• The accountant who prepared the accounts, unless that firm is also properly appointed as auditor and independent of the preparation work. Independence should be checked on every engagement.

Before engaging a firm, look the individual up on the HKICPA's public register and ask for the practising certificate number. It takes five minutes and prevents a rejected filing in December.

The standards behind the report

The audit is carried out under Hong Kong Standards on Auditing, issued by the HKICPA. Financial statements are usually prepared under one of three frameworks: full HKFRS, the HKFRS for Private Entities, or the SME-FRF and SME-FRS for eligible small private companies.

Many Indian parents are surprised to find that a company using the simplified SME framework still needs a full statutory audit. The simplification is a reporting concession, and it does not remove the audit. For your APR, the practical question is whether the statements follow a framework the entity is legally entitled to use in Hong Kong. They generally do, and the AD bank mainly wants a clean, signed report matching the numbers in the form.

What if the Hong Kong company is dormant?

Dormancy in Hong Kong is a formal status, created by a special resolution registered with the Companies Registry, and it removes the local audit duty. It does not wipe out your Indian obligation. A subsidiary with zero activity still counts as an ODI, so a report is still due each year.

Where you control a dormant entity, the cautious approach is to have a CPA (Practising) sign off the nil-activity statements, because RBI's wording asks for audited statements whenever control exists. Raise this with your AD bank before December, since bank desks differ on how they treat nil accounts.

Timing: how the two calendars fit

Hong Kong's financial year is the company's choice, and 31 March is very common, which happens to match the Indian year. Here is how the cycle usually runs for a 31 March year-end:

A company with a 31 December year-end has an easier timetable on the Indian side, since the APR for the year ended December 2025 isn't due until 31 December 2026. Even so, Hong Kong's own filing season, which includes the Profits Tax Return and the audited statements that go with it, tends to compete for the same auditors.

The usual advice applies: begin collecting records in the first week of October, and expect the auditor to need several weeks.

What your AD bank will check

APR filing for foreign subsidiaries tends to fail on small mismatches rather than big ones. For a Hong Kong subsidiary, the points that draw questions are:

1. Unique Identification Number. It must be identical across the form, the audit report and your records.

2. Single currency. Most Hong Kong entities report in HKD or USD. Choose one and apply it throughout the form.

3. Capital structure. The share capital in the audit report should agree with your remittance and share-allotment records.

4. Step-down entities. A Hong Kong company often sits above a mainland or Southeast Asian operation. Any subsidiary beneath it must be disclosed.

5. Related-party balances. Loans from or to the Indian parent in the audited notes should reconcile to the loans reported in the APR.

Typical mistakes

• Accepting a certificate from an Indian CA as a substitute for the audit. This is the most frequent error, and it invites rejection.

• Treating Hong Kong's reporting exemption as an audit exemption. The two are different things.

• Waiting for the Profits Tax filing before starting. Tax season and APR season overlap, and good auditors fill their calendars.

• Filing the APR with draft accounts. Numbers can shift between drafts, and the signed version must match the form exactly.

• Ignoring the Indian-side disclosures. Your own ITR and FLA return must tell the same story as the APR on the foreign entity.

Cost of getting it wrong

A late APR can be regularised by paying the late submission fee of ₹7,500 per return, if you opt for it within three years of the due date. Delay beyond that moves you toward compounding, and in the meantime AD banks can hold up remittances and fresh overseas investments until the record is clean. Each missed year adds its own problem, so catching up early is cheaper than waiting.

Frequently Asked Questions

1. Can a Hong Kong company use an Indian auditor?

For the statutory audit, no. The auditor must be a Hong Kong CPA (Practising).

2. Does a small Hong Kong company need an audit?

Yes, unless it is formally dormant.

3. Is the APR due on 31 December even for a 31 March Hong Kong year-end?

Yes. The deadline for the year ended March 2026 is 31 December 2026.

4. Who files when two Indian investors hold the Hong Kong company?

The larger shareholder files, or the two designate one filer by undertaking to the bank.