As an employer, your tax obligations commence when you hire the first employee. Employers are required to inform the Inland Revenue Department ("IRD") annually on the remuneration paid to employees and non-employees during the period from April 1 of the previous year to March 31 of the current year. This includes non-cash benefits and other fringe benefits such as share awards. The IRD typically issues the "Employer's Return" in early April each year, which usually comprises two forms: BIR56A and IR56B. Employers are generally required to complete and submit these forms within one month.
Other forms include IR56E, IR56F, IR56G, and IR56M. For more details, you can refer to the tax authority's website: https://www.ird.gov.hk/eng/tax/ere.htm
What’s the Difference between “Employer’s Return” and “Profits Tax Return”?
The "Employer's Return" refers to the remuneration paid by employers to employees and non-employees during the tax period. On the other hand, the "Profits Tax Return" is a declaration made by companies based on their operations and profits made during the financial year, for the payment of the corresponding profits tax.
What Tax Obligation Do I Have as an Employer?
Apart from informing the IRD of the remuneration paid by employers to employees annually, employers also have to maintain payroll records and inform the IRD of any updates of personal particulars of their employees and amendments to terms of employment, including:
(a) Personal particulars (name, address, identity card or passport number with place of issue, marital status)
(b) Nature of employment (full time or part-time)
(c) Capacity in which employed (e.g. sales manager, salesman, worker, in-house lawyer, accountant, director)
(d) Amount of cash remuneration (regardless of denomination in domestic or foreign currency and remuneration paid outside Hong Kong)
(e) Non-cash and fringe benefits (such as quarters, holiday journey benefits, share award, share option)
(f) Employer's and employee's contributions to the Mandatory Provident Fund (MPF) or its equivalent
(g) Employment contract and amendments to terms of employment
(h) Period of employment
According to legal requirements, business owners are required to keep business accounting records, including payroll records, for at least 7 years.. For information regarding employers' tax responsibilities and related legal requirements, please refer to the IRD official website:https://www.ird.gov.hk/eng/tax/ere_obl.htm
What are the Consequences of not Complying with the Inland Revenue Ordinance?
The Inland Revenue Ordinance (IRO) imposes requirements in relation to filing timely and accurate returns (including financial account information returns and country-by-country (CbC) returns); keeping and retention of records; establishing, maintaining and applying due diligence procedures for financial account information. If the requirements under the IRO are not complied with, the Commissioner, depending on the nature and/or the degree of culpability of the offence and at his discretion, to institute prosecution, to compound or to assess additional tax (which is a form of penalty) in respect of the offence.
For details regarding the penalty provisions, please refer to the official website of the Inland Revenue Department: https://www.ird.gov.hk/eng/pol/ppo.htm
How to Ensure Compliance with the Statutory Tax Obligations?
To ensure that businesses can meet their tax obligations in compliance with legal requirements, employers can choose a fully-compliant human resources management system to handle payroll-related tasks. BridgeBuilder HRMS offers a comprehensive payroll management module and professional payroll outsourcing service that can help you resolve all payroll-related concerns in one go. The system is regularly updated to ensure it aligns with and complies with the latest labor laws. It also supports e-tax, including tax forms IR56B, E, F, G, and M, ensuring compliance with the format and regulations of the IRD, thereby reducing the risk of legal violations.
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