Profits Tax Returns & Employer’s Returns Issued in Hong Kong
Every April, most companies and organisations in Hong Kong will receive the annual Profits Tax Returns (Form BIR 51) and Employer’s Returns from the Hong Kong Inland Revenue Department (“IRD”).
Employer’s Returns are issued to companies/organisations for reporting the remuneration paid/accrued by the companies/organisations to their directors and employees, if any, during each year ended 31 March.
The filing due date of the Employer’s Returns is usually within one month from the date of issuance. For 2022, the deadline for filing is extended to June 1, 2022.
Kindly note that the companies/organisations have the obligations to provide accurate and complete information in the Employer’s Returns as it may affect the individual tax liabilities of the directors and employees and/or result into enquiries from the IRD.
In particular, one has to be well aware of the reporting of certain remuneration in the Employer’s Returns, such as director’s fee and salary which may have different tax implications to directors, housing benefits, share-related benefits (e.g. share options and share awards) repatriation benefits as well as severance payment, which may not be straightforward.
Profits Tax Returns
Profits Tax Returns are issued to companies/organisations for reporting, amongst others, their assessable profits/adjusted loss as well as profits tax (re)payable, if any, for a year of assessment (“YoA”).
1. Documents required for a valid profits tax filing
It is in general required to submit the following documents to the IRD for a valid profits tax filing:
- original duly signed Profits Tax Return (copy is not accepted);
- profits tax computation together with the supporting schedules; and
- audited financial statements including an auditor’s report where required by Hong Kong or foreign law, balance sheet, profit and loss account for the relevant period.
2. Filing deadline
A profits tax return must be submitted within 1 month of receiving the notice, for the year of assessment ended 31 March.
For newly formed companies, the profits tax return must be filed at least 18 months after the incorporation date, and then within 12 months after the first tax return is filed.
3. Possible consequences for late filing of Profits Tax Returns
Failure to file a valid Profits Tax Return to the IRD by a specified deadline without reasonable excuse will potentially result into a compound penalty of maximum HK$10,000, issuance of an estimated tax assessment(s) by the IRD, a penalty in the form of additional tax under Section 82A of the Inland Revenue Ordinance and/or court actions.
4. Notes for Profits Tax Returns filing
- Obligation to inform chargeability and request for issuance of a Profits Tax Return
In case a company/organisation does not receive Profits Tax Return for the YoA from the IRD and it has profits chargeable to Hong Kong profits tax for the YoA, it will have an obligation to voluntarily inform the IRD in writing of its tax chargeability and request for issuance of the Profits Tax Return for completion within four months after the end of the basis period for the YoA. It has to be noted that penal actions might be taken by the IRD for infringement of this tax obligation unless reasonable excuse(s) can be provided by the taxpayers.
- Obligations to file a correct Profits Tax Return
Profits Tax Return has to be completed with due care in order to avoid penal/prosecutions actions to be taken by the IRD for an incorrect return filing and/or an incorrect information supplied. In particular, one should ensure the tax claims made in the Profits Tax Returns, such as offshore non-taxable/exemption claim on income, deduction claim on expenses as well as related party transaction disclosures, are valid/correct/supported with reasonable grounds.