Employers-FAQ

Tax Information : Employers - FAQ

	General
	Income
	Holiday Journey Benefits
	About Termination Payment
	Share Options
	Filing of Computerized Employer's Return
	Frequently Encountered Problems in using the IRD Software

Questions and Answers

General

1.	Q:	We close our accounts on 31st December. Can we file form I.R.56Bs in accordance with our accounting date?

	A:	No. The basis period for Salaries Tax runs from 1st April of the current year to 31st March of the succeeding year. Hence, form I.R.56Bs must be completed for the relevant year ended 31st March.

2. Q:
We have reported our new address in the box provided in form B.I.R.56A. Is it necessary for us to notify the Business Registration Office of our new address as well?

A:
If you have provided a new address in form B.I.R.56A, there is no need to file a separate notice with the Business Registration Office. However, you should notify the Business Registration Office of any subsequent changes of address in accordance with the Business Registration Ordinance.

3. Q:
We are a holding company. Should we include employees of our subsidiaries in our Employer's Return?

A:
No. The obligation to file employer's returns (form I.R.56Bs) rests with the employer shown in the respective employment contract. You and your subsidiaries should file separate employer's returns.

4. Q:
Is it necessary to report the income paid to shareholders/directors of a limited company? How about the income paid to proprietor or partners of an unincorporated business?

A:
You need not report dividends paid to shareholders of a limited company because dividends are not taxable. On the other hand, salaries and directors' fees received by directors are chargeable to Salaries Tax and should therefore be reported by means of form I.R.56B.
It is not necessary to file form I.R.56B for the proprietor /any partner of an unincorporated business or his spouse. The remunerations paid to such person are not allowable deductions under the Inland Revenue Ordinance and have to be adjusted in computing the profits chargeable to Profits Tax.

5. Q:
Can I print my own form I.R.56B, the format of which is the same as those issued by the Inland Revenue Department to the employers?

A: No, you cannot print your own paper form I.R. 56B. If you wish to submit paper form I.R.56B, you must use the form I.R.56B provided by the Inland Revenue Department. You can also download the form by click here; or obtain it from 'FAX-A-FORM' Service (2598 6001).

6.	Q:	I am the responsible person of a charitable organization. Do we need to make an employer's return for our part-time assistants?

	A:	Yes, even when your organization is entitled to exemption from registration under the Business Registration Ordinance and/or payment of Profits Tax, your reporting requirements are the same as other employers. You have to report the remuneration paid to all part-time assistants, both single and married persons (regardless of the amount paid). To obtain the relevant forms for reporting, you may write or complete the I.R. 6163 and send it to the IRD by mail or by fax.


7.	Q:	I work in the Personnel Department of a big company. Our company has employed 5 Country A citizens with permits to work in Hong Kong. They arrived last month and had gone to the Immigration Department to register for Hong Kong Identity Cards. They told me that a Hong Kong Identity Card number has been allotted to them – but the physical Identity Card is pending issue. On form I.R. 56Es, should I report their HK Identity Card numbers or their passport numbers?

	A:	The purpose of the passport number and the HK Identity Card number is to help identify the taxpayer. To avoid the opening of double tax files for the same employee, you should supply the HK Identity Card number in Part 2 of form I.R. 56E. However, if the employee does not have a Hong Kong Identity Card number when you prepare the I.R.56E, you can fill in his/her passport number. You then have to follow up with the employee. You should, soonest possible, write in to inform the Department to update his/her personal records when the Hong Kong Identity Card No. of the employee is known.

An employee resigned on 30 April Year X without giving notice. My company has not yet filed any I.R. 56B in respect of his remuneration. Which should be the appropriate form to use, should I file I.R. 56B, or I.R. 56F?

In the circumstance described by you, you should file the following forms in respect of this employee, namely:

(i) an I.R. 56B for year of assessment covering the period up to and including 31 March Year X; and

(ii) an I.R. 56F covering the period from 1 April Year X to 30 April Year X.

Income


9.	Q:	Under the terms of the employment contract, we refunded the full amount of rent paid by an employee. Should we report only the amount of "rent refunded to employee" in item 12 of the form I.R.56B?

	A:	No. Apart from reporting the amount of "rent refunded to employee", the column for "rent paid to landlord by employee" must be completed. Even if the two amounts are the same, the column for "rent paid to landlord by employee" should not be left blank or inserted with an "X".


10.	Q:	We run a restaurant and we distributed tips received from customers to our employees on irregular basis. Is it necessary to report the amount of tips in form I.R.56Bs?

	A:	Yes. Tips are subject to Salaries Tax as part and parcel of the income of the employees. The amounts distributed to them should therefore be reported in item 11(k) of the form I.R.56B.

Holiday Journey Benefit


11.	Q:	Employee A took a business trip to England for 8 days. Employer B paid his air ticket, accommodation and meal expenses. At the end of the business trip, he extended his stay for 3 days for sightseeing. Employer B also paid additional accommodation and meal expenses for these 3 days. Whether the additional accommodation and meal expenses were taxable as Employee A's income?

	A:	Where a trip is taken partly for business and partly for holiday, the Department will look at the immediate purpose of the trip and will refrain from taxing the benefit if the holiday element is merely incidental to a business trip. However, in cases where a clearly identifiable part of a journey is taken for holiday purpose, the expenses relating to that part of the journey will have to be ascertained and will be assessed as income of the employee. In the above scenario, the cost of additional accommodation and meal expenses for those 3 days should be taxable.


12.	Q:	Employer B offered a 3-days overseas brainstorming trip to her senior executives. Whether the trip expenses incurred were taxable?

	A:	If brainstorming was the sole purpose of the trip, the trip expenses were not taxable. For record purpose, Employer B might need to retain details of the seminar itinerary, subsequent reporting on the topics discussed and participants' involvement, etc.


13.	Q:	Employer B organized a tour for her employees on a group basis. The group comprised employee A, his two family members and seven other employees. Whether the expenses incurred for the tour are taxable on the employees? If yes, how?

	A:	The tour expenses would be taxable on the employees. Where the amount paid by the employer was not distinct and separable for individual employees, an apportionment on a head count basis might be adopted. As employee A joined the tour with his family members, his share of benefit should be greater than the seven other employees. In the absence of other more appropriate methods of apportionment, 3/10th of the tour cost should be allocated to employee A and 1/10th of the tour cost should be allocated to each of the seven other employees.

14.	Q:	Employer B purchased a package tour to be taken by Employee A for holiday. Employer B also paid for Employee A's visa fee and travel insurance premium. Apart from the package tour fee, should the visa fee and insurance premium be included as Employee A's taxable income?

	A:	The amount paid by an employer in connection with a holiday journey is taxable income of the employee. The visa fee and insurance premium were paid in connection with Employee A's holiday journey. Thus they should also be reported.

15.	Q:	Employee A sent his son to Australia for studying in high school and got reimbursement from his employer for his son's airfare on the trip to Australia. Was the amount reimbursed taxable?

	A:	As the trip was not for holiday purpose, the provisions on the taxation of holiday journey did not apply. However, the son's airfare was a private expense of Employee A. The reimbursement should be taxable as a perquisite.

		Please click here for Departmental Interpretation and Practice Notes No.41 - Salaries Tax - Taxation of Holiday Journey Benefits.

About Termination Payment

16.	Q:	I left my employment on 15.3.2008. My employer did not work out my entitlements to bonus and commission and did not pay them to me until 30.4.2008. Are these receipts taxable, and if they are, in which year of assessment should they be included as my assessable income?

	A.	Yes, they are taxable. Although these bonus and commission were paid to you in year of assessment 2008/09, they are regarded as income for the last day of your employment (15.3.2008) and are your assessable income for the year of assessment 2007/08.

17.	Q.	I resigned on 1.3.2008. As I was required to pay one month's salary in lieu of notice to my employer, I was not paid the salary for February 2008. For the year of assessment 2007/08, should I pay tax on my salaries for 10 months or 11 months?

	A.	Your assessable income is salaries for 11 months. Furthermore, for tax purposes, you cannot claim to deduct the salary in lieu of notice paid by you as your expense. Hence, salaries for 11 months are assessable.

18.	Q.	On quitting my job my employer paid me a lump sum. I do not know how it was calculated. How would the Assessor assess me on this sum of money?

	A.	You should report this sum of money in your Tax Return – Individuals. Then, on a separate sheet of paper, you could describe the circumstances under which it was paid to you. You should also supply a copy of all relevant documents (e.g., employment contract, notice of termination of employment and/or agreement to terminate service). The Assessor will examine the information supplied by you (and if necessary, will also ask your employer to furnish further information and computation) to determine if any part of the lump sum is non-taxable, such as the severance/long service payment that your employer is required to pay to you under the provisions of the Employment Ordinance.

19.	Q.	I left employment on 15 October 2008 and remained unemployed until 30 November 2008. May I be exempt from payment of Provisional Salaries Tax (“PST”) for year of assessment 2008/09?

	A.	If you have already received your Salaries Tax assessment, you may apply for the holding over of the whole or a part of the provisional tax for year of assessment 2008/09. To do so, you have to submit an application in writing, stating your actual income for the period from 1 April to 15 October 2008. Your application must be received by the IRD not later than 28 days before the due date for payment of tax.

		In other situations, when you complete your Tax Return – Individuals, you should state in your return the period of unemployment. The Assessor will consider your statements and compute the tax demand appropriate to your situation.

Share Options

20.	Q:	Some of our former employees/directors had realized gains during the 12-months to 31.3.Year Y by the exercise of share options previously granted to them prior to leaving our employment. Should we submit a form I.R.56B in respect of each person's realized gains?

	A:	Yes, in respect of the gains realized, you should file a form I.R.56B for each person. You are required to --

			report the amount of gains in item 11(j) of the form I.R.56B;

			where there is only one exercise, assignment or release transaction, show the date of transaction as both the start date and the end date in item 10 (i.e., the space for inserting the period of employment); but

			where there were more than one transaction, show the date of the first transaction as the start date and the date of the last transaction as the end date in item 10; and

			append to the forms I.R.56B a control list showing, in respect of each former employee/director -

		name & HKIC/passport number; and the sheet number of the relevant form I.R.56B. N. B. For any former employee/director who has ceased to earn income chargeable to Hong Kong Salaries Tax (such as by reason of retirement or departure from Hong Kong), you are required to file a form I.R.56B only when the gains realized during the year of assessment have exceeded the basic personal allowance for that year of assessment .

21.	Q:	If a new employee was conditionally granted a share option prior to commencement of his employment in Hong Kong and that option could only be exercised after rendering services in Hong Kong, is it necessary to report this information to the IRD? When to report? How to report?

	A:	Yes, you are required to supply the information to the IRD. From the information given, it would appear that the employee concerned must be liable to Salaries Tax so that you would have to file a form I.R.56E (the green form) for him within 3 months after employing him. You should confirm in item 14 of the form I.R. 56E that this new employee has been conditionally granted a share option that can be exercised after rendering services in Hong Kong. In addition, you are also required to supply a list, as an attachment to the form I.R. 56E, showing details of : the number and type of shares covered by the option; the consideration (if any) paid for the grant of the option; the consideration required to exercise the option; and the period within which the option must be exercised.

22.	Q:	If an employee is about to leave Hong Kong for good but he has not exercised all the share options granted to him by our company or other corporations, do we need to report this information to the IRD? When to report? How to report?

	A:	Yes, you are required to supply the information to the IRD. You are required to confirm in item 19 of the form I.R.56G (Notification by an employer of an employee who is about to depart from Hong Kong) (the pink form) that that employee has share options not yet exercised, assigned or released. In addition, you should also state the number of shares that can be exercised after termination of employment; and the date on which the relevant share options were granted to that employee. Subsequently when that employee has realized gains from the exercise, assignment or release of the share options, you will be required to report the amount of gains in form I.R. 56B. Please see answer to question 20 for details.

		Please click here for Departmental Interpretation and Practice Notes No.38 - Salaries Tax - Employee Share Option Benefits.

		Please click here for more details on taxation of share awards and share options.

Filing of Computerized Employer's Return

23.

Our company keeps computerized accounts. Can I use diskettes or CD-ROMs to file the employer's returns?

Yes. To relieve the manual efforts of employers in the preparation of form I.R. 56Bs, the IRD encourages employers to submit employer's returns by diskettes or CD-ROMs, using either of the methods described below. However, the employer must submit a signed form BIR 56A and a list generated by the IRD Software or IRD approved software. The control list must be signed by the same responsible person who has signed the BIR 56A. Please also state the signor's designation.

Method (1) Employer's Self-developed Software
The data format and the form I.R. 56B layout of the self-developed software must be submitted to the IRD for approval before use. Please contact the Computer Section of the Department on 2594 5111 for details.

Method (2) IRD Software
Alternatively, you may use the personal computer application developed by the IRD which is available free of charge. The current version is for MS Windows 2000 Professional, XP Home, XP Professional and Vista.

The software can be obtained by the following means :-

(a)	Downloading from Internet
	If you are an Internet user, a copy of the software, the operation guide and other relevant information can be obtained through the Internet IRD Web site at: http://www.ird.gov.hk/eng/ese/erc.htm (English)

(b)	In person
	A CD-ROM of IRD Software can be obtained at IRD's Receipt & Despatch Counter on 1/F of Revenue Tower during office hours at 8:15am to 5:30pm from Monday to Friday.

If you have any questions on installation and usage of the software, please call 2594 5177.

With the use of this application, employers can dispense with the filing of paper copies of Form IR56Bs. However, you have to print and submit a control list which contains the name, Identity Card number and total income of each employee in addition to the diskette ,CD-ROM or DVD-ROM.


Frequently Encountered Problems in using the IRD Software

24.	Q:	The operating system of my computer is Windows 2000, why it reboots repeatedly during the installation of the Software IR56B Version 3.41?

	A:	You may be using an old version operating system and you need the Windows 2000 Professional (Service Pack 1 or later). Please download the update Service Pack version from Microsoft Corporation at web site "http://windowsupdate.microsoft.com" and update your operating system before installation of the IRD Software.

25.	Q:	When I install the IRD Software, dialogue boxes prompting that there is version conflict with system files of my computer appear, what can I do?

	A:	Whenever you encounter problems of system files version conflict during installation of the IRD Software, please keep your own version of system files (i.e. click the <Yes> button in the dialogue box to keep your own version of system files).

26.	Q:	Can the IRD Software work under a network system?

	A:	Whilst a shareware under a network system might impose problems of access control, data contentions and various Chinese coding standard, the IRD Software is designed for stand-alone PC to make the installation and the application easy to use.

27.	Q:	I am required to provide a password to access my data, what is it? Can I change the password?

	A:	The default password is "ird" in small letter. It is case sensitive and capital letters will not work. Please see paragraph 6 of the Installation and Operation Guide for change of password. If you change the password and forget it later, you could not retrieve the new password set up by you and IRD would not be able to offer any help. As a last resort, if you still cannot retrieve your new password after searching, you may delete the file "ir56b.mdb" and then invoke the IRD Software again to re-input all the IR56B records; however, this method will delete the I.R.56B database you previously created. Please ensure you have the data to re-input all the I.R.56B records before deletion of the file.

28.	Q:	When I run the IRD Software, I can only see the input fields but I cannot find the buttons like <Create New Record>, <Print> etc. as shown on paragraph 5 of the Installation and Operation Guide.

	A:	The buttons are hidden under the Task Bar. Please do the following: -
		(a)	Click the <Start> button on the Task Bar
		(b)	Select "Setting", "Task List"
		(c)	Select "Auto Hide"
		(d)	Click the <OK> button

29.	Q:	I have two employees with the same name. When I use the <Name-Search> function, I can only see the name of the last employee inputted while I have to amend the data of the first one, how can I find another one?

	A:	Let's say you have two employees with the same name CHAN Tai Man. The first input is called CHAN Tai Man (A) and the second input CHAN Tai Man (B). To get to CHAN Tai Man(A), you have to: -
		(a)	activate the <Name-Search> function, then locate CHAN Tai Man(B), that is the second input,
		(b)	click the button (the small button above the Function Keys Buttons bar) and you will have CHAN Tai Man(A).

30.	Q:	I found that the I.R.56B hard copies have to be printed on two separate pages. Can the I.R.56B hard copy be printed on only one page?

	A:	The I.R.56B is designed to be printed in graphic mode. You have to re-configure your printer settings and to select either: -
		(a)	Print true type as graphics, or
		(b)	Print true type as bitmap, or the like as is appropriate for the case.

31.	Q:	I have completed the input of I.R.56B records and successfully printed the Control List; however, I found that the total number of employees per the Control List do not equal to the number of employees of my company and I.R.56B hard copies are missing for some employees, what should I do?

	A:	The irregularity may be due to updating of some I.R.56B records as supplementary or replacement records. Please be advised that the Control List only reports original I.R.56B records and the <Print-All> function only prints out original I.R.56B records. You have to start the program again and check each of the I.R.56B records to see whether they are updated as original I.R.56B records.

32.	Q:	Where are my IR56B records stored and what is the name of the file?

	A:	For IR56B version 3.41: the data are stored in the same folder as that of the IRD Software program. The default path and name of the folder for the IRD IR56B Software is "C:\IR56B". The name of the data file is "ir56b.mdb".

		For IR56B version 4.0: normally the data are stored in C:\ProgramData\HKSARG\IR56B\1.0.0.0\ir56b.mdb. But it may be in other directory depending on your system settings. You can always check it out at the bottom of the 'Common data for IR56B records' screen, which is the screen prompted up after you entered the password as shown below.


		If you cannot find the C:\ProgramData\HKSARG\IR56B\1.0.0.0\ir56b.mdb in the Windows explorer, please click 'Organize' on the top right corner then choose 'Folder and Search Options'. The 'Folder Options' windows will pop up. Click the option for 'Show hidden files and folders' and then <Apply> button. Now you should be able to see 'ProgramData'. Just follow the path and you will find the ir56b.mdb.


33.	Q:	I have upgraded my computer system and a new computer is used. How can I migrate the old data to the new computer?

	A:	For Computer system of Windows 2000/XP, please:
		(a)	Set up IR56B version 3.41 in the new computer.
		(b)	Copy the file "ir56b.mdb" (see Q32) to the folder in which the IRD Software is installed.
		(c)	Activate the IRD Software to check data correctness.

		For Computer system of Windows Vista, please:
		(a)	Set up the IR56B version 4.0 in the new computer.
		(b)	You will be asked 'Do you have old database?'. Please answer 'Yes'.
		(c)	You have to locate the old database in the next screen. The system will convert the old database to a new format in compliance with the Chinese coding standard for Windows Vista.
		(d)	Activate the IRD Software to check the data correctness.

34.	Q:	I have upgraded my computer system and a new computer is used, but I have erased all my data in the old PC. What can I do to recover the old data?

	A:	If you have retained a second copy of the diskette created by using the <Save to Floppy> button, you will find a file named "nnnnnnnn.mdb", where "nnnnnnnn" is the business registration number of your company. If this file is not corrupted, please try the following steps to recover the old data: -

		For Computer system of Windows 2000/XP, please:
		(a)	Set up IR56B version 3.41 in the new computer.
		(b)	Copy the file "nnnnnnnn.mdb" to the folder in which the Software is installed.
		(c)	Rename the file "nnnnnnnn.mdb" to "ir56b.mdb".
		(d)	Activate the IRD Software to check data correctness.

		For Computer system of Windows Vista, please:
		(a)	Copy the file "nnnnnnnn.mdb" to a temporary folder and rename it as "ir56b.mdb" .
		(b)	Set up the IR56B version 4.0 in the new computer and run the application.
		(c)	You will be asked 'Do you have old database?' Please answer 'Yes'.
		(d)	You have to locate the old database in the next screen. The system will convert the old database to a new format in compliance with the Chinese coding standard for Windows Vista.
		(e)	Activate the IRD Software to check data correctness.

		Please note that the "nnnnnnnn.mdb" file is not identical to the original "ir56b.mdb" file because supplementary and replacement IR56B records are not included.

35.	Q:	I have installed the IRD Software and is in the process of data input, can I use "copy and paste" method to copy data, such as names and address, from other software and then fill them into the relevant fields of the IRD Software?

	A:	It is not recommended to use "copy and paste" method to fill in data of the IRD Software. By using the "copy and paste" method, some invisible keys, such as "Enter key", will also be copied and then pasted in the relevant fields of the IRD Software. This will cause data format error.

		However, if you use the "copy and paste" method, please ensure that those "Enter keys" are not included in the input fields of the IRD Software.

36.	Q:	My company has developed our own computer payroll system and would like to use the IRD Software. Can I use any means to export the data from our own system to the IRD Software data file and save the manual effort of data input?

	A:	Unfortunately, this function is not available in the IRD Software. You can develop your own software to prepare the computerized IR56B provided that all requirements specified by the Department are met and approval in writing has been granted by the Department. For more information, please call 2594 5111.

37.	Q:	The operation system of my personal computer is Windows XP version. When I click the <Save to Floppy> button, I cannot perform the function to save the I.R.56B records to a floppy diskette as well as printing of a hard copy of the Control List. What is the reason?

	A:	Some system access control settings in your network or PC workstation might block you from performing the printing and saving functions. Please reinstall the IRD IR56B Software in a standalone PC with the "Administrator User" account by:

		(i)	backup the data file, i.e. ir56b.mdb (or ir56b.access);
		(ii)	remove the IRD IR56B Software from the Control Panel;
		(iii)	reinstall the IRD IR56B Software.

		Please ensure the program is installed to the original folder.

38.	Q:	I have to prepare the records of IR56B for more than one ERs, am I required to install the software for each employer in the same Personal Computer?

	A:	For IR56B version 3.41, if you install the software many times for different employers in the same personal computer, the capacity of your personal computer would be reduced and the program may not function well.

		For IR56B version 4.0, installation for more than once is prohibited.

		For preparing IR56B for more than one ERs in the same computer, you might want to remove the database file (i.e. ir56b.mdb file) from the IRD Software's working folder to a floppy diskette or other folders before you handle different employer's file. Make sure that you use different folder names or labels in your floppy diskette for each ER so that you can identify them.

		You could then create a new employer's file record or copy another employer's file record (also named as ir56b.mdb) to the working folder (C:\IR56B for IR56B version 3.41 and C:\ProgramData\HKSARG\IR56B\1.0.0.0. for IR56B version 4.0) and activate the IR56B Software as usual to prepare the IR56B records. Please see Q32 for details on where is the IR56B records stored and the name of the file.

39.	Q:	When I executed the program, the program showed an error message 'Type mismatch' and I cannot use the program.

	A:	You probably input the common data for I.R.56B records and quit the program without input any record on the I.R.56B detail screen. You may delete the database file "ir56b.mdb" and then re-input all data again. Please ensure to input at least one I.R.56B detail to create the employee record after finishing the input of the common data for IR56B records.

40.	Q:	I am using IR56B Software Version 3.41 on MS Windows Vista, why it does not show some of the Chinese Characters that I input or copied from the database of previous years?

	A:	This is because Microsoft Windows Vista has adopted new character coding standards, namely 'ISO/IEC 10646:2003' and 'HKSCS-2004', which differs from the standards adopted on MS Windows 2000/XP for which IR56B Software Version 3.41 are riding on.

		A new version of IR56B Software Version 4.0 has been released in April 2008 to adopt the Chinese coding standard of MS Windows Vista. You can upgrade your IR56B Software to Version 4.0 by simply download it from the IRD website and follow through the installation guide.


41.	Q:	How can I input Chinese Character in MS Windows Vista?

	A:	Please refer to Appendix F of the Installation and Operation Guide of IR56B Software Version 4.0.



Important Note:
(1)	These are suggested solutions only. There is no guarantee that it will perfectly work on all personal computers as the computer environments and software installed are different from one to another. The Department will not accept any loss or damage incurred by its use.