Note: This article was published in April 2018 and has been updated in Mar 2021 to reflect the latest updates to the Hong Kong Tax Filing/Submission process. As of the publish date, Talenox now supports four Hong Kong tax forms: IR56B, IR56E, IR56F, and IR56G.
Employers’ tax obligations in Hong Kong
Due to its world-class infrastructure and connectivity, Hong Kong is a popular investment centre. Many entrepreneurs from around the world look to Hong Kong as one of their expansion cities, or even the headquarters itself. If you currently operate a business and employ people, you should be aware of Hong’s Kong taxation system and your obligations as an employer.
The tax year generally runs from 1 April to 31 March. Hence, employers usually start preparing their tax forms on 1 April.
If you’re unsure where to start, don’t worry – that’s where we’re here to give you a primer on what to do.
Income tax in Hong Kong
In Hong Kong, there is no income tax withholding throughout the tax year. Instead, it is the employee’s responsibility to declare, file, and pay their annual income taxes via the Inland Revenue Department (IRD).
This is where you, as an employer, comes in. Employers need to report remuneration (i.e. salaries/wages) paid to employees by submitting an Employer’s Return. This is done annually, or, once a year.
The forms are BIR56A and IR56B.
IR-what? The different tax forms
There are four forms you must be familiar with.
As an employer, you must submit IR56B for your employees yearly for the Inland Revenue Department (IRD) to calculate the tax contribution. This is done every year in April from 1st April to 30th April, in which the taxes will pertain to the salary earned from 1st April of the previous year to 31st March of the current year. (Example: When filling in April 2021, you are filling based on payroll records from 1st April 2020 to 31st March 2021.)
IRD will send the form BIR56A by mail to the employer (you). You will then need to complete BIR56A and IR56B and return them to IRD within one month after you received BIR56A. It’s worth noting that IRD usually sends BIR56A to the employer on the 1st of April every year.
This is a form that you’ll need to submit for new hires/new employees. Furthermore, you’ll need to carry out the submission within 3 months from the commencement of employment or date of hire.
This form pertains to employees who are about to leave the company (e.g. cessation of employment, resignation, or termination). As an employer, you will need to submit this form one month prior to the actual departure date.
IRD specifically designed this form for leavers who will remain in Hong Kong; it is different from the one below (i.e. IR56G) is for those who are not remaining in Hong Kong.
For resignees, you will need to submit this 1 month prior to the cessation of employment or resign date.
Similar to the form above (IR56F), this form pertains to employees who are about to leave the company. If your employee is a foreigner (or not) and he/she is leaving Hong Kong after the cessation of employment, you will need to submit this form one month before the expected departure date of this employee.
Any employer who files Form IR56G is further required to withhold all further payments to the employee from the date of filing IR56G. A copy of IR56G should be provided to the leaving employee, as they will need it to approach IRD that tax clearance has been made.
Only when the leaving employee has fully settled all remaining tax responsibilities before departing the country, they will be granted a “Letter of Release”.
Once the “Letter of Release” is granted, the employer may request for it and then make the final payment (previously withheld) to this leaving employee.
How an HR platform can help
The forms above are just a few of many. As an employer in Hong Kong, there are many obligations to fulfil. However, there are tools (even free ones!) that may help you navigate through Hong Kong’s payroll and tax regulations.
Talenox ensures that you never miss out on these obligations. With the four tax forms available on our platform, we can help to auto-prepare these forms according to your employee records and salary details. You can then file or upload the forms electronically via IRD, or print them out for mailing. Payroll and tax records are always kept in our system for your reference.
Our price plans start at HKD$0. With a Talenox FREE Plan (it’s really free), you may generate and export Form IR56B for free.
To generate the other three forms, you may upgrade your subscription. Our price plans are always transparent and commitment-free. Generate your Form IR56B now.