Employer's Tax Return Filings

Increased penalties for employing overstayers in Hong Kong after changes to Immigration Ordinance Hong Kong Budget 2021/22 Hong Kong Resident Visa Extension of Stay applications processing update under COVID-19 Payroll and HR Obligations for Hong Kong Employers Singapore update: BizFile+ filing extensions and filing penalty waivers

The Inland Revenue Department had issued the Employer's Return to Hong Kong based companies for employees salary reporting earlier in April. If a company received an Employer's Return, it is required to file a completed return, even if the company does not, at this point, have any employees. Employees for tax purpose include persons employed by Hong Kong companies, whether they are full-or part-time employees, resident or non-resident persons, or provide services in or outside Hong Kong; persons assigned or seconded to Hong Kong by an associated company overseas; and persons who render personal services under employment-like conditions, but have entered into service contracts in the name of service companies owned by them. Further is the remuneration paid to directors, sub-contractors, consultants, agents, brokers and freelancers to be reported. For all these different types a company provides remuneration to a person, different forms may be required, i.e. BIR56A, IR56B,  IR56M, IR6036B, and IR56E, IR56F, IR56G as the case may be.

The identification of service companies may be one of the more difficult reporting inclusion. Case law, over the years, has defined some of the relevant criteria that should be looked at to identify whether a company is a service company.

Another often overlooked reporting requirement are payments made to directors or directors fees. Directors of Hong Kong companies would generally be considered as taxable persons for their directors fees paid to them, regardless of their personal tax residence. This is a result of the source principle. The directorship of a Hong Kong company would have as the source of directors fees paid, the Hong Kong company, and therefore a Hong Kong source.

For assistance with the Employer's Return filing, payroll administration, or calculation of income, inclusions and deductions, contact us.