If you own a registered company in Hong Kong, filing the Return of Remuneration and Pensions, also known as Employer’s Return, is mandatory under law.
This is the annual reporting of the amount of salary and all other benefits that your employees receive.
Here’s everything you need to know about how to file the return:
Employer returns are filed to the Inland Revenue Department through forms BIR56A and IR56B.
Form BIR56A serves as a cover letter to IR56B forms, and both need to be submitted.
These forms are directly sent by the Department.
The employer also needs to find the requisite number of Form IR56B corresponding to the number of employees on a roll.
Moreover, these forms need to be filed regardless of the employee’s income.
That’s why the employer must maintain payroll records to report how much do the employees earn accurately.
Apart from BIR56A and IR56B, an employer also needs to submit the following to report the earnings of the employees in Hong Kong:
- IR56E: When hiring a new staff
- IR56F: When the employer terminates the contract of an employee or upon the death of the employee
- IR56G: When an employee leaves Hong Kong for a substantial period of time or for good
Who’s an employee?
For the purpose of these forms, the term employee refers to persons employed by Hong Kong companies, including full-time or part-time employees; Hong Kong residents or non-Hong Kong residents; and persons who provide services in or outside Hong Kong.
It also includes all employees assigned or seconded to a Hong Kong company by the overseas holding company or subsidiary, including persons who provide services in or outside Hong Kong.
What are your tax obligations as an employer?
The tax obligations commence as soon as you hire the first employee.
Accordingly, you must maintain a record of that employee’s personal particulars, nature of employment, the designation in which the employee is employed, the cash remuneration provided, non-cash perquisites, employer’s and employee’s contributions to the Mandatory Provident Fund (MPF), or it’s equivalent.
Employers also need to maintain business accounting records, including payroll records, for at least seven years.
In case of any change in the employee’s personal details or terms of employment, the employer must inform the Inland Revenue Department as soon as possible.
Filing Form BIR56A and IR56B
Forms BIR56A, and IR56B should be submitted to the Inland Revenue Department (IRD) of Hong Kong annually.
Every year, these forms are issued by the Department on 1 April.
Here’s what you need to provide when you are filling up Form BIR56A:
- Company’s name and address
- Name of the officer who is filling up the Employer’s Return
- Number of IR56B forms filed up; and
- How the forms have been submitted: in hard copy, online, or a mix of both
Form IR56B should be submitted for the following employees:
- Employees (including laborers, whether daily paid or otherwise, and employees who have received remuneration through service company arrangements), whether resident in Hong Kong or not, whose total income during a financial year is more than HKD $132,000 (if employed for less than a year, a proportionately reduced amount).
- Directors, married persons, and part-time employees who are likely to have other income chargeable as Salaries Tax, regardless of their income and whether resident in Hong Kong or not.
- Employees of any non-Hong Kong company who were assigned or seconded to the company during the financial year for duties in or outside Hong Kong.
- Employees receiving pension during a financial year.
If there are any freelancers employed by a company, the remuneration paid to such freelancers should be disclosed in Form IR56M and submitted to the Inland Revenue Department.
For Form IR56B, the following details must be provided:
- Employee’s personal particulars
- Position/designation in the organization; and
- All salary, benefits, and pension received
Forms IR56B should be submitted in alphabetical order of surnames followed by other names and should be marked in numerical order.
While H.K. Identity Card No. of the employee is mandatory, passport number and place of issue can be provided in case the identity card number is not available.
However, the employer must inform the Inland Revenue Department once the identity card number is known.
What is the timeline for filing the forms?
The forms should be submitted within one month from the date of issue.
Keep in mind that when you receive the forms, you should complete them and submit them even if you do not hire any employees.
In that case, you should tick the Box “NO” in the form.
Similarly, the form should be submitted even if the business has not commenced or has ceased operations.
In case you are a newly incorporated Hong Kong company, Form BIR56A will be issued 3 to 6 months from filing your first audit, and it should be submitted within one month from the date printed on the form.
If you need more time to prepare the forms, you can submit a written request for an extension with the IRD.
Ensure to include the company name, file number, the year of assessment in question, the additional time you need, and the reason for the extension, along with necessary documentary evidence.
What’s the process of filing?
Once you have filled up the forms, there are different modes of submitting them:
Both forms in hardcopy or physical form: You can submit physical copies of the forms, provided they are downloaded from the website of the Inland Revenue Department or obtained from Fax-A-Form.
Moreover, such forms require wet ink signatures of the director, secretary, manager, as the case may be, prior to delivery.
BIR56A in hard copy and IR56B in soft copy: IR56B forms should be either on a CD-ROM, DVD-ROM, or USB storage device.
Downloading and using the IRD’s IR56B software to prepare the forms is mandatory.
The storage device with the soft copies is preserved by the Department as a source document.
E-filing services: You can either opt for online mode or submit the forms through mixed mode.
If you wish to go through the online mode, create an eTAX (Inland Revenue Department’s online services) account.
Such accounts can be also accessed by an Authorised Signatory such as director, sole proprietor, or partner.
The same person will need to sign the Employer’s Return.
You can either type in employees’ information on the IR56B forms and form BIR56A one-by-one online, or you submit a data file containing all the information.
From November 2018 onwards, the Department allows mixed modes for submitting the returns.
As per this method, you can submit IR56B or IR56F data files without using the Authorized Signatory’s eTAX / “iAM Smart” Account.
Any person designated by the employer can upload the relevant data files.
Once the data files are successfully uploaded, a Control List paper containing the Transaction Reference Number and QR code is generated by the system.
The same should be signed by the Authorized Signatory and submitted to the Department to complete the submission process.
Is there any penalty due to non-compliance with filing requirements?
Yes, as per the terms of the Inland Revenue Ordinance, if the filing requirements are not complied with, the Commissioner can invoke relevant punitive provisions, depending on the nature of the offense
The Commissioner may, at their sole discretion, initiate prosecution to assess additional tax (which is a form of penalty) in respect of the offense and also impose fine or order imprisonment.
As the director of your company, do you still need to file your own Employer’s Return?
Under the law, a company director is an employee of a company.
That’s why the details of your earnings and benefits should be submitted as part of the Employer’s Return.
Are you looking for assistance to handle the filing process?
Needless to say, there’s a fair bit of paperwork involved with filing an Employer’s Return in Hong Kong.
As a business owner, it may be a lot for you to handle, and that’s precisely where Air Corporate steps in!
We take care of all the formalities so that you can solely focus on growing your business.
Our digital company secretary services are specially tailored for entrepreneurs like you to make compliance a hassle-free process.
Speak to us today and let’s find out a way to help you.