Hong Kong Employers Guide to IR56B – Employer’s Return of Remuneration & PensionsA Hong Kong company must adhere to various employer obligations the moment they hire an employee. As many Hong Kong businesses will actually have their management run and operate their company from outside the city, it’s not always clear what their Hong Kong employer obligations are. While it’s commonly recognised that Hong Kong employers are required to maintain proper records of their employee’s wage and employment history, it is not always clear how this information is used. Of all these employer obligations, filing IR56B is among the most important forms to file. In this article, we look to provide guidance on how employers can navigate filing IR56B and what they need to consider
What You Will Learn:
- What is an IR56B form
- When you have to file your IR56B form
- What you need to pay attention to when completing your form
- Why you should engage a professional firm
1. What is an IR56B form?IR56B is also known as the Employer’s Return of Remuneration & Pensions. This is the form Hong Kong employers must submit to the Inland Revenue Department (“IRD”) which outlines the amount of remuneration their employees have received during a financial year. Company carrying on business in Hong Kong is obliged to file Form IR56B for all its employees, irrespective whether the employee rendered services in or outside Hong Kong
2. When Do I Have to File an IR56B?Normally, the IRD will issue a Hong Kong employer with a BIR56A together with the form of IR56B, on the first working day of April each year. A BIR56A form is also known as an Employers Return and can be considered as the cover letter to IR56B. This document is to be completed and submitted alongside IR56B and should be filed within 1 month from the date of issue of BIR56A.
3. What Should I Pay Special Attention to When Completing an IR56B?One of the most important aspects of completing an IR56B for an employee is to make sure that their compensation is taken into consideration. You will need to make sure that the following aspects of your employees remuneration are properly accounted for:
Commissions, Bonuses, Leave Pay, End of Contract Gratuities and PaymentsAs a general guide, most forms of income that a Hong Kong employer pays to their employees are taxable, regardless of when the payments are made. Only a few types of payments are exempt. These include, but are not limited to, compensation for injuries and payments specifically exempted under the Inland Revenue Ordinance (“IRO”).
Allowances, Perquisites and Fringe BenefitsAny income that an employer pays to their employee in the form of an allowance, perquisite or fringe benefit should be reported on the employees salary tax return. These forms of income include cash allowances, liability of employees discharged by employers, convertible benefits, education benefits and holiday journey benefits. Holiday journey benefits are taxable. The benefits are to be assessed by reference to the amount paid by the employer for such benefits. More information is available through the following links.
Stock Awards and Share OptionsIf an employee was granted any stock awards or share options and realised those shares during this year of assessment, the employer should recognize and record this amount.
Back Pay, Gratuities, Deferred Pay and Pay in ArrearsAny income that an employee has received in the form of back pay, gratuities, deferred pay and arrears of pay during the course of employment or upon or after cessation of employment are assessable and should be reported on your IR56B.
4. Why should you engage a professional firm?We understand that matters relating to payroll and HR administration are time-consuming tasks that require a significant amount of the company’s resources. Although such resources could otherwise be spent on revenue-driving activities, payroll and HR administration are essential aspects of running a successful business. FastLane HR can manage these essential business tasks, such as payroll accounting and HR system management, on your behalf.