Each April the Inland Revenue Department sends Hong Kong employers an Employer's Return (BIR56A), which must be filed within one month with a form IR56B for every employee. Separate notifications are due when someone joins (IR56E), is about to stop work (IR56F) or leaves Hong Kong (IR56G). The figures must match your payroll.
The Employer's Return of Remuneration and Pensions, form BIR56A, is the annual filing in which an employer reports what it paid to employees and others during the year ended 31 March. The Inland Revenue Department uses the returns to assess employees' salaries tax, so the return affects people who are not parties to the filing, and errors surface when employees question their assessments.
The department issues the return to employers in early April. The employer must complete it within one month, listing every person employed during the year, including part-time and short-term staff, and attach an IR56B, the individual statement of earnings, for each. Even a company with a single employee, perhaps a director on payroll, must file. Electronic filing is available through the department's online service, which is more convenient than paper for more than a handful of employees.
The person who signs the return is declaring that the figures are correct. Directors should read the summary before signing, check totals against the payroll records and keep a copy of the filing with the supporting workings.
Each individual statement identifies the employee by name, Hong Kong identity card or passport number, address and capacity in which employed, and records the period of employment and the amounts paid. The income items include salary or wages, leave pay, commission, bonus, director's fees, allowances, the value of benefits such as quarters, and any lump sums. The statement also shows the employer's address and details of any non-Hong Kong payments, and asks whether the employee is likely to leave Hong Kong.
Accuracy matters most on the classification of payments. A bonus that was paid in April for the year ended March may belong to the following year of assessment; a reimbursement that is a genuine expense claim is different from an allowance. If the facts are not clear, ask your tax adviser rather than guessing, because the employee's assessment will follow what you report.
Compare the total in your return with your payroll ledger and with the year-end MPF reports. A gap between payroll and return is the first question an inspector asks.
The most frequent errors are easy to list. Part-time and short-term staff left off the schedule; employment dates that start from the probation confirmation instead of the first day; bonus and in-lieu payments omitted; identity numbers copied incorrectly; and directors' remuneration omitted because it is paid through a different account. Check the schedule against the list of everyone paid by bank transfer during the year.
Besides the annual return, employers must notify the department at specific moments. A form IR56E reports the commencement of employment and is due within three months of the employee starting. A form IR56F is filed at least one month before an employee ceases employment, and a form IR56G at least one month before an employee leaves Hong Kong for more than a month. These notices exist so that the department can collect tax before someone leaves.
For leavers, the employer may be directed to withhold payments due to the employee until the department issues a clearance notice, so build the notice into the exit checklist. Telling the employee on the last day, when the money has already been paid out, defeats the purpose and can leave the employer liable.
Keep a log of every employee event with dates: start, role change, resignation notice, final day and notification filed. When the annual return arrives, the log shows who must appear and whether event notifications were made on time.
A timing example: an employee gives notice on 15 May with a last day of 30 June. The IR56F must reach the department at least one month before 30 June, so by 30 May. Because the final salary and leave pay would normally be paid at the end of June, the employer should know before that date whether the department has asked it to withhold any of the payment.
Start in March. Export the year's payroll by employee, reconcile it to the general ledger, and check that every person who received a payment, including former employees and directors, has a record. Collect corrections on addresses and identity numbers from HR, since mismatched details lead to rejected submissions.
When the return arrives, set the one-month deadline in the calendar the same day and give each preparer a deadline a week earlier. Review the draft totals with the finance lead, then file electronically and save the acknowledgement. Update the employee list for next year at the same time, so new IR56E and IR56F items are added as they occur.
Retain the return, the individual statements, the workings and the acknowledgement for seven years. If the department later questions an employee's income, you need to reconstruct what was reported.
Keep the employee's side in mind: individuals receive their own tax return and can claim allowances and deductions that the employer does not know about. Your task is to report accurately what you paid, not to calculate the employee's tax. If an employee asks about the statement, give a copy of what you filed and point them to the department for tax questions.
4softhr holds employee records, leave and timesheets, so you can export start dates, leaving dates and absences to prepare the notifications. It does not calculate Hong Kong payroll, does not generate forms BIR56A or IR56B and does not submit anything to the Inland Revenue Department; all filings are made by you or your adviser through the department's own channels.
Where the company is part of a group and staff are seconded or recharged between entities, decide which employer reports the pay, and document the arrangement. Overlapping reports from two employers for the same remuneration are one of the situations the department queries.
Each employee's annual salary, bonus and allowances are pieced together from several spreadsheets at year-end, and the totals rarely agree.
Compile each employee’s annual pay from your payroll records and complete BIR56A and IR56B on the IRD forms. 4softhr does not export IR56B data or file returns.
A departing employee is not notified to the IRD, or the final pay is delayed.
Keep a list of joiners and leavers in your own process and notify the IRD on IR56E, IR56F or IR56G. 4softhr keeps employee records; it does not create automatic to-do lists or deadline reminders.
The Inland Revenue Department issues form BIR56A to employers in early April, and it must be completed within one month. The return covers the year ended 31 March and includes an IR56B statement for each employee. File electronically if possible and keep the acknowledgement. If the date has passed, contact the department promptly rather than waiting for a reminder.
IR56E notifies the department that an employee has started work and is due within three months. IR56F is filed at least one month before an employee ceases employment, and IR56G at least one month before an employee leaves Hong Kong for more than a month. They allow tax to be collected before departure. Check the department's current guidance for any exemptions.
Yes, if the director is paid as an employee. The return covers all persons employed during the year, including directors, part-time staff and short-term workers, and each needs an IR56B. A company that paid nobody can say so in reply to the notice. Check with your accountant what to report for a director who takes dividends only.
The department assesses employees' salaries tax on what you report, so errors surface when employees query their assessments. You should correct the return as soon as you find the error and tell the department. Wilful or careless errors can lead to penalties, so keep payroll workings and reconcile the return to your ledger and MPF records.
The employer, usually a director or authorised officer, signs the declaration that the information is correct. Review the summary against payroll and MPF records before signing, because the declaration covers the whole return. Keep a copy of the filed return, the individual statements and the workings for seven years in case the department asks questions.
Employee, leave and timesheet records; returns are filed with the IRD.
