Note: This article was published in April 2018 by Jesslyn Phoon and has been updated in May 2022 by Wong Hern Yee to reflect the latest updates to the Hong Kong Tax Filing/Submission process. As of April 2022, Talenox supports five IR56 forms: IR56B, IR56E, IR56F, IR56G, and IR56M.
Hong Kong is a popular investment centre because of its world-class infrastructure and connectivity. That’s why entrepreneurs all over the world look to Hong Kong as one of their expansion cities. Many even consider it a suitable hub to house regional and/or global headquarters. If you currently operate a business and employ people in Hong Kong, you must be aware of Hong Kong’s taxation system and your employer obligations.
What is the employer’s tax obligation in Hong Kong?
The tax year runs from 1 April to 31 March. Hence, employers usually start preparing their tax forms on 1 April.
In Hong Kong, there is no income tax withholding throughout the tax year. As an employer, you will need to report remuneration (i.e. salaries/wages) paid to employees by submitting an Employer’s Return. After all, it is the company’s responsibility to declare, file and pay each employee’s annual income taxes via the Inland Revenue Department (IRD).
This is done annually, or, once a year – with forms BIR56A and IR56B. Depending on each employee’s circumstance, you may have to file the other forms instead, i.e. IR56E, IR56F, IR56G or IR56M.
If you’re unsure where to start, don’t worry – we’re here to give you a primer on each IR56 form’s application purpose.
IR-what? The different IR56 forms for employee income tax filing.
These are four IR56 forms that you must be familiar with.
IR-what? The different tax forms
There are five IR56 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. The taxes will pertain to the salary earned from 1st April of the previous year to 31st March of the current year. Example: When you file IR56B in April 2022, you are filling based on payroll records from 1st April 2021 to 31st March 2022.
IRD will send the form BIR56A by mail to the employer (you on the 1st of April every year). You will then need to complete BIR56A and IR56B; and then return them to IRD within one month after you received BIR56A.
You’ll only need to submit IR56E for new hires charged under the Salaries Tax. The submission has to be done within 3 months from the commencement of employment or date of hire.
You might wonder whether you need to file IR56E for freelancers or contracted staff under your employment. The answer is, no. The reason is that freelancers and contracted staff are considered ‘non-employees’ who are charged under Salaries Tax. That is why IRD has a separate form – IR56M – to track data on non-employee paid individuals like:
- Consultants, agents, brokers, freelance artistes, entertainers, sportsmen, writers, freelance guides, etc. to whom commission, fees or other remuneration paid exceeded a total of $25,000 per annum for the relevant year ended 31 March.
- Sub-contractors to whom fees or other remuneration paid exceeded a total of $200,000 per annum for the relevant year ended 31 March.
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 leaving Hong Kong.
For resignees, you will need to submit this 1 month prior to the cessation of employment or resign date.
Similar to IR56F, this form pertains to employees who are about to leave the company. The difference is that Form IR56G is designed for leavers who are leaving Hong Kong, while Form IR56F is for leavers remaining in the country.
So, 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 will also need to withhold all further payments to the employee from the date of filing IR56G. The employer will then need to provide a copy of IR56G to the leaving employee; that’s because the employee will need a copy of IR56G to show IRD proof of tax clearance.
Leaving employee will only receive a “Letter of Release” once he/she fully settles all remaining tax responsibilities before departing the country.
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.
A good payroll & HR platform can help you auto-complete all five IR56 forms
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 five 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 four forms, you may upgrade your subscription. Our price plans are always transparent and commitment-free. Generate your Form IR56B now.