Filing a Hong Kong Employer’s Return, Form BIR56A and IR56B, is an easy process. All employers are required to file these returns annually with the Inland Revenue Department (IRD). The main objective of filing these returns is to ensure accurate taxation of the employer’s employees. To record the amount of compensation and other employee benefits, you, as the employer, must complete the Employer’s Return. Each IR56B form that an employer send must have a cover letter in the form BIR56A.
Employer’s return form BIR56A and IR56B in Hong Kong
BIR56A and IR56B are two different forms that are used to report the wages and other payments made by employers to their employees. BIR56A is an annual return form completed by an employer, while IR56B is a statement of the employees’ income and deductions for taxes purpose.
What is an employer’s return form?
The employer’s return form is a document used to report wages and other payments made by an employer to their employees. This form must be completed annually in order for the Inland Revenue Department (IRD) to assess the income and deductions of each employee correctly. Suppose you own a business in Hong Kong and have employees; you must take the following actions:
- Maintaining payroll data, and
- Inform us about your employees’ salaries.
What does form BIR56A and form IR56B include?
Form BIR56A states whether there are persons in the company reportable in IR56B. Form IR56B is used to report the income and deductions of each employee. This form captures the employee’s gross pay, any taxable benefits or allowances received, tax withheld from wages paid and other deductions made from their salary.
Whether they work in Hong Kong or abroad, all employers must report remunerations of all employees using the forms BIR56A and IR56B. Form BIR56A serves as a cover letter for all IR56B forms that an employer would send. An employer’s hiring of personnel will be reflected in the number of IR56B forms submitted.
The following details will appear on the BIR56A form:
- Address and name of the business
- File number
- Completed IR56B form count
- The number of IR56B forms submitted in various format (i.e. paper, electronic, or a combination of both)
The following details are listed on Form IR56B:
- Employee’s personal information
- Position within the business
- Details of remunerations and pensions
Yearly obligation for employees in Hong Kong
Employers in Hong Kong are required to file a Hong Kong employer’s return form BIR56A (and include IR56B if applicable) once a notice is issued from the Inland Revenue Department (IRD) of Hong Kong during the year. The deadline for filing the returns is within 1 month from the date of the notice. Failing to file these forms on time may lead to penalties imposed by the IRD. It is important that employers ensure that all information reported on the forms is accurate and up to date.
It is stated that if employment has been commenced in a Hong Kong company regardless it is in Hong Kong or abroad, all payroll records should be kept properly and submit the information to the IRD
Keeping payroll record
It is important for employers to keep accurate payroll records of all employees in order to ensure the accuracy and completeness of the employer’s return form. Employers should maintain a record of each employee’s salary, overtime pay, bonus payments and deductions from wages paid. When you hire new employees, your obligation as an employer (in terms of filing an Employer’s Return in Hong Kong) begins right away. You must write down the following details from them:
- Name, address, date of birth, identity card or passport number, and marital status are examples of personal information.
- Working conditions: Full- or part-time
- Job title: for example, sales manager, salesperson, employee, internal attorney, accountant, or director
- Paid in both local currency and foreign currency; also includes salary received outside of Hong Kong.
- Benefits that are not financial in nature, such as housing or lodging, travel reimbursements, stock awards, and share options
- Contributions made by both employers and employees to the Mandatory Provident Fund (MPF) or an equivalent
- Employment agreement and modifications to the terms of employment
- The time frame of employment
You must retain these documents for at least 7 years, and if anything changes, you must notify the Inland Revenue Department.
Reporting of how much employees earn
You must submit the following forms to the IRD in order to report any wages paid to your staff members who are employed in Hong Kong:
- Employer’s Return forms, such as those in the previous samples BIR56A and IR56B
- IR56E: Form used when employing new employees
- When you terminate an employee’s contract or after their passing, you must complete Form IR56F.
- When an employee departs Hong Kong permanently or for a sizable amount of time, they must fill out the IR56G form.
The BIR56A and IR56B forms will be sent to employers by the Hong Kong Inland Revenue Department (typically in paper copy, but you can also file them electronically or even use your company’s own filing software – with previous IRD approval).
How to file employers’ return form BIR56A and form IR56B in Hong Kong?
Filing the employer’s return form BIR56A and IR56B in Hong Kong is a straightforward process. Employers can either submit their returns online or via post to the Inland Revenue Department.
Employers should log onto the e-Tax website where they will be guided through a set of steps to complete the online filing process. They will need to provide information such as employer’s name, business address and contact details as well as employee details such as names, salary and deductions in order to complete the forms accurately.
Employers can also opt to submit their returns via post. The BIR56A and IR56B forms can be downloaded from the Inland Revenue Department website and must be completed accurately. Employers should then send the form to the address provided on the website.
Requirements to fulfill to file form BIR56A and form IR56B in Hong Kong
An employer must disclose her employee’s chargeable income when submitting an Employer’s Return. The amount of chargeable income depends on whether the income or earnings would be subject to Hong Kong’s Salaries Tax (Income Tax).
The compensation package (chargeable income) for the employee that must be declared on form IR56B of the Employer’s Return consists of the following:
- Wages, salaries, and director fees
- Commissions, bonuses, leave pay, gratuities at the end of a contract, and payments made instead of notice that has accrued as of or after April 1 of the assessment year;
- Allowances, perquisites (benefits you obtain as a result of your employment), and fringe perks, including benefits for holiday travel;
- received tips;
- Tax on salaries paid by the employer;
- Rent of a residence provided by the employer;
- Share options and stock awards
- Pay in arrears, gratuities, deferred pay, and back pay;
- Retirement benefits and termination payments;
For example: Ben, who is 67 years old, has been the sales manager for Pacific Pte. Ltd. during this year’s assessment period. On December 31, 2020, he officially retired and began receiving a pension. His employer, Jason, will list his wages as follows on his IR56B form:
- “Salaries” under item 11(a) from 1 April 2020 to 31 December 2020, and
- “Pension” under item 11 from January 1, 2021, to March 31, 2021 (l).
Right time to file the employer’s return form BIR56A and form IR56B
Every year, the Inland Revenue Department of Hong Kong issues Hong Kong employers forms BIR56A specifically on the first working day of April.
Employers have one month from the date of issuance to complete and submit form BIR56A (and IR56B if applicable).
The IRD issues the BIR56A form to all Hong Kong companies, despite the fact that none of them have hired any staff members, started any business operations or stopped doing so during the assessment year. They would still have one month from the date listed on the form to complete and submit Form IR56B.
A newly incorporated Hong Kong company would receive a BIR56A form from the IRD 3 to 6 months after the company submitted its initial audit.
In case you want extra time to complete your IR56Bs, you can ask the IRD for an extension. Please include your company’s file number, name, the assessment year in question, the amount of additional time you require, and your justification for the extension in your request.
Penalties for not filing employer’s return form BIR56A and form IR56B on time
For entries that are made late or incorrectly, the IRD levies severe sanctions. Businesses that fail to file the yearly IR56B are subject to an HKD 10,000 punishment.
Steps to file employer’s return in Hong Kong
Make sure you have obtained the relevant payroll data for the year of assessment between 1 April to 31 March before filing your Employer’s Return for submission . Next, determine each employee’s total annual compensation and update any necessary personal information.
Choose a filing method after that for your employer’s return. Three options exist:
Both BIR56A and IR56B are in physical hardcopy paper form.
The IRD only accepts official forms that can be downloaded from their website (IR56B) or ordered from the Fax-A-Form Service. The autographs must be wet. The director, secretary, managers, or liquidators may all sign it.
BIR56A in hardcopy and IR56B in softcopy.
Soft copies of the IR56B forms may be stored on a CD-ROM, DVD-ROM, or USB storage device. To prepare it, you must obtain and utilize the IR56B software from the IRD. The source document will be the storage device that has the soft copy.
By Employer’s Return e-Filing Services.
The online and mixed modes are the two choices for this strategy.
You require an eTAX (Inland Revenue Department’s online services) account to use this method of payment, and only an Authorized Signer (such as a sole proprietor, a previous partner, a director, etc., depending on the kind of organization) can log in to this account. The Employer’s Return must be signed and submitted by this Authorized Signer.
Employers have the option of directly entering each employee’s information on the IR56B forms and the BIR56A “cover letter” form (direct keying) online, or however you can also submit by uploading a data file. As opposed to Direct Keying, which has a file capacity of just 30 IR56B forms, uploading a data file can accommodate up to 800 sets of IR56B forms (however, multiple file sets could be uploaded per day).
The IRD accepts data files created using the following techniques:
- Direct Keying (all forms of employer notifications and returns)
- Tool for Preparing IR56 Forms (Forms IR56B and IR56F)
- IRD IR56B Software (Annual Form IR56B with Employer’s Return Submission)
- Self-developed software with prior approval (Forms IR56B and IR56F)
In November 2018, this approach was just recently launched in response to the operational demands of some organizations. Employers can submit IR56B or IR56F data files via the online mode instead of the Authorized Signer’s individual eTAX / “iAM Smart” Account. The IR56B/IR56F data files can be uploaded by anyone the employer appoints.
After the data files have been successfully uploaded, the system will generate a Control List paper (with the Transaction Reference Number and QR code). To finish the submission process, the Authorized Signer just needs to sign and deliver the Control List paper to the IRD.
How to file employer’s return for different types of employees?
Different types of employees have different filing requirements. The most common types of employees that need to file a return are salaried, contract and self-employed. They must submit both the BIR56A and IR56B forms to the Inland Revenue Department.
Salaried Employees working overseas
Regardless of whether they are employed in Hong Kong or elsewhere, employers are required to include all employees whose combined annual incomes are at least HKD $132,000 in their payroll. You can provide more details in the remarks column (item 14 of Form IR56B); for example, during the evaluation year, the employee worked in Beijing and travelled to Hong Kong for less than 60 days.
Self Employed or Freelancers and part-timers
Employers in Hong Kong are required by the IRD to record the pay scales offered to full-time, part-time, and independent contractors alike. Part-time workers and their compensation are published in IR56B, whereas independent contractors and other non-employees are disclosed in IR56M.
One month prior to the date of the termination of employment, you must file one copy of Form IR56F or via Electronic Filing of Employer’s Return.
Employees leaving Hong Kong permanently
These actions should be taken if your employee plans to leave Hong Kong permanently or for a long length of time.
- Determine the employee’s anticipated leave date
- Send in two copies of the IR56G or the employer’s return electronically one month prior to the anticipated departure date.
- Disburse all funds owed to the employee (including salary, commissions, bonuses, and rent/expense reimbursements) only when the employee has satisfied all of his tax obligations in Hong Kong and has received a ‘letter of release’ from the IRD.
For example: Evans submitted his resignation from Gem Pte. Ltd. on August 5, 2020. He moved to Mexico on September 5, 2020, one month after leaving Hong Kong.
For Evans, Gem Pte. Ltd. must submit a completed IR56G or file electronically in duplicate on or before August 5, 2020. Additionally, from the date of submitting the IR56G, it is necessary to withhold all sums owed to Evans (including salaries, commissions, etc., as well as money or money’s worth included).
Evans should be given a copy of IR56G by Gem Pte. Ltd., and the company should advise him to obtain tax clearance from the IRD before departing Hong Kong.
The IRD will provide him with a “letter of release” once his taxes have been paid. In the event that Evans presents Gem Pte. Ltd. with this letter, the company may release the amounts withheld for Evans.
Note: The “letter of release” from IRD “may be given out the same day an employee pays their taxes in full in person at the 1/F Revenue Tower Hong Kong Post Office payment counters using cash, EPS, or a cashier’s order. To obtain a “letter of release,” he must take the payment receipt to IRD’s Collection Office at 7/F Revenue Tower “. The letter will typically take the IRD staff 30 to 40 minutes to create.
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