Filling in and filing taxes can be a long, arduous and daunting task for companies and individuals alike. One simple mistake could take you down a warren of twists and turns that leave you both tired and frustrated. To avoid falling into this trap, we at FastLane HR have put together an in-depth guide to forms BIR56A and IR56B, which are essential for employers in Hong Kong. This blog will provide all the information on how to fill in these tax return forms properly and correctly, so you can have peace of mind when going through the process and upon submitting it.
What are forms BIR56A and IR56B?
Like every other country, employers in Hong Kong have to be aware of the labour and employment laws and ensure they abide by them. They have an obligation to keep records of the salaries paid to all employees during the financial year and must prepare a report of what they paid to whom via the Employer’s Returns forms, which constitutes BIR56A and IR56B. These tax return forms are issued to employers by the Inland Revenue Department every year on April 1.
If you are a first-time employer in Hong Kong, you may be wondering: how exactly do you fill in a tax return form? But before delving into the process, let’s first take a look at what forms BIR56A and IR56B are.
Simply put, form BIR56A is basically a cover letter for IR56B forms as it should include the following:
- The company’s name and address
- The name of the employer who completed the Employer’s Return
- The number of IR56B forms filled out, with one having to be completed for each employee that works for the employer
- Whether the IR56B forms were prepared in paper format, stored on a CD-ROM, DVD-ROM or USB storage device, or prepared electronically and filed to the Inland Revenue Department using its Employer’s Return e-Filing Services
When filling out form IR56B, employers must ensure the following information is included for each employee they have hired:
- The employee’s personal information
- The employee’s job title
- The salary, benefits and pensions they have received throughout the relevant financial year
Tax return form: What you need to know
Now that you have a general understanding of what you need to include in forms BIR56A and IR56B, let’s dive into a few more important things employers will need to know when filling out these tax return forms in Hong Kong.
As soon as an employer hires an employee in Hong Kong, they have to start keeping detailed records of the employee’s personal particulars, what position they hold in the company, whether they are hired full-time or part-time, along with the amount they are being paid for their services. In addition to this, employers must also keep note of any non-cash perquisites and their and the employee’s contribution to the Mandatory Provident Fund (MPF).
As the number of employees within a business grows, it is the employer’s duty to inform the Inland Revenue Department regarding changes to an employee’s personal details, along with their terms of employment.
Companies in Hong Kong must also maintain thorough business accounting records, which includes employee payroll records, for at least seven years.
The filling in process
Now that you are armed with all the background information needed, let’s take a deeper look into filling in the employer tax return forms in Hong Kong.
As mentioned, forms BIR56A and IR56B must be submitted to the Inland Revenue Department annually. Form IR56B must be completed for each employee that is employed by the employer, meaning if you have 30 people working for your company, you will have to fill out 30 IR56B forms and make note of that on the BIR56A form.
If you are still unsure whether you need to fill in form IR56B, here is a more detailed list of which employees it needs to be filed for.
- Employees whose total income during a financial year is more than HK$132,000, regardless of whether they are paid daily, monthly or via service company arrangements
- Employees living in Hong Kong and those who don’t reside in the city, as long as they are employed by the employer
- Directors of the company and part-time employees, regardless of their income and whether they live in Hong Kong or not
- Employees of foreign companies who were assigned to work at a Hong Kong-listed firm during the financial year. Even if this employee was not based in Hong Kong during their secondment, the employer of the business in Hong Kong is required to fill in form IR56B
- Employees that received a pension during the financial year
For companies that hire freelancers, the remuneration paid to them should be submitted to the Inland Revenue Department via form IR56M.
The filing process
Once you have completed filling in forms BIR56A and IR56B, it is time to submit them to the Inland Revenue Department. This can be done one of three ways:
Physical copies of BIR56A and IR56B forms can be given in as long as they have been downloaded from the department’s website or obtained through Fax-A-Form.
Just remember that when giving in hard copies of these forms, it will require a wet signature of a director, manager or secretary.
Hard copy of BIR56A and soft copy of IR56B
If opting this method, filing form BIR56A remains the same. However, employers must make sure certain requirements are met if they want to submit a soft copy of form IR56B.
When giving in form IR56B, it must be downloaded from the Inland Revenue Department’s website and filled in using their software. Upon completion, it has to be handed in on a CD-ROM, DVD-ROM or USB storage device.
To use this method, employers need to create an eTAX account via the Inland Revenue Department’s website. It can be accessed by an authorised signatory, which could be a director or partner of the company. However, it is important to note that whoever has access to the eTAX account will also have to sign the Employer’s Return.
When completing forms BIR56A and IR56B, employers can opt to fill them out one by one for each employee or choose to submit a data file consisting of all the necessary information.
How long do you have to file the employer tax returns in Hong Kong?
Forms BIR56A and IR56B have to be completed one month after it is issued by the Inland Revenue Department. For new companies in Hong Kong, the employer tax return form, specifically BIR56A, will be issued three to six months after the business has filed its first audit. Upon receiving the form, employers will have one month to complete it and submit it to the department.
Should an employer need more time to complete forms BIR56A and IR56B, they can apply for an extension from the department.
What penalties can be incurred?
If employers fail to file their tax returns, they can be charged under Hong Kong law – more specifically, the Inland Revenue Ordinance. Depending on the severity of the offence, the Inland Revenue Commissioner can make the business pay additional tax as a penalty, impose a fine, or imprison the person authorised to complete the tax return forms.
FastLane HR is here to help
Still have questions on how to fill in and file forms BIR56A and IR56B, or need assistance regarding employer tax returns in Hong Kong? FastLane HR can provide the answers you seek. Contact us today for all your payroll and HR needs.