Hong Kong Tax Filing Obligations of Employers
This article will give you a brief summary of the Hong Kong salaries tax filing obligations of employers under the Inland Revenue Ordinance (IRO).
Meaning of Employee
Employees are:
- persons employed by Hong Kong entities, regardless of the persons’ residency or services rendered in or out of Hong Kong
- persons assigned to Hong Kong entity by its overseas holding or subsidiary company who provide services in or out of Hong Kong
- persons who render personal services under employment-like conditions, but have entered into service contract in the name of service companies owned by them
For tax purposes, the employers should also report remuneration paid to the persons who receive pension and who hold office as directors.
Keeping payroll records
In general, the tax filing obligations commence when you hire the first employee. The employers have to maintain a record of that employee’s:
- Personal particulars (i.e. name, address, identity card or passport number with place of issue and marital status)
- Employment nature (full time or part time)
- Capacity in which employed and employment period
- Cash remuneration (regardless of payment location)
- Non-cash and fringe benefits (such as quarters, holiday journey benefits, share award, share option etc.)
- Employer’s and Employee’s contributions to the Mandatory Provident Fund (MPF) or its equivalent
- Employment contract and amendments to terms of employment
Same as keeping business accounting records, the employers are also required to keep the payroll records for at least 7 years for the Hong Kong Inland Revenue Department (IRD).
Reporting remuneration paid to an employee
Unlike other countries, there is no pay as you earn system / no payroll tax withholding requirement in Hong Kong. Thus employers are not required to deduct salaries tax from the payroll. Alternatively the IRD imposes the following filing obligations on employers pursuant to the IRO:
- To make an annual return of remuneration paid to employees (Form BIR56A and IR56B)
- To report an employee’s commencement of employment in Hong Kong (Form IR56E)
- To report an employee’s cessation of employment in Hong Kong (Form IR56F)
- To report at least one month before the expected date of departure if the employee is about to leave Hong Kong for a period in excess of one month (Form IR56G). This requirement does not apply to an employee who is required to leave Hong Kong at frequent intervals for business purposes
- To withhold payment to the employee within one month of having the notice in (4) above
Penalties may be incurred for not complying with the above obligations or making incorrect returns.
Should you have any questions in relation to the Hong Kong tax filing obligations of employers or Hong Kong salaries tax filing, please do not hesitate to contact us.
For more details on the above, please contact Kenneth Au at kennetha@zetland.biz/+ 852 35529096 or Lily Chow at lilyc@zetland.biz/ + 852 3552 9097 at Zetland Tax Advisors
