Employer’s return in Hong Kong.

Employer’s return in Hong Kong

Company employers in Hong Kong are responsible for filing an Employer’s Return annually, which is a requirement from the Inland Revenue Department. This guide will provide an overview of preparing and filing the Employer’s Return in Hong Kong.

Let’s dive right in.

What is an employer’s return in Hong Kong?

An Employer’s Return, also known as the BIR56A and Form IR56B, are reporting disclosures issued by the Hong Kong Inland Revenue Department (IRD) to employers in April each year.

The purpose of the Employer’s Return is to facilitate the IRD’s assessment of the employee’s salary tax liabilities for 1 April to 31 March of each year of assessment.

What information must be disclosed?

Information that the employer must disclose in the Employer’s Return include:

  • Employee’s name
  • Nature of employment
  • Amount of remuneration
  • Details on non-cash and fringe benefits
  • Any changes to the above information

Employee’s salary tax calculation

To ensure that the IRD correctly assesses the salary tax, employers must provide the following information:

  • Back pay, contract gratuities, deferred pay and arrears of pay
  • Bonus
  • Cash allowances
  • Commission
  • Educational benefits or costs
  • Holiday journey benefits
  • Housing allowances
  • Leave pay
  • Mandatory Provident Fund (MPF) and other recognised occupational retirement schemes
  • Overseas income
  • Salary
  • Share awards and share options
  • Termination payments

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Hong Kong employer’s obligations

As an employer of a company in Hong Kong, you must meet two obligations: keeping payroll records and reporting remuneration paid to an employee.

Keeping payroll records

When you hire new employees, you have to maintain a record of information about the employees.

The information you need to keep include:

  • Personal information, including the employee’s name, marital status, address, identification card or passport number)
  • Nature of employment
  • Period of employment
  • Capacity in which the person is employed
  • Contributions to the MPF
  • Employment contract and amendments to the terms of employment
  • Amount of cash remuneration
  • Non-cash and fringe benefits

The payroll records must be maintained for at least seven years, and if any of the information is changed, the employer must inform the IRD.

Reporting remuneration paid to an employee

To report remuneration paid to employees, employers will have to submit the following forms:

FormsNotes
BIR56A and IR56B – Employer’s ReturnMust be lodged with the IRD within one month even if you do not hire any employees, the business has not commenced or has ceased operations.
IR56E – new employee informationMust be filed within three months of employing a new employee that is likely to be chargeable to salaries tax
IR56F – employee’s termination or deathMust be filed within one month before the date of termination
IR56G –employee leaves Hong Kong permanently or for a period of time
  • Must confirm the employee’s departure date
  • Must file two copies with the IRD one month before the expected date of departure
  • Should withhold all amounts to be paid to the employee until the employee has made tax clearance and submits a letter of release issued by the IRD

How to complete and submit the employer’s return in Hong Kong?

The IRD will issue the Employer’s Return to companies on the first working day of April, and employers must prepare payroll information from 1 April to 31 March of the following year. The employer will then need to update the employee’s personal information and annual remuneration.

The Employer’s Return must be submitted within one month from the date the IRD issued the forms.

Once the above steps are completed, you must decide on the mode of filing the Employer Return:

  1. BIR56A and IR56B in paper form
  2. BIR56A in paper copy and soft copy of the IR56B records
  3. By ER e-filing services

Filing the BIR56A in paper form

The steps of filing the Employer’s Return in paper form are:

  • Tick the YES or NO box to specify if they were any persons who were within the scope of Note 1(a) of the Notes and Instructions for Form BIR56A
  • If you ticked YES, you would need to fill in the following:
    • Item (1) – the number of paper IR56B submitted
    • Item (2) – the number of IR56B records submitted visa a storage device (i.e., CD-ROM, DVD-ROM, USD)
    • Item (3) – the number of IR56B records uploaded visa the ER e-filing services
  • The BIR56A must be signed by one of the following persons:
    • Proprietor for a sole proprietorship
    • Precedent partner for a partnership
    • Company secretary, manager, director or investment manager for open-ended fund companies
    • Provisional liquidator or liquidator for a corporation
    • Principal officer for a body of persons
    • Agent for a non-resident person
  • If you file the IR56B through a storage file or ER e-filings services, you must submit a signed Control List. Printed copies of the IR56B are not required to be submitted if the records are submitted through this method.

ER e-filing services

There are two modes of submitting the Employer’s Return through the e-filing service, which is the online mode and mixed mode.

  1. Online mode
  • Requires an eTAX account, and only the authorised signer can log in
  • An authorised signer is one of the following persons:
    • Proprietor for a sole proprietorship
    • Precedent partner for a partnership
    • Company secretary, manager, director or investment manager for open-ended fund companies
    • Provisional liquidator or liquidator for a corporation
    • Principal officer for a body of persons

Submission of a data file by Direct Keying:

  • Employers can use the Direct Keying service to submit the Employer’s Return BIR56A, IR56B, IR6036B and IR56M, and the Employer’s Notifications IR56E, IR56F and IR56G.
  • Employers can submit these forms through the online mode only once each year of assessment. Multiple submissions for the same year is not permitted.
  • Data files created by Direct Keying can contain only up to 30 sets of IR56B/M forms.

Submission of a data file by uploading:

  • Employers can submit a data file that can contain up to 800 sets of IR56 forms.
  • The following tools will be needed to prepare the forms:
    • IR56 forms preparation tools – IR56B and IR56F
    • IRD IR56B software – annual Form IR56B with the submission of Employer’s Return
    • Pre-approved self-developed software – IR56B and IR56F
  1. Mixed mode

For the mixed mode, employers can submit the IR56B or IR56F data file without using the authorised signer’s eTAX account.

The appointed person can upload the forms containing up to 800 IR56 form records by the following tools:

  • IR56 forms preparation tools – IR56B and IR56F
  • IRD IR56B software – annual Form IR56B with the submission of Employer’s Return
  • Pre-approved self-developed software – IR56B and IR56F

Once the data file is uploaded, a Control List is generated by the system that the authorised signer will sign and submitted to the IRD in paper form to complete the process.

For annual submissions of the IR56B records, a completed and signed BIR56A must be submitted with the Control List.

It is important to ensure all Control Lists are signed and submitted to complete the submission process.

Penalties for late employer’s return filing

Employers who fail to submit the IR56B, report false information or fails to meet the reporting requirements without a reasonable cause will be subject to penalties (usually HKD 2,000) in accordance with section 80(1) of the Inland Revenue Ordinance.

Conclusion

Companies must ensure that the Employer’s Return is filed and submitted on time to avoid any penalties. The Employer’s Return must contain the employee’s personal information and details concerning remuneration. If you need any help, do not hesitate to contact Acclime.

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