How to Manage Employer’s Return in Hong Kong
5 minute read
Any company that wishes to carry out business in Hong Kong is required to fill out the Employer’s Return to the Inland Revenue Department (IRD). This is necessary for each of their employees at the end of every year of assessment.
So, what is the employer’s return of remuneration and pensions?
It is a form that the IRD sends this form to Hong Kong employers every year on the first working day of April. Newly set up companies will receive this form, also known as form BIR56A, 3 to 6 months after they file their first audit.
All Hong Kong employers are required by law to complete the Employer’s Return and file it with the IRD within one month after receiving it.
Managing employer’s return in Hong Kong is a very important aspect of complying with the law, so you need to know how to do it properly. Read this article to find out all the details.
- How to complete and submit your employer’s returns and notification forms
- What is IR56B?
- Expats in Hong Kong
As an employer in a Hong Kong company, you have two main obligations. They are keeping payroll records and reporting remuneration paid to an employee.
Keeping payroll records
As soon as you hire a new employee, your tax obligations begin and you need to maintain a record of certain information about the employees.
These include employees’
- Personal information (their name, marital status, address, and identity card or passport number with the place of issue)
- Nature of employment
- Capacity in which the person is employed
- Amount of cash remuneration
- Non-cash and fringe benefits
- Employee’s and employer’s contributions to the Mandatory Provident Fund (MPF)
- Employment contract and amendments to terms of employment
- Period of employment
You need to maintain payroll records and keep them for at least 7 years. If any of this information is changed, the business owner is required to inform the IRD.
Reporting remuneration paid to an employee
To report remuneration paid to employees who are working in Hong Kong, you need to submit the following forms:
- BIR56A and IR56B – Employer’s Return
- IR56E – form filled out for every new employee
- IR56F – form filled out after termination of an employee or their death
- IR56G – form filled out when an employee leaves Hong Kong permanently or for a substantial period of time
How to complete and submit your employer’s return and notification forms
When you create your employer’s return, you need to prepare the payroll information beforehand. As this form needs to be submitted on the first working day of April, you need to prepare the payroll information for 1 April to 31 March of the following year.
The next step is to update each of your employee’s personal particulars and ascertain the annual remuneration for every employee.
After you finish those two steps, decide on the mode of filling. There are three options:
- BIR56A and IR56B in paper form. This option requires a signature of the same person on both forms, the one who physically delivered them to the IRD. Note that the IR56B form needs to be provided by the IRD, downloaded from their website, or obtained from the Fax-A-Form Service.
- BIR56A in paper copy and a soft copy of IR56B records. This soft copy needs to be on a CD-ROM, DVD-ROM, or USB storage device. You also need to use the IRD IR56B software to prepare it. The storage device containing the soft copy will be kept as a source document.
- By ER e-filling Services. This method has two options – the online and mixed mode. Both will be further discussed later in the text.
Steps for filling out the BIR56A in paper form
Tick the “YES” or “NO” box to specify if there is a person who falls within the scope Note 1(a) of the Notes and Instructions for Form BIR56A.
If you ticked “YES”, then write the number of the submitted IR56B Forms.
- In item (1) report on the number of paper IR56B submitted.
- In item (2) write the number of IR56B records submitted via a storage device.
- In item (3) report on the number of IR56B records uploaded via the Employer’s Return e-Filing Services.
The Employer’s Return (BIR56A) must be signed by one of the following people:
- Proprietor for a sole proprietorship business
- Precedent Partner for a partnership business
- Company Secretary / Manager / Director / Investment Manager – for open-ended fund companies
- Provisional Liquidator / Liquidator for a corporation
- Principal Officer – for a body of persons
- Agent – for a non-resident person
If you decide to file your IR56Bs via storage device or through the Employer’s Return e-Filing Services (mixed mode), you need to submit a duly signed Control List. If you’re using this method, you aren’t required to submit printed copies of the IR56B. Always submit the BIR56A and IR56B forms together after they have been duly completed and signed.
Note that the person who signed the Employer’s Return also needs to sign every page of the Control List. All documents need to be originally signed. Photocopies, scanned copies, or signed copies won’t be accepted.
At the end of the yearly assessment, you can also choose between two modes of submission for the Employer’s Return e-Filing Services (also known as ER e-Filing Services): the online mode and the mixed mode.
The online mode
This mode requires an eTAX account to which only an Authorized Signer can log in. This authorized signer has to sign and submit the Employer’s Return.
An employer should use the Direct Keying service of the Filing of Employer’s Return/Notifications Services to create and submit the necessary forms. This includes the annual Employer’s Returns BIR56A, IR56B, IR6036B plus IR56M and Employer’s Notifications IR56E/IR56F/IR56G
You can provide annual submissions of these forms via Online Mode only once per year of assessment and multiple submissions during one year aren’t allowed. The maximum capacity of the file is 30 sets of IR56B/M forms.
If an employer needs to add an additional, replacement, or supplementary IR56B/M and original, additional or replacement IR56E/F/G, they can make multiple submissions a day. You can complete and submit up to 30 sets of IR56 forms each time.
If you don’t want to use the delivery mode of Direct Keying, you can also submit a data file by uploading it. This data file can contain up to 800 sets of IR56 forms.
To prepare these forms, you need the following tools:
- For forms IR56B and IR56F – IR56 Forms Preparation Tool
- For the annual Form IR56B with the submission of Employer’s Return – IRD IR56B Software
- For forms IR56B and IR56F – Pre-approved self-developed software
Annual submissions are allowed only once a year, at the end of every year of assessment. Multiple submissions a day are allowed for other cases.
What is IR56B?
Employer’s Return of Remuneration and Pensions, also known as the IR56B, is another form that is important for employers whose company is based in Hong Kong. They need to submit this form to the Inland Revenue Department within one month after the issue of BIR56A.
Both of these forms are sent together to employers on the first working day of April at the end of every year of assessment.
An IR56B represents salaries tax and there are three ways a Hong Kong employer can fill it out:
- Manually complete hard copies of the form for every employee at the company.
- Download the software from IRD for this form and use it to generate an XML data file.
- Use an IRD-approved self-developed software, such as Backstage. This software captures the salary details in the HR system and generates the XML data file.
An IR56B is a tax return, so the employer fills it out with all taxable income items for their employees. Remember that most income items are taxable in Hong Kong apart from:
- Certain compensation items that are exempted by Inland Revenue Ordinance
- Severance payments
- Long service payments
- Jury fees
Income that is delivered from overseas employment is also not taxable while the one arising in Hong Kong is. After the employer writes out the tax return for each employee, they can send hard copies directly to the Inland Revenue Department, or use the same methods as with the previous forms.
Employees assigned to work overseas or to work in Hong Kong (Expats)
If a company carries on its business in Hong Kong, the employer is required to fill out Form IR56B for all its employees. This is true no matter if the company has employees who work outside of Hong Kong, as long as their total income surpassed the limit stated in Note 1(a) of Notes and Instructions for form BIR56A.
If necessary, the employer can provide additional information in the remarks column. For instance, if an employee that is stationed somewhere else visits Hong Kong for less than a total of 60 days during one year of assessment.
An employee of a company from Hong Kong can be partly paid by a non-Hong Kong subsidiary if they provide services for that subsidiary outside Hong Kong. The company needs to report this in the IR56B form in item 11. In this instance, the employer will input the aggregate amount of income paid to the employee by the company from Hong Kong and the non-Hong Kong subsidiary.
The amount that was paid by the non-Hong Kong subsidiary needs to be stated in form IR56B again in item 13. Here, the employer needs to report the full payment the employee received, regardless of whether the employee will be entitled to a tax return from it.
If a non-Hong Kong parent company assigns an employee to the Hong Kong office, the Hong Kong company needs to name the company name of the employer in item 1 of form IR56B
Another thing all employers need to consider is the currency in which these employees are paid. Salaries tax is charged in Hong Kong dollars, so an employer is required to use that currency when filling out Form IR56B.
If you’re an employer at a Hong Kong company, you probably worry about your employer’s return and salaries tax during every year of assessment. While this guide can help you manage the large amount of work that goes into managing and submitting different types of files, that may not be enough.
If you want to optimize the process of submitting salaries tax, you need professional help. With Sleek’s accounting services, you won’t ever have to worry about managing employer’s return in Hong Kong again.