Everything You Need to Know About BIR60 Form

 

In Hong Kong, if you are a director of a Hong Kong company or receive a pension in Hong Kong, you will have to pay salary tax every year. In this article, we will give you an overview of the wage tax and the points that you should be aware of as a Hong Kong employer.

One point to keep in mind is that calculating the taxes you have to pay in Hong Kong as a business owner can be confusing. Our experienced Hong Kong CPAs will help you prepare paperwork, verify numbers, and file annual returns on time.

What Is Salaries Tax?

In Hong Kong, tax on employment income and directors' fees is known as salary tax, and the tax authority that collects taxes in Hong Kong is the Internal Revenue Department (IRD).

When the Internal Revenue Department sends you a tax return form (individual tax BIR60) to file, you must complete it and submit it before the deadline, even if you have no income subject to wage tax. Also, if you have income attributable to Wage Tax but did not receive a tax return, you must notify the IRD.

Wage tax is paid on the attributable income that a person earns. If you are a business owner and self-employed, you are considered self-employed and the tax you must pay is income tax.

Attributable income includes:

·         Director salaries, salaries and fees;

·         Commissions, bonuses, license fees and bonuses for termination of the contract and payments in lieu of notification accrued as of April 1, 2012;

·         Grants, gratuities, and fringe benefits, such as cash allowances, educational benefits, and vacation travel benefits

·         Tax on wages paid by the employer;

·         Termination payments and retirement benefits;

·         Pensions;

·         Late payments, tips, deferred payments and late payments;

·         Stock awards and stock options;

·         Tips received;

·         Rental value of a place of residence provided by the employer.

However, this income is not subject to wage tax. They are known as non-attributable income:

·         Severance payments and long service payments

·         Jury fees

An evaluation year begins from April 1 of the previous year to March 31 of the following year.

 

How To Calculate Salaries Tax in Hong Kong?

In Hong Kong, wage tax is charged according to how much is earned annually. The more income you get, the more taxes you pay. This is known as a progressive tax rate.

The wage tax is charged on:

Net attributable income = Total income - Deductions - Allowances

** Deductions include donations to approved charities, contributions to a Mandatory Provident Fund (MPF) scheme and allowances such as basic allowance for oneself (HKD $ 132,000 per year), allowances for spouse and / or dependents.

Taxpayers can choose to be charged at a standard 15% if their annual taxable income exceeds HK $ 200,000. However, your chargeable income would be calculated as follows:

Net Income = Total Income - Deductions (no deductions for personal allowances)

 

How to File Salaries Tax?

All taxpayers must file their annual tax returns with the Internal Revenue Department (IRD). The IRD would notify and send individuals the BIR60 tax return form before May 1 of each year, for the assessment year from April 1 of the year prior to March 31 of that year.

There are two ways a taxpayer can file their tax return form, either by filing on paper in a physical copy or by filing electronically.

1.      Paper filing:

Step 1: Use the original BIR60 form.

Those who choose to submit a paper copy should only use the original BIR60 form sent to them by the Internal Revenue Department.

Step 2: Complete the form and send it to the IRD within 1 month from the date of issuance of the BIR60 form.

2.       By e-filing:

Step 1: Make sure you meet the requirements to create an eTax account online.

Requirements include not claiming any exemptions or not earning more than HKD $ 2,000,000 gross for your sole proprietorship.

Step 2: Create an eTax account.

Step 3: Complete the online form and submit it within 2 months after the tax return form is issued.

If you don't have any income to report, you must report zero income on your tax form and return it to the IRD anyway.

 

When to file tax on Salaries?

The Hong Kong Department of Internal Revenue normally submits BIR60 payroll tax forms on the first business day of May each year, with the submission deadline printed on each form.

For the first time, as a taxpayer, a wage tax return would normally be submitted 5 months after your employer notifies the IRD of your employment (employer filing form IR56E), or when the taxpayer himself notifies the IRD that he is employee and would be subject to wage tax.

On the other hand, employees who work in Hong Kong but have not received their tax return, must report to the IRD before July 31 of the year following that tax year.

Typically, individuals have one month to complete and submit their BIR60 wage tax forms. If the taxpayer was the sole owner of an unincorporated business during the year of assessment, they would have 3 months from the date of issuance of the Tax Return, and those who file the return online will receive an additional month of extension for the tax return presentation.