Essential Forms for Hong Kong Employers for 2024: What you need to submit to the IRD
An essential part of the payroll compliance process in Hong Kong is to file forms with the Hong Kong Government through the Inland Revenue Department (IRD).
The fiscal 2023/24 Hong Kong tax year wraps up on 31 March 2024, which means employers have to prepare for the annual Employer’s Return filing that begins in April. Collecting sufficient information upfront can ensure smooth operations for your business.
To make this more straightforward, here is a roundup of the forms you need to complete, separated into:
Employees
Non-corporates, such as freelancers, consultants, and agents
These forms apply to the majority of companies. If you’re uncertain, reach out to us for personalised assistance tailored to your specific business needs.
At the point of Hiring and Onboarding an Employee: Form IR56E
When a new employee joins a company, it is mandatory to report the relevant information to the Inland Revenue Department (IRD) in Hong Kong.
Form IR56E includes the particulars of the newly hired employee along with their salary and benefits. This form must be filed within three months from the employment date to meet the regulatory requirements.
Employer's Return: Form BIR56A + IR56B
The annual “Employer's Return" consists of two key components:
BIR56A: This is a cover letter for the IR56B forms. It contains essential information about the employer and the business.
IR56B: This form outlines income details, deductions, withheld tax, and several other details. Employers have to prepare an IR56B for each employee.
This return confirms the remuneration paid to employees during the tax year, which spans from 01 April to 31 March. The IRD usually issues the Employer's Return every year for companies that have employees. However, if a company hasn't received a return but has reportable employees, it becomes the company's responsibility to request a return. If you have not received Form BIR56A by mid-April, fill out Form IR6163 on the IRD’s website.
The Employer's Return is generally issued on the first working day of April and must be filed by the first working day of May.
Failing to file the Employer’s Return accurately and on time may result in severe penalties based on delay time, company size, and other factors. The penalties include a fine of up to HK$10,000, additional tax charges, and imprisonment for up to six months if the form contains false or purposefully omitted information.
A new change starting from 1 April 2024 is that the IRD will no longer accept IR56B submissions through removable storage devices. Employers who opt to file electronically should switch to the IR56 Forms Preparation Tool. You can learn more about e-filing on this link.
What are ‘Reportable Employees’?
Reportable employees are individuals who are likely to be subject to salary tax or for whom it is difficult for employers to determine their tax liability. This category includes:
Employees earning more than the Basic Allowance (currently HK$132k per year).
Married employees, part-time employees, and company directors who receive remuneration, regardless of the level of remuneration.
Employees seconded to Hong Kong from overseas.
Overseas employees (i.e., employees based in another country) of the Hong Kong company.
Ex-employees who have exercised share options and incurred a gain.
Upon Termination of Employment and Continuation in Hong Kong: Form IR56F
For employees who continue to reside in Hong Kong after their employment is terminated, employers must file Form IR56F. This form must be filed at least one month before the last day of the employee's employment with the company.
Employees Leaving Hong Kong: Form IR56G
When an employee departs from Hong Kong, employers must file Form IR56G at least one month before the employee's departure. This applies whether they remain an employee of the company or not.
Additionally, the employee has to obtain a "letter of release," i.e., tax clearance from the IRD, confirming that all outstanding tax returns have been filed and all outstanding taxes have been paid. The employer should not make any payments to the employee for one month from the date of filing the IR56G or until the IRD issues the letter of release.
It is crucial to adhere to these guidelines as the IRD may ask the employer to settle outstanding tax obligations using withheld funds if the employee fails to fulfil their tax payment obligations.
Forms to Report Payments to ‘Local Non-Corporate Persons’, such as freelancers, consultants, and agents: IR6063B + IR56M
Companies that work with non-corporate local (Hong Kong) individuals, such as consultants, agents, freelancers, entertainers, sole proprietors or partnerships, need to report remuneration above certain thresholds paid during the tax year.
Reporting is done through Form IR6063B (cover letter) and one sheet of Form IR56M per reportable person.
The information to be reported is similar to IR56B, including basic information about their business (trading name, Business Registration Number) and the amount of payments made.
This is only for LOCAL (HK) non-incorporated persons. You don’t need to report payments made to limited companies. You also don’t need to report payments to freelancers or consultants who provide their services abroad. If these professionals come to Hong Kong to provide their services, then you do need to report the payments via form IR623P.
Payment Thresholds
Consultants, agents, brokers, freelance artists, entertainers, sportsmen, writers, freelance guides, etc., who have been paid above HK$25,000 per year.
Sub-contractors who have been paid above HK$200,000 per year.
Tip: Use our template to ensure you have collected the required information before paying any freelancers. Even if the amount of the invoice is below the threshold, this helps to be prepared for the filing at year-end.
It can be difficult to collect the information needed to fill in the IR56M after the freelancer has been paid, especially when the working relationship has ended.
Forms to Report Payments to Non-Resident Entertainers and Sportsmen
This section deals specifically with entertainers and sportsmen when they are brought to Hong Kong to perform services, such as a performance, concert or game. The payer of the entertainer's fees is responsible for preparing the entertainer's tax return and ensuring that the tax is paid.
Generally, the tax payable is calculated by applying the tax rate to the gross income of the entertainer and a 30% allowance for expenses (on gross income). It is possible to itemize the expenses if they exceed 30%, but a tax return must be completed for this purpose. Entertainers can benefit from two-tier tax rates, but again, a tax return must be submitted to qualify.
To report remuneration payable to the entertainer, employers need to file Form IR623 and retain 10% or 11% (depending on the company type of the entertainer) of the sums payable to settle the tax obligations.
Additional Obligations
Apart from the forms mentioned above, there are additional obligations for employers in Hong Kong, such as Employee Compensation Insurance (ECI) and Mandatory Provident Fund (MPF) contributions. Compliance with these requirements is essential to ensure a smooth and lawful employer/employee relationship.
In conclusion, the process of filing various forms during an employer/employee relationship is a critical aspect of doing business in Hong Kong. Adhering to these requirements is not only necessary for compliance but also helps maintain a healthy working relationship between employers and employees. To avoid any potential issues and ensure a successful business operation, it is crucial for companies to familiarize themselves with the different forms and their respective filing deadlines.
All forms can be downloaded from the Inland Revenue Department website. If you are having difficulties with your filings, don’t hesitate to reach out to us at Shepherd Asia for advice specific to your business.
