What is Employer's Return? Understanding The Forms

If you’ve registered a business in Hong Kong, you know there are many advantages. For example, a dynamic business environment, a strong regulatory system and a simple tax regime. As the owner of a Hong Kong company, you mustn’t forget to comply with the regulations every year. There are tax declarations related to the profit of a company. But, these aren’t the only ones, there are other forms! And these need to be submitted to the government authorities.

In this article, we'll be focusing on the Employer's Return form. It’s officially known as the Employer's Return of Remunerations and Pensions. Some of the aspects that we’ll be covering here will be what it’s, its content and some considerations for the employees. The employees in Hong Kong also have their responsibilities. More details will be discussed in the next sections. Of our article prepared by the team of experts of Statrys.

Forms BIR56A and IR56B - What Are They?

Companies in Hong Kong need to declare the salaries paid to the current employees. This is done within a defined period. Each period is known as the year of assessment. Each year covers 12 months (31st of March to the 1st of April). The government body that is involved in this process is the Hong Kong Inland Revenue Department (IRD). 

Hong Kong companies will normally receive this form every year.  By the end of March or at the beginning of April. The form that a company receives, related to the Employer's Return, is known as form BIR56A. Additionally, a complementary form, the form IR56B, needs to be filled and submitted together if a paper version is used in the submission process. It’s possible to make an online submission through the Inland Revenue Department with the return e-filing services.

Just as with the Profits Tax Return forms, the forms IR56B and IR56A need to be completed and submitted one month after the date of reception. It’s important to mention that the government authorities use the Employer's Return as a way to confirm the salaries tax declaration from individuals and the corresponding tax rates, in Hong Kong.

Content of the Forms

In this subsection, we’ll be covering some of the elements that are contained in the form and must be filled in by the employers or their authorised tax representatives.

Form BIR56A

As we’ve mentioned, this is the form that a Hong Kong company will receive at their registered office address.  Here is a list of the elements of the form:

• Period of assessment
• Name of the company
• Postal and business address
• Date of the notice
• Form of preparation for the form IR56B (paper or digital data file disk, as well as how many forms are included)
• Declaration from the director (with his or her signature)

We can notice that this form doesn't require to include much information since it's only used to file the complimentary forms to the government authorities. On the other hand, as we're going to see in the next section with the form  IR56B,  here the employer must include more details about their employees.

Form IR56B

We need to make the distinction that this form must be filled out per employee. For example, if the company has five employees, they’d need five forms IR56B. They must be attached to the  submission form (Employer's return). If your company doesn’t have any employees, a form must be filed too! This kind of form is filled as nil. Directors also need to file a form as an employee. Now we’ll mention some of the contest of this form:

• Name (from the employer)
• Employee’s name
• ID number (Hong Kong) or passport number
• Sex
• If the employee is single or not
  undefined
• Their address (residential and postal)
• Company position or title
• Period of employment
• Details of the income during the year of assessment
• Expenses of their residence (if any, for example, rent)
• An additional source of income for the employee if it’s paid outside of Hong Kong
• Remarks
• Name and signature of the director

❗Important: Keep your registered address information up to date. If the address was changed, you need to notify the authorities to avoid any delays or losing official document forms.

Employee's Perspective

Receiving a salary in Hong Kong is quite attractive for foreign individuals since the tax rates are quite competitive.  Nevertheless, an individual also has the responsibility to accurately declare their income sources from Hong Kong. In this section, we’ll be discussing a few scenarios where an employee that is hired by a Hong Kong company must file his or her returns:

• Being the Company Director: something that is often forgotten is that a director of a company, no matter if he or she is also the owner, must submit an employer's return form as well.
• Working from Overseas: if you have a working contract with a Hong Kong company, you must declare your annual income, no matter if they’re currently in Hong Kong or not. For these cases, there is a section of remarks in the form IR56B.
• Freelancers and Part-time Staff: If you’re working on a part-time basis, you must mention it when filling out your form IR56B. On the other hand, freelancers must fill out the form IR56M, which contains the categories of your remuneration. 
• Ending a Working Relationship Contract: If you decide to leave your job or your contract is terminated or not renewed before the deadline for the submission of the Employer's Return, you must also submit the declaration one month after the termination date of your contract.

It’s important to mention that if an individual makes inaccurate declarations about their income, there could be some legal consequences and penalties to be paid.  The same happens for the company's owners that don't meet their Employer's Return on time. For the delay in the submission of official forms, the government issues a penalty fee that cannot be deducted or refunded.

Conclusion

We’ve discussed some aspects of the Employer’s Return document. It’s something that should not be forgotten about. You as a company owner should not take it lightly. As any other form, it should be submitted at the right time. If you don’t submit the form, it could affect your company’s operations. Since this matter involves taxes, a more specialised knowledge might be needed. This is where your tax representative enters to save the day! They can guide you to file and fill in the right information. Don’t let your business and your employees be affected by a simple mistake! Let them handle your taxes and so you can focus on your business.