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Frequently Asked Questions & Answers on Completion of Profits Tax Returns [BIR51 & BIR52] issued on or after 1 April 2019

Introduction

For the benefit of the tax paying public and their tax representatives, some frequently asked questions and their answers are listed below for general information and guidance.

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General Issues

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BIR51 / BIR52

1.

Q:

If the company does not have any data for completing the items, can I leave those items blank?

A:

No. You must complete all these items. If nil, just enter "0".

2.

Q:

If the amounts shown in the company's financial statements include cents, should I put in the cents when stating amounts in the Profits Tax return?

A:

No. You should exclude cents when stating amounts.

3.

Q:

How should a figure be entered for an item?

A:

You should put in the numbers without inserting " , " in between them and align the figure to the right-hand side.

4.

Q:

Will the Department accept photocopies of returns, supplementary forms, unsigned auditor's report and unsigned financial statements for return filing purpose?

A:

Photocopy of tax returns, supplementary forms and uncertified financial statements are not acceptable for return filing purpose.

5.

Q:

Can I send correspondence for enquiries or claims in the same envelope that I send the tax return and supplementary forms?

A:

Letters of enquiries, objections or claims should not be sent together with the tax return and supplementary forms unless it is an objection against an estimated assessment made in the absence of the tax return and supplementary forms. Do not staple these letters to returns and supplementary forms or bury them among financial statements and schedules.

6.

Q:

Is it necessary for a dormant company to prepare audited financial statements before completing the return?

A:

Even if you are a dormant company, you still have to prepare audited financial statements in support of the return unless you are a dormant company within the terms of the Companies Ordinance.

Under the Companies Ordinance, a company may pass a special resolution authorizing its directors to make a statutory declaration that the company will become dormant and to deliver a copy of the statutory declaration to the Registrar. Upon delivery of the statutory declaration, the company shall be deemed a dormant company as from the date of such delivery. If the declaration specifies a later date for the company to become dormant, the company shall be deemed dormant as from that later date. A company so deemed is exempt under the Companies Ordinance regarding audited financial statements.

7.

Q:

If my business changed from a partnership to a sole-proprietorship or vice versa during the year, should I report such business in the Profits Tax Return (BIR52)?

A:

The profits/(loss) of the business for the full basis period of the year of change should be reported in the Profits Tax Return (BIR52) for the partnership file. In subsequent years, the profit/(loss) should be reported in the Profits Tax Return (BIR52) or Tax Return - Individuals (BIR60) as the case may be.

8.

Q:

If I have prepared financial statements for a period of more than 12 months (or less than 12 months), how should the items of financial data be completed? Should the amounts be apportioned or grossed up to show figures for a 12-month period?

A:

It is not necessary to apportion (or gross up) the figures if the financial statements for a period of more (or less) than 12 months have been prepared. Amounts extracted from the Statement of Financial Position/Balance Sheet and the Statement of Comprehensive Income/Profit and Loss Account should be used in completing the items of financial data.

9.

Q:

According to the Notes and Instructions on completing Returns, I may have to provide personal particulars of persons who have made payments to or received payments from me. Would such disclosure be in breach of provisions in the Personal Data (Privacy) Ordinance?

A:

No, personal data are exempt from the provisions of data protection if they are for the purposes of assessment or collection of tax or duty. See section 58 of the Personal Data (Privacy) Ordinance, Cap. 486.

10.

Q:

I am the director/provisional liquidator/liquidator of a company which is under liquidation. Can I sign the profits tax return of the company after it is placed in liquidation?

A:

On the appointment of a provisional liquidator/liquidator, all the powers of the directors in a company shall cease. Thereafter, the directors do not have any official capacity to act on behalf of the company under liquidation, including signing tax return. In the circumstances, the provisional liquidator/liquidator shall be the only person who is empowered to sign the tax return of a company in liquidation. Whilst the provisional liquidator/liquidator may appoint another person to perform certain acts on his behalf, the act of signing a tax return cannot be delegated to that person. Profits tax return of a company in liquidation signed by any person other than the provisional liquidator/liquidator will not be accepted.

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Two-tiered profits tax rates

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BIR51 Item 2.3 ; BIR52 Item 1.5
[Are you chargeable at two-tiered rates for this year of assessment?]

11.

Q:

What are the two-tiered profits tax rates and under what circumstances will a taxpaying entity be chargeable at two-tiered profits tax rates?

A:

For details, please refer to the Q & A for Two-tiered Profits Tax Rates Regime in this web site.

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SMALL corporation/business

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BIR51 / BIR52

12.

Q:

What is a SMALL corporation/business?

A:

A SMALL corporation/business is a company which satisfies ALL the following conditions in the relevant year:

(i) Its gross income does not exceed HK$2,000,000;
(ii) It has not paid or accrued to a non-resident person any sum for the use of intellectual property specified in section 15(1)(a), (b) or (ba) of the Inland Revenue Ordinance ("IRO") or for the assignment of performer’s right in section 15(1)(bb) of the IRO;
(iii) It does not have any deemed assessable profits pursuant to section 20AE, 20AF and/or 20AK of the IRO;
(iv) It does not claim deduction for research and development ("R&D") expenditure under section 16B of the IRO and/or it does not have trading receipts or sale proceeds from intellectual property rights generated from R&D activities;
(v) It does not claim deduction for expenditure on energy efficient building installation under section 16I of the IRO;
(vi) It is not a ship-owner;
(vii) Its Assessable Profits / Adjusted Loss do not include any interest, profits/loss arising from "short / medium term debt instruments" (issued before 1 April 2018) as defined in section 14A(4) of the IRO, any profits / loss of a professional reinsurer or an authorized captive insurer as stipulated in section 14B of the IRO, any qualifying profits / loss of a qualifying corporate treasury centre as defined in section 14C of the IRO, nor include any qualifying profits of a qualifying aircraft lessor or qualifying aircraft leasing manager as defined in section 14G of the IRO, which are subject to tax at one-half of the tax rate;
(viii) It does not claim any tax relief pursuant to an arrangement for avoidance of double taxation specified under section 49(1) or 49(1A) of the IRO;
(ix) It has not obtained an advance ruling on any of its tax matter in relation to that year of assessment;
(x) It does not claim debt treatment for an arrangement as "an originator" or "a bond-issuer" of a specified alternative bond scheme under section 40AB and Schedule 17A of the IRO; and
(xi) It does not claim deduction for distribution arising from a regulatory capital security for the relevant year.

13.

Q:

What items should be included in calculating the total gross income?

A:

Total gross income means ALL TYPES OF INCOME including sales and other ordinary business income, sales income from closely connected persons, proceeds from the sale of capital assets and other non-taxable income, whether or not derived from the principal business activity.

14.

Q:

Should proceeds from sale of fixed assets be included in total gross income?

A:

Yes.

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Details of the Corporation/Business

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BIR51 Item 4.4; BIR52 Item 3.4
[Hong Kong Standard Industrial Classification Code]

15.

Q:

What is Hong Kong Standard Industrial Classification Code? Where can I find it?

A:

Hong Kong Standard Industrial Classification Code is a 6-digit industry code of the Hong Kong Standard Industrial Classification (version 2.0) maintained by the Census and Statistics Department ("C&SD"). For the index of industry codes, you may refer to C&SD's web site (www.censtatd.gov.hk).

16.

Q:

If the company engaged in more than one business activity, should I provide all the related industry codes?

A:

The company should only state one industry code with reference to the principal business activity, where appropriate.

17.

Q:

If the company has multiple lines of business in very diverse business segments in the basis period and the business size and the revenue of these businesses are about the same, which HSIC code should be stated?

A:

As an industrial classification system, the HSIC is devised by using the United Nations' ISIC as a framework and adapting it to reflect the structure of the local economy. HSIC system classifies establishments to industry classes according to their major kind of activities, based mainly on the principal class of goods produced or services rendered. Taxpayer is advised to report the HSIC code with reference to the principal business activity of the company.

18.

Q:

If the company did not have any business activity, should I leave the field blank?

A:

No, you should state "000000" as the industry code.

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Auditor's Report

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BIR51 Item 7.1.1
[Did the Auditor(s) in his/their Report express an adverse opinion or a disclaimer of opinion?]

19.

Q:

My Auditor expressed a qualified opinion in the Auditor's Report.  Should I tick "Yes" in Item 7.1.1?

A:

No, you should tick "No" in Item 7.1.1.

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BIR51 Items 7.1.2 and 7.1.3
[State the name of the Auditor who prepared your Auditor's Report for the basis period and state the date of the Auditor's Report]

20.

Q:

If the company is a SMALL corporation and does not need to submit the financial statements and Auditor's Report with the Return, can I first complete and submit the Return in accordance with the management accounts and engage an auditor to prepare audited financial statements later?

A:

No, you should have prepared the financial statements, Auditor's Report and the tax computation before you complete the Return.

21.

Q:

If the company is a SMALL corporation, can I leave Items 7.1.2 and 7.1.3 blank?

A:

You must complete both items if your financial statements are required to be audited by law.

22.

Q:

What should I put in Item 7.1.2 for the name of the auditor?

A:

You should insert the name of the auditing firm.

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Conversion Rate

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BIR51 Item 7.5; BIR52 Item 7.4
[Are your financial statements prepared in a foreign currency?]

23.

Q:

If the company's financial accounts are prepared in a foreign currency, what exchange rate should I use for converting the amounts into HK dollars?

A:

You should use the yearly average rate as at the accounts closing date. You can find the conversion rate for major foreign currencies in this web site.  If you require an exchange rate for other foreign currency, you may use any reasonable externally sourced average exchange rate for that currency and use it consistently.

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Industrial Building or Commercial Building Allowance

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BIR52 Item 7.5
[Did you purchase any property during the basis period for which industrial building or commercial building allowance is claimed?]

24.

Q:

Are all properties bought by the Company qualified for industrial building or commercial building allowances?

A:

No. Certain specified conditions have to be satisfied before an allowance is granted. For details, please refer to the Departmental Interpretation & Practice Notes No. 2 (Revised).

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Transactions For / With Non-residents

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BIR51 Part 8; BIR52 Part 8

25.

Q:

What does the term "non-resident person" refer to?

A:

The IRO does not contain any definition of "non-resident person" but the Department has long accepted that the term refers to a person who has no permanent business presence in Hong Kong.

26.

Q:

If a payment is made or accrued to a BVI incorporated company whose directors are resident in Hong Kong and its central management and control is in Hong Kong, should the BVI incorporated company be regarded as a non-resident?

A:

A BVI incorporated company should not be regarded as a non-resident if its directors are resident in Hong Kong and its central management and control is in Hong Kong.

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BIR51 Item 8.3; BIR52 Item 8.3
[Fees paid or accrued to non-resident persons in respect of professional services rendered in Hong Kong]

27.

Q:

What does the term "fees in respect of professional services" include?

A:

"Fees in respect of professional services" include management, consultancy or service fees, etc. paid or accrued in respect of professional services which may include scientific, literary, artistic, educational or teaching activities as well as the independent activities of physicians, lawyers, engineers, architects, dentists, accountants, etc.

28.

Q:

What amount should be entered for this item if the non-resident person has rendered services both in and outside of Hong Kong?

A:

The full amount paid or accrued should be included.

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Supplementary Forms

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BIR51 Part 9; BIR52 Part 9
[Supplementary Forms]

29.

Q:

Do I have to complete all supplementary forms?

A:

No. You only have to complete the corresponding supplementary forms if you fall within the descriptions in item 9.1 to item 9.7. For further details, please refer to the FAQ for supplementary forms in this web site.

30.

Q:

The supplementary forms are not found in the Profits Tax return sent to me. Where can I get the forms?

A:

The Profits Tax return does not enclose with the supplementary forms. You need to download the relevant supplementary forms from Department's web site www.ird.gov.hk/e_pfr for completion.

31.

Q:

Can I file the Profits Tax return first and the supplementary forms later?

A:

The supplementary forms are part of the tax return that should be filed together with the Profits Tax return.

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BIR51 – Item 9.7.1 Ship Owner

32.

Q:

What is meant by "carrying on a business as a ship owner"?

A:

Business as an owner of ships means a business of chartering or operating ships, but does not include dealing in ships or agency business in connection with shipping. If your business is only engaged in dealing in ships or agency business in connection with shipping, you do not need to tick the box 9.7.1 and do not need to submit supplementary form S5.

33.

Q:

I carry on the business as an owner of ships but I do not earn any income from operation of ships within Hong Kong or commencing from Hong Kong waters during the year. Do I still need to fill in supplementary form S5?

A:

Yes. You must fill in supplementary form S5 as long as you are carrying on a business as an owner of ships, even if you do not earn any income from operation of ships within Hong Kong or commencing from Hong Kong waters during the year.

34.

Q:

I have incurred loss for my business as an owner of ships for the year. Do I need to submit supplementary form S5?

A:

Yes. You need to submit supplementary form S5.

35.

Q:

Can I submit the profits tax return and supplementary form S5 separately? Is there a different due date for supplementary form S5?

A:

No. You have to submit both the profits tax return and supplementary form S5 all together at the same time. The due date for both forms is the same.

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BIR51 – Item 9.7.2 Professional Reinsurer

36.

Q:

What is meant by "professional reinsurer"?

A:

"Professional reinsurer" means a company authorized under section 8 of the Insurance Ordinance (Cap.41) to carry on in or from Hong Kong reinsurance business only. The assessable profits of the corporation derived from the business of reinsurance as a professional reinsurer will be subject to concessionary tax rate if the corporation has made the election.

37.

Q:

What is the concessionary tax rate for a professional reinsurer?

A:

The concessionary tax rate is one-half of the rate specified in Schedule 8 to the IRO.

38.

Q:

Do the assessable profits of a professional reinsurer which were subject to tax at concessionary tax rate still qualify for the two-tiered profits tax rates?

A:

No. The two-tiered profits tax rates is not applicable to the assessable profits of a professional reinsurer who has made the election for the concessionary tax rate.

39.

Q:

I carry on a business as a professional reinsurer. What should I submit if I wish to claim the assessable profits subject to tax at concessionary tax rate for the year?

A:

You have to complete and submit both BIR51 and supplementary form S6 for each year that you wish to claim the assessable profits subject to concessionary tax rate.

40.

Q:

I carry on a business as a professional reinsurer. Are my assessable profits subject to tax at concessionary tax rate automatically by completing supplementary form S6?

A:

The completion of the supplementary forms does not mean you are automatically eligible for the claim. IRD will consider, including but not limited to, the information provided on supplementary form S6, in determining whether you are a qualified professional reinsurer for the year. You may be required to provide further information to support the claim.

41.

Q:

I carry on a business as a professional reinsurer but do not wish to claim my assessable profits subject to tax at concessionary tax rate. Do I need to submit supplementary form S6?

A:

Yes. You need to submit supplementary form S6.

42.

Q:

I have incurred loss for my professional reinsurance business for the year. Do I need to submit supplementary form S6?

A:

Yes. You need to submit supplementary form S6.

43.

Q:

Can I submit BIR 51 and supplementary form S6 separately? Is there a different due date for supplementary form S6?

A:

No. You have to submit both BIR51 and supplementary form S6 all together at the same time. The due date for both forms is the same.

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BIR51 – Item 9.7.3 Authorized Captive Insurer

44.

Q:

What is meant by "authorized captive insurer"?

A:

"Authorized captive insurer" means a company which is a captive insurer as defined by section 2(7)(a) of the Insurance Ordinance (Cap.41) (“the IO”) and is authorized under section 8 of the IO to carry on in or from Hong Kong insurance business as such a captive insurer. The assessable profits of the corporation derived from the business of insurance as an authorized captive insurer will be subject to concessionary tax rate if the corporation has made the election.

45.

Q:

What is the concessionary tax rate for an authorized captive insurer?

A:

The concessionary tax rate is one-half of the rate specified in Schedule 8 to the IRO.

46.

Q:

Do the assessable profits of an authorized captive insurer which were subject to tax at concessionary tax rate still qualify for the two-tiered profits tax rates?

A:

No. The two-tiered profits tax rates is not applicable to the assessable profits of an authorized captive insurer who has made the election for the concessionary tax rate.

47.

Q:

I carry on a business as an authorized captive insurer. What should I submit if I wish to claim the assessable profits subject to tax at concessionary tax rate for the year?

A:

You have to complete and submit both BIR51 and supplementary form S7 for each year that you wish to claim the assessable profits subject to concessionary tax rate.

48.

Q:

I carry on a business as an authorized captive insurer. Are my assessable profits subject to tax at concessionary tax rate automatically by completing supplementary form S7?

A:

The completion of the supplementary forms does not mean you are automatically eligible for the claim. IRD will consider, including but not limited to, the information provided on supplementary form S7, in determining whether you are a qualified authorized captive insurer for the year. You may be required to provide further information to support the claim.

49.

Q:

I carry on a business as an authorized captive insurer but do not wish to claim my assessable profits subject to tax at concessionary tax rate. Do I need to submit supplementary form S7?

A:

Yes. You need to submit supplementary form S7.

50.

Q:

I have incurred loss for my authorized captive insurance business for the year. Do I need to submit supplementary form S7?

A:

Yes. You need to submit supplementary form S7.

51.

Q:

Can I submit BIR 51 and supplementary form S7 separately? Is there a different due date for supplementary form S7?

A:

No. You have to submit both BIR51 and supplementary form S7 all together at the same time. The due date for both forms is the same.

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BIR51 – Item 9.7.4 Qualifying Corporate Treasury Centre

52.

Q:

What is meant by "qualifying corporate treasury centre" ("QCTC")?

A:

A corporation is a QCTC if:
(a) it is a dedicated corporate treasury centre ("CTC") which has carried out in Hong Kong one or more corporate treasury activities and has not carried out in Hong Kong any income-generating activity other than a corporate treasury activity;
(b) it is a CTC which has satisfied the safe harbour rule under section 14E of the IRO even though it has carried out in Hong Kong income-generating activity other than a corporate treasury activity; or
(c) it is a CTC which the Commissioner has determined under section 14F(1) to be a QCTC even though it satisfies neither of the conditions in (a) and (b) above.
 
A financial institution is not eligible to be a QCTC.
 
The assessable profits of the corporation derived from the business of QCTC will be subject to concessionary tax rate if the corporation has made the election.

53.

Q:

What is the concessionary tax rate for a QCTC?

A:

The concessionary tax rate is one-half of the rate specified in Schedule 8 to the IRO.

54.

Q:

Do the assessable profits of a QCTC which were subject to tax at concessionary tax rate still qualify for the two-tiered profits tax rates?

A:

No. The two-tiered profits tax rates is not applicable to the assessable profits of a QCTC who has made the election under for the concessionary tax rate.

55.

Q:

I carry on a business as a QCTC. What should I submit if I wish to claim the assessable profits subject to tax at concessionary tax rate for the year?

A:

You have to complete and submit both BIR51 and supplementary form S8 for each year that you wish to claim the assessable profits subject to concessionary tax rate.

56.

Q:

I carry on a business as a QCTC. Are my assessable profits subject to tax at concessionary tax rate automatically by completing supplementary form S8?

A:

The completion of the supplementary forms does not mean you are automatically eligible for the claim. IRD will consider, including but not limited to, the information provided on supplementary form S8, in determining whether you are a QCTC for the year. You may be required to provide further information to support the claim.

57.

Q:

I carry on a business as a QCTC but do not wish to claim my assessable profits subject to tax at concessionary tax rate. Do I need to submit supplementary form S8?

A:

Yes. You need to submit supplementary form S8.

58.

Q:

I have incurred loss for my QCTC business for the year. Do I need to submit supplementary form S8?

A:

Yes. You need to submit supplementary form S8.

59.

Q:

Can I submit BIR 51 and supplementary form S8 separately? Is there a different due date for the supplementary form S8?

A:

No. You have to submit both BIR51 and supplementary form S8 all together at the same time. The due date for both forms is the same.

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BIR51 – Item 9.7.5 Qualifying Aircraft Lessor

60.

Q:

What is meant by "qualifying aircraft lessor"?

A:

"Qualifying aircraft lessor" is a corporation which is not an aircraft operator and has carried out in Hong Kong one or more qualifying aircraft leasing activities. It also has not carried out in Hong Kong any activity other than a qualifying aircraft leasing activity. The qualifying profits of the corporation derived from the business of qualifying aircraft leasing activities will be entitled to profits tax concessions if the corporation has made the election.

61.

Q:

What are the profits tax concessions available for a qualifying aircraft lessor ?

A:

If the conditions under section 14H(4) of the IRO are met, a qualifying aircraft lessor is entitled to have its profits derived from its qualifying aircraft leasing activity for a year to be charged at the concessionary tax rate, which is one-half of the rate specified in Schedule 8 to the IRO. In addition, the qualifying aircraft lessor is entitled to have the taxable amount of the lease payments calculated at 20% of tax base (i.e. gross lease payments less deductible expenses) if it further meets the conditions under section 14I of the IRO.

For details, please refer to paragraphs 10-21 of Departmental Interpretation & Practice Notes No. 54.

62.

Q:

Do the assessable profits of a qualifying aircraft lessor which were subject to tax at concessionary tax rate still qualify for the two-tiered profits tax rates?

A:

No. The two-tiered profits tax rates is not applicable to the assessable profits of a qualifying aircraft lessor who has made the election for the concessionary tax rate.

63.

Q:

I carry on a business as a qualifying aircraft lessor. What should I submit if I wish to claim the assessable profits subject to tax at concessionary tax rate for the year?

A:

You have to complete and submit both BIR51 and supplementary form S9 for each year that you wish to claim the assessable profits subject to concessionary tax rate.

64.

Q:

I carry on a business as a qualifying aircraft lessor. Are my assessable profits subject to tax at concessionary tax rate automatically by completing supplementary form S9?

A:

The completion of the supplementary forms does not mean you are automatically eligible for the claim. IRD will consider, including but not limited to, the information provided on supplementary form S9, in determining whether you are a qualifying aircraft lessor for the year. You may be required to provide further information to support the claim.

65.

Q:

I carry on a business as an aircraft lessor but do not qualify to be a qualifying aircraft lessor. Do I need to submit supplementary form S9?

A:

No. You do not need to tick the box 9.7.5 and do not need to submit supplementary form S9.

66.

Q:

I carry on a business as an aircraft lessor but do not wish to claim my assessable profits subject to tax at concessionary tax rate. Do I need to submit supplementary form S9?

A:

Yes. You need to submit supplementary form S9.

67.

Q:

I have incurred loss for my qualifying aircraft leasing business for the year. Do I need to submit supplementary form S9?

A:

Yes. You need to submit supplementary form S9.

68.

Q:

Can I submit BIR 51 and supplementary form S9 separately? Is there a different due date for supplementary form S9?

A:

No. You have to submit both BIR51 and supplementary form S9 all together at the same time. The due date for both forms is the same.

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BIR51 – Item 9.7.6 Qualifying Aircraft Leasing Manager

69.

Q:

What is meant by "qualifying aircraft leasing manager"?

A:

"Qualifying aircraft leasing manager" is a corporation which is not an aircraft operator, that has met one of the following conditions:
(a) It is a dedicated aircraft leasing manager that has carried out in Hong Kong one or more qualifying aircraft leasing management activities, and has not carried out in Hong Kong any activity other than a qualifying aircraft leasing management activity;
(b) It is an aircraft leasing manager that has satisfied the safe harbour rule under section 14K of the IRO even though it has carried out in Hong Kong income-generating activity other than a qualifying aircraft leasing management activity; or
(c) It is an aircraft leasing manager that the Commissioner has determined under section 14L(1) to be a qualifying aircraft leasing manager even though it satisfies neither of the conditions in (a) and (b) above.
The qualifying profits of the corporation derived from the business of qualifying aircraft leasing management activities will be subject to concessionary tax rate if the corporation has made the election.

70.

Q:

What are the profits tax concessions available for a qualifying aircraft leasing manager?

A:

If the conditions under section 14J(5) of the IRO are met, a qualifying aircraft leasing manager is entitled to have its profits derived from its qualifying aircraft leasing management activity for a year to be charged at the concessionary tax rate, which is one-half of the rate specified in Schedule 8 to the IRO.

For details, please refer to paragraph 38 of Departmental Interpretation & Practice Notes No. 54.

71.

Q:

Do the assessable profits of a qualifying aircraft leasing manager which were subject to tax at concessionary tax rate still qualify for the two-tiered profits tax rates?

A:

No. The two-tiered profits tax rates is not applicable to the assessable profits of a qualifying aircraft leasing manager who has made the election for the concessionary tax rate.

72.

Q:

I carry on a business as a qualifying aircraft leasing manager. What should I submit if I wish to claim the assessable profits subject to tax at concessionary tax rate for the year?

A:

You have to complete and submit both BIR51 and supplementary form S10 for each year that you wish to claim the assessable profits subject to concessionary tax rate.

73.

Q:

I carry on a business as a qualifying aircraft leasing manager. Are my assessable profits subject to tax at concessionary tax rate automatically by completing supplementary form S10?

A:

The completion of the supplementary forms does not mean you are automatically eligible for the claim. IRD will consider, including but not limited to, the information provided on supplementary form S10, in determining whether you are a qualifying aircraft lessor for the year. You may be required to provide further information to support the claim.

74.

Q:

I carry on a business as an aircraft leasing manager but do not qualify to be a qualifying aircraft leasing manager. Do I need to submit supplementary form S10?

A:

No. You do not need to tick the box 9.7.6 and do not need to submit supplementary form S10.

75.

Q:

I carry on a business as a qualifying aircraft leasing manager but do not wish to claim my assessable profits subject to tax at concessionary tax rate. Do I need to submit supplementary form S10?

A:

Yes. You need to submit supplementary form S10.

76.

Q:

I have incurred loss for my qualifying aircraft leasing management business for the year. Do I need to submit supplementary form S10?

A:

Yes. You need to submit supplementary form S10.

77.

Q:

Can I submit BIR 51 and supplementary form S10 separately? Is there a different due date for supplementary form S10?

A:

No. You have to submit both BIR51 and supplementary form S10 all together at the same time. The due date for both forms is the same.

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Tax Data

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BIR51 Item 10.1; BIR52 Item 10.1
[Offshore profits excluded from the Assessable Profits or Adjusted Loss stated in Part 1 of BIR51/52]

78.

Q:

What amount should I enter for this item if an offshore loss is sustained for the year?

A:

You should insert "0" in the input box if the net amount of offshore income as reduced by all the related expenses incurred in earning that income is nil or a negative figure.

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BIR51 Item 10.2.1; BIR52 Item 10.2
[Offshore profits from business (already included in Item 10.1) in respect of which the Internet was used to accept orders, sell goods, provide services or accept payment]

79.

Q:

Should I put a negative figure here if an offshore loss is sustained from business conducted by using the Internet?

A:

Just put "0" in the input box.

80.

Q:

What should I put here if offshore profits are generated from business conducted by using the Internet whilst there is an overall offshore loss?

A:

You should still enter the amount of offshore profits from using the Internet in Item 10.2.1 / 10.2, even though you have inserted "0" for offshore profits in Item 10.1.

81.

Q:

Does "Internet" used here include "intranet" and "e-mail"?

A:

Yes. However, "fax" is excluded.

82.

Q:

Should I treat the company as accepting orders for goods or services using the Internet if its customers place orders by email?

A:

Yes. This includes orders received by using a form on a web site and e-mail etc.

83.

Q:

What is meant by "The Internet was used to accept payment" in Item 10.2.1 / 10.2?

A:

"The Internet was used to accept payment" here includes e-banking and credit card payments through the Internet.

* 

BIR51 Item 10.3; BIR52 Item 10.3
[Profits from sale of landed properties in Hong Kong]

84.

Q:

What should I put here if a loss is sustained from sale of landed properties in Hong Kong?

A:

You should insert "0" in the input box.

* 

BIR51 Item 10.4; BIR52 Item 10.4
[Profits from sale of capital assets (other than landed properties in Hong Kong)]

85.

Q:

What should I put here if a loss is sustained from sale of capital assets other than landed properties in Hong Kong?

A:

You should insert "0" in the input box.

* 

BIR51 Item 10.5; BIR52 Item 10.5
[Net Interest income exempted from payment of Profits Tax]

86.

Q:

What types of interest income are exempted?

A:

For details, please refer to the Departmental Interpretation & Practice Notes No. 34 (Revised) in this web site.

* 

BIR51 Item 10.6; BIR52 Item 10.6
[Interest, profits or gains from qualifying debt instruments (issued on or after 1 April 2018) exempted from payment of Profits Tax]

87.

Q:

What amount should be entered for this item?

A:

You should state the amount of interest income, profits or gains derived from a qualifying debt instrument issued on or after 1 April 2018 where you are not an associate of the respective issuer.

88.

Q:

Should I enter a negative figure here if a loss was incurred?

A:

You should insert "0" in the input box.

* 

BIR51 Item 10.7; BIR52 Item 10.7
[Deduction claimed for approved charitable donations]

89.

Q:

What amount should be entered for this item?

A:

You should state the amount claimed as deduction. For 2008/09 onwards, deduction is limited to 35% of the adjusted assessable profits.

* 

BIR51 Item 10.11 to 10.13; BIR52 Item 10.10 to 10.12
[Deduction claimed for expenditure on environmental protection facilities]

90.

Q:

What are expenditure on environmental protection machinery, expenditure on environmental protection installation and expenditure on environment-friendly vehicles?

A:

For details, please refer to the Departmental Interpretation & Practice Notes No. 5 (Revised) in this web site.

* 

BIR51 Item 10.15.2; BIR52 Item 10.14.2
[Deduction claimed for specified expenditure on performer’s economic rights]

91.

Q:

What is a performer's economic right?

A:

It is a right mentioned in section 215(1)(a), (b), (c) or (d) of the Copyright Ordinance (Cap. 528) and conferred by Part III of that Ordinance on a performer, or a right that corresponds to the foregoing right and subsists under the law of a place outside Hong Kong.

* 

BIR51 Item 10.15.3; BIR52 Item 10.14.3
[Deduction claimed for specified expenditure on protected layout-design (topography) rights]

92.

Q:

What is a protected layout-design (topography) rights?

A:

It is a right in a layout-design (topography) that is protected under section 3 of the Layout-design (topography) of Integrated Circuits Ordinance (Cap. 445); or a right that corresponds to the foregoing right and subsists under the law of a place outside Hong Kong.

* 

BIR51 Item 10.15.4; BIR52 Item 10.14.4
[Deduction claimed for specified expenditure on plant variety rights]

93.

Q:

What is a protected plant variety right?

A:

It is a right granted under Part III of the Plant Varieties Protection Ordinance (Cap. 490); or a right that corresponds to the foregoing right and subsists under the law of a place outside Hong Kong.

* 

BIR52 Item 10.15
[Deduction claimed for mandatory contributions made for proprietor or partners under the Mandatory Provident Fund Schemes Ordinance]

94.

Q:

What amount should I enter for this item?

A:

You should only enter the sum of mandatory contributions made on behalf of the proprietor or partners which can be claimed for deduction under Profits Tax. Voluntary contributions, any amount exceeding the value which can be claimed for deduction under Profits Tax and contributions made for the proprietor's or partners' spouses and contributions for employees should be excluded.

95.

Q:

Can a business claim deduction for specific provisions made for its proprietor's or partners' mandatory contributions made to MPF Schemes (under Mandatory Provident Fund Schemes Ordinance)?

A:

No. Claims for deduction for partner's own contributions can only be made for sums which have been paid. Provisions charged to account are not deductible.

96.

Q:

Can deductions be claimed by the proprietor or partners in respect of mandatory contributions under the Mandatory Provident Fund Schemes Ordinance if the amounts have not been charged in the Statement of Comprehensive Income/Profit and Loss Account of the business?

A:

Yes, such amounts can be claimed in the tax computations.

97.

Q:

One of the partners has a separate employment, and mandatory contributions have been made by him both in the capacity of a self-employed person and an employee. How should tax deduction be claimed under profits tax?

A:

In arriving at the deductible amount, sums already deducted in the partner's Salaries Tax Assessment or Personal Assessment and Profits Tax Assessments of his businesses have to be taken into account. In other words, the aggregate amount to be deducted should not exceed $18,000 in a year ($14,500 for 2012/13, $15,000 for 2013/14, $17,500 for 2014/15 and $18,000 for 2015/16 onwards).

Click here for further information.

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Financial Data

* 

BIR51 Part 12; BIR52 Part 11
[Financial Data]

98.

Q:

Some of the terms or items are accounting terms and have no precise or uniform definition. How can I give the exact figures?

A:

The listed items are intended to refer to items of an identical or similar nature, irrespective of the actual accounting terminology which may have been used in the financial statements. In the case where more than one entry in the financial statements match a particular item, you should fill in the total of these entries.

* 

BIR51 Item 12.1; BIR52 Item 11.1
[Turnover]

99.

Q:

What is the meaning of turnover? Is it the same as "sales"?

A:

According to the Hong Kong Accounting Standard 1 (Revised), "turnover" should consist of revenue arising from the principal activities of the entity and therefore should not usually include those items of revenue and gains that arise incidentally.

* 

BIR51 Item 12.2; BIR52 Item 11.2
[Opening inventories]

100.

Q:

What figure should be entered if the company is a manufacturer and has several kinds of opening stock such as "raw materials", "work-in-progress" and "finished goods" etc.?

A:

(i) This refers to the total of all kinds of opening stock disclosed in the detailed Statement of Comprehensive Income/Profit and Loss Account. Thus, a company having more than one kind of opening stock should add them up and insert the total sum in the input box.
(ii) The same treatment should be adopted for closing inventories [i.e. Item 12.4 of BIR51 and Item 11.4 of BIR52].

 

* 

BIR51 Item 12.3; BIR52 Item 11.3
[Purchases]

101.

Q:

What is the meaning of purchases? What figure should I enter if the company is in the manufacturing business?

A:

(i) This refers to the total of all purchases of stock.
(ii) Simply extract the figure for "purchases" from the Statement of Comprehensive Income/Profit and Loss Account, irrespective of whether direct costs, direct expenses or overheads have been included under "purchases" in the accounts.

102.

Q:

If the company is only engaged in the provision of services and is not engaged in trading, what figure should I enter?

A:

In cases where companies are not engaged in the trading of goods or commodities [e.g. companies having rental income, interest income and/or dividend income as their only business receipts] and there are no purchases of trading stock, insert "0" in the input box.

* 

BIR51 Items 12.5 and 12.6; BIR52 Items 11.5 and 11.6
[Gross profit and Gross loss]

103.

Q:

If the company is not engaged in the trading of commodities, how should I complete this part?

A:

In some cases where companies are not engaged in the trading of goods or commodities [e.g. companies having rental income, interest income and/or dividend income as their only business receipts], the Statement of Comprehensive Income/Profit and Loss Account may not have any figure for "Gross profit/Gross loss". In such cases, insert "0" in the input box.

* 

BIR51 Item 12.8; BIR52 Item 11.8
[Interest income]

104.

Q:

What happens if the company has more than one type of interest income? Which figure should I fill in?

A:

If there is more than one entry in the financial statements for interest income [e.g. bank interest, inter-company interest income, loan interest received etc.], add up all items of an identical or similar nature and insert the total in the input box.

105.

Q:

The company has a small amount of interest income which has been included under other entries in the Statement of Comprehensive Income/Profit and Loss Account for the sake of simplicity. Is it necessary to find out the amount of interest income so included and enter it in the input box?

A:

When the interest income has been included under other entries [e.g. as part of the sales proceeds] in the Statement of Comprehensive Income/Profit and Loss Account, you need not separate them from those entries.

* 

BIR51 Item 12.9; BIR52 Item 11.9
[Interest expense]

106.

Q:

X Limited carries on business as a plastics manufacturer. In order to obtain additional working capital, X Limited borrowed from a local bank Bank Y. This borrowing is secured by a mortgage over the factory premises owned by X Limited. Besides, X Limited purchased a machine from Company Z (unrelated to X Limited) under hire purchase. During the basis period, X Limited paid interest in the amount of $150,000 and $20,000 to Bank Y and Company Z respectively. If X Limited claims deduction for interest paid or payable to Bank Y and Company Z, what information should be provided?

A:

X Limited should provide the following information:

Information to be provided on the details of interest paid or payable - This table consists of three columns. The first column is the type of information to be provided. The second column is the information in respect of Loan One. The third column is the information in respect of Loan Two.
 

Loan 1

Loan 2
Interest paid and payable $150,000 $20,000
Name & address of lender Bank Y, address of Bank Y Company Z, address of Company Z
Relationship No No
Purpose for the loan 
 
Working capital Purchase of machine
 
Security Given Address of factory premises Machine
 
Specific condition under section 16(2) of the IRO relied on section 16(2)(d) section 16(2)(e)

For further details relating to the specific conditions under section 16(2) of the IRO, please refer to the Departmental Interpretation & Practice Notes No. 13A.

107.

Q:

What figure should be entered if the company has more than one entry in the financial statements for interest expense?

A:

If there is more than one entry in the financial statements for interest expense [e.g. bank interest, hire-purchase interest, inter-company interest, mortgage loan interest, Trust Receipt interest etc.], add up all items of an identical or similar nature and insert the total in the input box.

108.

Q:

Are bank charges treated as interest expenses? Do I need to insert the figure in the input box?

A:

Bank charges are usually in the nature of handling charges for making available loan facilities and are therefore not interest. They are not to be included here.

* 

BIR51 Item 12.10; BIR52 Item 11.10
[Employee and Director remuneration / Employee remuneration]

109.

Q:

What should be included here?

A:

(i) The "employee" referred to here includes all employees whose remuneration has been charged in the Statement of Comprehensive Income/Profit and Loss Account of the company, irrespective of whether the employees perform their duties in Hong Kong or elsewhere. Remuneration paid by you as employer to overseas employees or staff working in the Mainland of China should also be included. "Employee" also includes a director of a corporation. However, "employee" does not include a proprietor or partners or their spouses of an unincorporated business.
(ii) It is the sum of all salaries, bonuses, wages, cash allowances etc. paid to employees and includes director's fees.

110.

Q:

If the company provides some fringe benefits to its employees, do I have to include such amount for this item?

A:

Fringe benefits such as quarters expenses, reimbursement of travelling expenses, share options granted, passages, medical expenses etc. need not be added unless these have already been grouped under "employee remuneration" in the Statement of Comprehensive Income/Profit and Loss Account of the company.

* 

BIR51 Item 12.12; BIR52 Item 11.11
[Commission payments]

111.

Q:

What figure should I insert if a small amount of commission payments has been merged with other expense items in the financial statements?

A:

If such expenses have been included under other entries in the Statement of Comprehensive Income/Profit and Loss Account [e.g. commission payments to estate agents having been included as part of the purchase cost of landed properties, commission payments to employees having been included under employee remuneration etc.], it can be excluded here.

* 

BIR51 Item 12.13; BIR52 Item 11.13
[Intellectual property payments]

112.

Q:

What does the term "Intellectual property payments" refer to?

A:

Intellectual property payments refer to:-
(a) royalty payments to the owner (whether a non-resident person or not) for the use of intellectual property (such as cinematograph or television film or tape, sound recording, patent, design, trade mark, copyright material, *layout-design (topography) of an integrated circuit, *performer's right, *plant variety right, secret process or formula, and computer software), whether paid or accrued; and
(b) *payments to a performer or an organizer for the assignment of, or agreement to assign, a performer's right in relation to a performance given by the performer in Hong Kong on or after 29 June 2018, whether paid or accrued.
(*only applicable for sums paid or accrued on or after 29 June 2018)

* 

BIR51 Item 12.14; BIR52 Item 11.13
[Management and consultancy fee payments]

113.

Q:

What does the term "management and consultancy fee payments" mean?

A:

This term refers to payments for management, administrative and professional services, whether to third parties and / or related parties. Professional services may include property or asset valuation, technical and /or feasibility studies, consultancy, etc. Such payments, however, should exclude building management fees, accountancy fees, audit fees and legal fees, which in normal circumstances are seldom included under "management and consultancy fees".

114.

Q:

Should building management fees be included here?

A:

Building management fees paid are NOT to be included.

115.

Q:

If this expense is not substantial and has been lumped together with other items in the Statement of Comprehensive Income/Profit and Loss Account, do I need to include it here?

A:

If minor items falling within this category have been included in other items in the Statement of Comprehensive Income/Profit and Loss Account [e.g. small amount of consultancy fee may have been included under "sundries" or "miscellaneous expenses"], such items can be excluded here.

* 

BIR51 Item 12.16; BIR52 Item 11.15
[Bad debts]

116.

Q:

Does this include provision for bad debts?

A:

Bad debts can usually be found in the Statement of Comprehensive Income/Profit and Loss Account if they have been charged in the accounts. It includes provision for bad debts [whether specific or general provision] charged in the accounts, irrespective of whether or not the sums concerned have been claimed as a "deduction" for Profits Tax purposes.

* 

BIR51 Items 12.17 and 12.18; BIR52 Items 11.16 and 11.17
[Net profit per account and Net loss per account]

117.

Q:

Does this refer to the figure before tax or after tax?

A:

This item can be found in the Statement of Comprehensive Income/Profit and Loss Account. It is the net profit or net loss figure BEFORE tax.

* 

BIR51 Item 12.19; BIR52 Item 11.18
[Accounts receivable (trade)]

118.

Q:

Does this refer only to trade receivable? Does this include bills receivable?

A:

(i) It is intended to refer to trade receivable. This figure can usually be found in the Statement of Financial Position/Balance Sheet.
(ii) In the event that such "trade receivable" was grouped together with other non-trade receivable [e.g. inter-company loans] and shown under headings like "accounts receivable", "debts due from other companies" etc., simply transcribe the Statement of Financial Position/Balance Sheet figure into the box. It is however advisable to segregate trade and non-trade receivables in future.
(iii) This term also includes bills receivable.

* 

BIR51 Item 12.20; BIR52 Item 11.19
[Accounts payable (trade)]

119.

Q:

Does this refer only to trade payable? Does this include bills payable?

A:

(i) It is intended to refer to trade payable. This figure can usually be found in the Statement of Financial Position/Balance Sheet.
(ii) In the event that such "trade payable" was grouped together with other non-trade payable [e.g. inter-company loans] and shown under headings like "accounts payable", "debts due to other companies" etc., simply transcribe the Statement of Financial Position/Balance Sheet figure into the input box. It is however advisable to segregate trade and non-trade payables in future.
(iii) This term also includes bills payable.

* 

BIR51 Item 12.21
[Issued share capital]

120.

Q:

Does this refer to the share capital issued during the basis period?

A:

(i) No. This refers to all issued share capital of a limited company [whether fully paid or partly paid] as at the accounting date.
(ii) In the case where a company is a branch of a foreign company, the branch accounts will not usually have any item for share capital. In such cases, insert "0" in the input box.

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* 

Personal Particulars of Proprietor or Partners and Allocation of Profits/(Loss) and Claim for Deduction of Mandatory Contributions

* 

BIR52 Items 6.1 and 6.2
[Personal Particulars of Proprietor or Partners / Allocation of Assessable Profits/(Adjusted Loss) / Claim for Deduction of Mandatory Contributions]

121.

Q:

If all partners do not elect for Personal Assessment and agree the partnership profits be assessed under Profits Tax, are we still required to complete Items 6.1 and 6.2?

A:

Yes. Particulars of the partners, change of partners during the year and allocation of Assessable Profits/(Adjusted Loss) among partners are still required to be provided in Items 6.1 and 6.2. These details will be useful in calculating the tax liability of an individual partner when loss set-off arises or change occurs in Personal Assessment election by any partner.

122.

Q:

Should I leave columns "Date entered" and "Date left" in Item 6.1 blank if no partner has entered or left the partnership during the relevant basis period?

A:

Yes. These 'Date' fields should be left blank. For any change of partners after the basis period, you should notify Business Registration Office separately by form IRBR64 or by letter.

123.

Q:

If the number of partners is more than four, how should I fill in the details of other partners?

A:

Provide the details on a separate sheet of paper if the space is insufficient.

124.

Q:

How should the allocation of Assessable Profits or Adjusted Loss among partners be made?

A:

A detailed example can be found on page 4 of the Pro Forma Profits Tax Computation (IR957) which is a step by step guide for making the allocation of Assessable Profit or Adjusted Loss among partners. This form can be obtained through the Fax-A-Form service (Telephone No. 2598 6001) or downloaded from this web site.

125.

Q:

Should I, as a partner of a partnership business, make an election for Personal Assessment in my own Tax Return - Individuals (BIR60) even if I have stated my intention of election for Personal Assessment in Item 6.2?    

A:

Yes. You should make an election for Personal Assessment in your own Tax Return - Individuals (BIR60). If the proprietor or partner who is required to complete a BIR60 does not make a valid election in the BIR60, the election in Item 6.2 will be ignored and profits tax demand note may be issued if it is a profit case.

126.

Q:

If the partnership has made an adjusted loss for the year, should I put a negative sign in the last column of Item 6.2?

A:

No. Negative signs or brackets are not required in the last column of Item 6.2, but the total should match the adjusted loss reported in Item 1.2 of BIR52.

127.

Q:

If one partner has a share of profit and the other has a share of loss, should a negative sign be put before the shared loss in the last column of Item 6.2?

A:

As explained on page 4 of the Pro Forma Profits Tax Computation (IR957), each partner should have a share of profit if the business as a whole has assessable profits. Similarly, each partner should have a share of loss if the business has an adjusted loss. It is not possible that one partner has a share of profit and the other has a share of loss. Your allocation should be wrong. You are advised to study the example on page 4 of the IR957 and re-compute the allocation. You can obtain a copy of IR957 through the Fax-A-Form service (Telephone No. 2598 6001) or from this web site.

128.

Q:

Should I provide the amount of mandatory contributions made for proprietor / each partner under Mandatory Provident Fund Schemes Ordinance?

A:

Yes, you should provide the amount of mandatory contributions made for proprietor / each partner under Mandatory Provident Fund Schemes Ordinance. The total amount should match the deduction claimed for mandatory contributions under Item 10.15 of BIR52.