Completion of Profits Tax Returns and Supplementary Forms

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Frequently Asked Questions & Answers on Completion of Supplementary Form S1 – Person electing for 2-tiered profits tax rates (applicable for year of assessment 2018/19 and subsequent years)

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.

Under what circumstances should a company submit supplementary form S1 – Person electing for 2-tiered profits tax rates?

For the year of assessment 2018/19 and subsequent years, a company should complete and submit supplementary form S1 together with the tax return if all the following conditions are met:
(i)	The company has a positive assessable profit after loss set off;
(ii)	The company elects to be chargeable at the two-tiered profits tax rates for the year of assessment;
(iii)	The company has one or more connected entity (see examples) carrying on a trade, professional or business in Hong Kong; and
(iv)	The company is not a member of a group of companies, one of its connected entities is listed on the Stock Exchange of Hong Kong.

What is meant by "connected entity"?

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

What should I do if the company has 1,000 or more connected entities to be reported in supplementary form S1?

You have to write to the Assessor, quoting the Profits Tax file reference, and provide the details on a separate sheet of paper and staple it to the Control List (with QR code) for the supplementary form uploaded (IR1477). Details to be provided in the separate sheet include complete list of connected entities (Business Registration Number and Name of Connected Entities) that have not been included in supplementary form S1 uploaded. For each sheet, please put your file number, page number and sign at the bottom of the sheet.

What should I do if I make amendment to the information provided in S1 after I have uploaded the form?

Please refer to Q8 of "FAQs about electronic filing of Profits Tax Return" under GovHK.

I did not have any connected entity at the end of the basis period for the relevant year of assessment and wish to elect to be chargeable at the two-tiered profits tax rates for the year. Apart from ticking "Yes" for Item 2.3 in BIR51 or Item 1.6 in BIR52, do I need to tick "Yes" for Item 9.1 and submit supplementary form S1?

No. You do not need to tick the box in Item 9.1 nor submit supplementary form S1 because you did not have any connected entity.

I carry on a business as a professional reinsurer, an authorized captive insurer, a specified insurer, a licensed insurance broker company, a qualifying corporate treasury centre, a qualifying aircraft lessor, a qualifying aircraft leasing manager, a qualifying ship lessor, a qualifying ship leasing manager, a qualifying ship agent, a qualifying ship manager, or a qualifying ship broker for the year. Do my assessable profits still qualify for the two-tiered profits tax rates? Which box should I tick for Item 2.3 in BIR51? Do I need to tick the box in Item 9.1 and submit supplementary form S1?

The two-tiered profits tax rates are not applicable to you who has made the election for the concessionary tax rate under section 14B(2)(b) (qualifying insurance business and insurance brokerage business), section 14D(5)(b) (qualifying corporate treasury centre), section 14H(4)(b) (qualifying aircraft lessor), section 14J(5)(b) (qualifying aircraft leasing manager), section 14P(4)(b) (qualifying ship lessor), section 14T(5)(b) (qualifying aircraft leasing manager), section 14ZD(7)(b) (qualifying ship agent), section 14ZM(7)(b) (qualifying ship manager) or section 14ZV(7)(b) (qualifying ship broker) of the Inland Revenue Ordinance ("IRO"). You should tick "No" for Item 2.3 in BIR51 to indicate that you are not chargeable at two-tiered rates for the year. You do not need to tick the box in Item 9.1 nor submit supplementary form S1 because you do not qualify for the two-tiered profits tax rates.

I paid royalties to a non-resident person which is a connected entity under the two-tiered profits tax rates regime. Since the non-resident person only received royalties from Hong Kong and has not carried on any other trade or business in Hong Kong, do I need to list this non-resident person in supplementary form S1?

Where the royalties mentioned fall within the ambit of s.15(1) of the IRO, the non-resident recipient of the royalties is deemed to be carrying on business in Hong Kong, and you should declare this non-resident person as a connected entity in supplementary form S1.

What should I do if the connected entity did not have a business registration number (BRN). For example, the connected entity is a non-resident person only received royalties from Hong Kong and has not carried on other trade or business in Hong Kong. Can I leave the input for BRN blank?

Business Registration Number (BRN) is a mandatory input. For a connected entity deemed to be carrying on business in Hong Kong, you should provide, under the input for BRN, the IRD allotted BRN equivalent number for the non-resident, that is, the last 8 digits from the file number of the non-resident. For non-resident without file number / IRD allotted BRN equivalent number, you should provide the details on a separate sheet of paper and staple it to the Control List (with QR code) for the supplementary form uploaded (IR1477). Details to be provided in the separate sheet include the name of the Hong Kong Payer, file number of the Hong Kong Payer and the name of the non-resident. For each sheet, please put your file number, page number and sign at the bottom of the sheet.