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Employers in Hong Kong have the responsibility of annually filing an Employer's Return, which is a requirement set by the Inland Revenue Department (IRD). This guide aims to provide an overview of the process of filing the Employer's Return in Hong Kong and its requirements.
What is an Employer Return in Hong Kong?
An Employer's Return, also known as the BIR56A and Form IR56B, is an annual reporting disclosure issued by the Hong Kong Inland Revenue Department (IRD) to employers every April . Its purpose is to assist the IRD in assessing the salary tax liabilities of employees for the period from 1 April to 31 March of each year of assessment. Each employee is also required to file an individual tax filing separately. IRD will compare the employer's return and the individual tax return to issue a tax assessment accordingly.
What information needs to be disclosed on Employer Return?
When preparing the Employer's Return, employers must disclose the following information the staff's:
personal details (name, marital status, address, identification card or passport number)
nature of employment (full time or part-time)
period of employment
capacity in which employed
contributions to the Mandatory Provident Fund (MPF)
details of cash remuneration (including remuneration paid outside Hong Kong)
non-cash fringe benefit
employment contract and amendments to terms of employment
To ensure that the IRD correctly compute the salary tax, employers must also classify the payroll items into the appropriate categories:
Salary/Wages
Leave Payment
Director's Fee
Commission
Bonus
Back Pay, Payment in Lieu of Notice, Terminal Awards or Gratuities
Payments from Retirement Schemes
Educational benefits
Gain realized under Share Option Schemes
Share Awards
Other Allowances, Rewards
Pensions
Overseas income
What's the Employer's Obligations on tax reporting?
As an employer in Hong Kong, it is crucial to understand and fulfill your obligations to ensure full compliance with the law.
Keeping Payroll Records for at least 7 years:
You are required to maintain accurate and up-to-date payroll records for each of your employees.
The information to be recorded the requirement listed above
These records must be retained for at least seven years. A guide to keep business records can be found here.
For any change in employee's personal details and employment terms, you must inform the Inland Revenue Department (IRD).
Reporting Remuneration Paid to Employees:
Employers need to submit various types of forms to report remuneration paid to employees by the statutory deadline
A copy of the completed IR56B/56E/56F/56M/56G shall be provided to the employee concerned so as to facilitate the correct completion of the staff's own individual tax return
What are the different types of employer return? How to Complete?
Please refer to the following summary.
Forms | When to Submit | How to Complete | Sample |
BIR56A & IR56B (Annual Employer's Return reporting remuneration for the year) | Within 1 month from the date of issue of BIR56A, , which is generally issued in early April each year. | ||
IR56E (Commencement Form for New Joiners) | Within 3 months of commencement of employment of an employee. | Please refer to the specimen | |
IR56F (Cessation Form on Employee's termination or Death) | 1 month prior to the cessation of employment of an employee. | Please refer to the specimen | |
IR56G (Departure Form on leaving Hong Kong for good or for a substantial period of time) | At least 1 month before the expected departure date of an employee. *Withholding salary required | Please refer to the specimen | |
IR6036B & IR56M (For Persons Other than employees) | Together with BIR56A. |
*What's the withholding requirements for IR56G?
For staff leaving leaving Hong Kong for good or for a substantial period of time, employer is required to submit IR56G 1 month before the staff's departure date. From the date of filing IR56G and until such time the employee has made tax clearance and can produce a " letter of release" issued by the IRD, employer is required to withhold all amounts due to be paid to him (including salaries, commission, bonus, money or money's worth included).
How to Complete and Submit Employer Return?
The IRD will issue the Employer's Return forms on the first working day of April each year .
Employers must prepare payroll information from April 1 to March 31 of the following year and update employee's personal information and annual remuneration .
The Employer's Return must be submitted within one month from the date the IRD issued the form .
There are different modes of filing the Employer's Return,
Submit paper form by physical delivery to the IRD,
Submit a CD/ DVD/ USB storage device containing all employer return's data with a signed original control list
Any Penalties for Late Filing of Employer Return?
Failure to submit the Employer's Return, reporting false information or incorrect misstatement, or not meeting reporting requirements without a reasonable cause may result in heavy penalties, up to HKD$10,000, for each offence in accordance with the Inland Revenue Ordinance.
Conclusion
To avoid penalties, it is crucial to meet the tax filing deadlines and submit accurate and complete tax returns in a timely manner. Staying organized, seeking professional advice when needed, and keeping track of relevant tax regulations and updates will help ensure compliance with tax requirements in Hong Kong.
By doing so, you can facilitate smooth business operations while remaining in compliance with the law. Keeping yourself well-informed and taking advantage of available deductions will empower you to navigate the tax landscape confidently. Check out our HR & Payroll Outsourcing Service, and work with Biz & Bird to ensure full compliance with the local law.
FAQs
Is it possible to extend the deadline to submit the Annual Employer Return?
If employers require an extension of time to submit the BIR56A/IR56B, it is required to submit a written application that includes the employer's file number, the company's name, the relevant assessment year, the requested additional time, and a detailed explanation of the reasons, subject to the IRD's own discretion.
I haven't hired any staff yet. Do I still need to file the Annual Employer Return?
Yes, you are still required to submit a "NIL" form to the IRD.
Who can be the Authorized Signer of Employer Return?
Authorized Signer refers to the person in one of the following capacities:
Proprietor for the sole proprietorship business
Precedent Partner for the partnership business
Director, Company Secretary, Manager, Investment Manager (only applicable to a corporation that is an open-ended fund company), Provisional Liquidator or Liquidator for the corporation
Principal Officer for a body of persons
Agent for a non-resident person
A staff resigned on 15 April 2023 without serving any notice. My company has not yet filed any IR56B. Which form should be used, should I file IR56B, or IR56F?
You would need to file the following:
one IR56B to report the remuneration covering the period up to and including 31 March 2023; and
one IR56F to report remuneration covering the period from 1 April 2023 to 15 April 2023.