How to Prepare for Mandatory e-Filing: Hong Kong’s Shift to Digital Tax Compliance

Hong Kong is undergoing a significant transformation in tax administration, moving from traditional paper-based filing to a comprehensive digital ecosystem. The Inland Revenue Department (IRD) has implemented a phased approach to mandatory electronic filing of Profits Tax Returns, marking the most substantial change to Hong Kong’s tax compliance landscape in decades. This transition aligns Hong Kong with global best practices and international tax transparency standards, particularly the OECD’s Base Erosion and Profit Shifting (BEPS) Pillar Two framework.

For businesses operating in Hong Kong, understanding the timeline, technical requirements, and preparation steps is critical to ensuring compliance and avoiding penalties. This comprehensive guide outlines everything you need to know about Hong Kong’s mandatory e-filing requirements and how to prepare your organization for this digital transformation.

Understanding the Three-Phase Implementation Timeline

The IRD has structured the rollout of mandatory e-filing across three distinct phases, each targeting different categories of taxpayers. This gradual approach allows businesses adequate time to prepare while ensuring the tax authority can manage the transition effectively.

Phase 1: In-Scope MNE Groups (2025/26)

The initial phase of mandatory e-filing targets multinational enterprise groups subject to the BEPS Pillar Two top-up tax requirements. According to IRD Commissioner Benjamin Chan, “The initial phase of mandatory e-filing will be implemented for the 2025/26 profits tax returns, targeting in-scope MNE groups subject to top-up tax requirements.”

All Hong Kong entities—including dormant and inactive entities—of in-scope MNE groups that have a Profits Tax filing obligation must e-file their Profits Tax returns for Year of Assessment 2025/26 and subsequent years, regardless of where the ultimate parent entity (UPE) is located.

Important timing considerations for Phase 1:

• Hong Kong Constituent Entities (HKCEs) with D-code or M-code (December or January-to-March year-end) of an UPE must mandatorily e-file for 2025/26
• Exception: HKCEs whose accounting year begins in December 2024 are not required to mandatorily e-file for 2025/26
• HKCEs with N-code (other than D- or M-code) are not required to mandatorily e-file for 2025/26, but will be required from 2026/27 onwards

Phase 2: High-Turnover Businesses (2028)

The second phase will expand mandatory e-filing to businesses with turnover above a specified threshold. While the IRD has confirmed 2028 as the target year, the exact revenue threshold has not yet been finalized. This phase is expected to capture medium to large-sized local enterprises that do not fall within the MNE group criteria.

Businesses should monitor IRD announcements closely as the threshold determination will significantly impact which entities must prepare for mandatory e-filing in this phase.

Phase 3: Universal Coverage (2030)

By 2030, the IRD aims to achieve full-scale mandatory electronic filing of Profits Tax returns for all businesses. This represents the culmination of Hong Kong’s digital transformation journey, bringing all taxpayers—regardless of size or turnover—into the electronic filing ecosystem.

The New eTAX Portal Ecosystem

Supporting the mandatory e-filing initiative, the IRD officially launched three interconnected tax portals on July 22, 2025, following a pre-launch registration period that began on April 22, 2025. These portals represent a complete reimagining of Hong Kong’s tax administration infrastructure.

Business Tax Portal (BTP)

The BTP is the primary platform for businesses to handle tax matters and compliance obligations electronically. It provides a secure, multi-user environment designed to streamline tax management processes for organizations of all sizes.

Key features of the BTP include:

• Electronic filing of Profits Tax returns and supplementary forms
• Instant access to tax and business registration information
• Multi-user access with designated administrators and authorized users
• Application for electronic or certified extracts of business registration information
• Secure interface for managing all business tax affairs

Tax Representative Portal (TRP)

The TRP is designed for tax professionals, accountants, and tax representatives who manage tax affairs on behalf of clients. It enables service agents to efficiently handle multiple client accounts through a single, centralized platform.

Individual Tax Portal (ITP)

While primarily focused on individual taxpayers, the ITP is a prerequisite for BTP access. Business representatives must first establish an ITP account before registering for BTP services.

Registration Process for Business Tax Portal

To access BTP services, businesses must follow a structured registration process:

1. Establish Individual Tax Portal Account: The Responsible Person must first create an ITP account with unique credentials
2. Open BTP Business Account: The Responsible Person opens a BTP Business Account for the organization
3. Designate BTP Administrators: Appoint individuals to manage the BTP Business Account
4. Appoint Authorized Users: BTP Administrators can designate additional authorized users to handle specific tax matters

Important note for existing eTAX users: Those who already have eTAX accounts do not need to re-register. Their accounts have been seamlessly transitioned to the ITP, and they can log in using their existing credentials.

Understanding iXBRL Filing Requirements

A critical component of Hong Kong’s mandatory e-filing framework is the adoption of Inline eXtensible Business Reporting Language (iXBRL) for tax computations and financial statements. This international standard enables machine-readable data submission while maintaining human-readable presentation.

What Must Be Filed in iXBRL Format?

The IRD has established specific format requirements depending on the type of document being submitted:

IRD Tools and Resources

To facilitate iXBRL adoption, the IRD provides comprehensive tools and support resources, which were enhanced on April 1, 2025:

1. IRD Taxonomy Package: The standardized framework defining the data elements and structure for iXBRL filing. Available in both English and Traditional Chinese versions.

2. IRD iXBRL Data Preparation Tools: Free software tools to help taxpayers create compliant iXBRL files:

• Specified iXBRL Templates Input Tool: Designed for small businesses with simpler reporting needs. Uses pre-defined templates with default tags for easy data entry
• iXBRL Comprehensive Tagging Tool: For businesses with more complex tagging requirements. The 2025 enhancement includes upgraded English Windows Tagging Tool that accepts Microsoft Excel format imports

3. Technical Support: The IRD offers dedicated support for iXBRL-related enquiries:

• Email: [email protected]
• Phone: Available through the IRD’s e-Appointment system for scheduled consultations

The Pillar Two Connection: Global Minimum Tax Compliance

The mandatory e-filing requirement for Phase 1 taxpayers is intrinsically linked to Hong Kong’s implementation of the OECD BEPS Pillar Two framework—the global minimum tax regime requiring MNE groups to pay at least 15% effective tax rate in each jurisdiction where they operate.

Pillar Two Portal Launch Schedule

The IRD is developing a specialized Pillar Two Portal as an extended function of the Business Tax Portal to facilitate compliance with global minimum tax requirements:

Critical Deadlines for Calendar Year In-Scope Taxpayers

MNE groups with calendar year-end must be aware of the following compliance deadlines:

• November 2025: Deadline to reply to IRD letter declaring in-scope status and applying for group/JV codes
• June 30, 2026: Deadline to file top-up tax notification
• June 30, 2027: Deadline to file top-up tax return for the first transition year

Voluntary e-Filing Benefits and Incentives

While certain taxpayers will face mandatory e-filing requirements, the IRD encourages all businesses to adopt electronic filing voluntarily through various incentives and benefits.

Automatic One-Month Extension

One of the most significant benefits of voluntary e-filing is an automatic one-month deadline extension without requiring separate application:

Additional Voluntary e-Filing Advantages

• Environmental benefits: Reduced paper consumption and carbon footprint
• Convenience: File anytime, anywhere with internet access
• Instant confirmation: Immediate acknowledgment of submission
• Reduced errors: Built-in validation checks minimize common filing mistakes
• Secure storage: Digital records accessible through your tax portal account
• Future-proofing: Early adoption provides experience before mandatory deadlines

Record Retention Requirements: The 7-Year Rule

Regardless of whether you file electronically or on paper, Hong Kong law requires businesses to maintain comprehensive records of all transactions and supporting documentation.

Statutory Requirements

Under the Inland Revenue Ordinance (IRO), business records must be retained for a minimum period of 7 years after the completion of the transactions to which they relate. This requirement applies to all businesses, regardless of size, turnover, or industry.

Types of Records to Maintain

The IRD requires businesses to keep the following documentation:

Financial Statements and Reports:

• Income statements (Profit and Loss accounts)
• Cash flow statements
• Balance sheets showing assets and liabilities
• Tax computations and working papers

Transaction Records:

• Daily transaction records of all money received or paid
• Sales receipts and invoices
• Purchase records and supplier invoices
• Expense vouchers and supporting documentation
• Bank statements and reconciliations

Additional Requirements for Trading Businesses:

• Product details (description, quantity, buyer/seller identification, pricing)
• Stock records and inventory checks
• Final stock reports at financial year-end

Employer Records:

• Employee remuneration records
• IR56B forms and supporting documentation
• Employment contracts and terms of service
• Records must be retained for at least 7 years for auditing purposes

Electronic Record Retention

Hong Kong law permits businesses to maintain records electronically, providing flexibility in record-keeping methods. The IRD accepts alternative storage methods including:

• Scanned documents saved on secure servers
• Documents stored on CD-ROMs or other digital media
• Cloud-based storage systems
• Electronic accounting system databases

Critical requirement: Electronic records must be readily accessible and producible in readable format upon IRD request.

Penalties for Non-Compliance

The consequences of failing to maintain proper records are significant:

• Maximum fine: HKD 100,000 for failure to comply with record retention requirements without reasonable excuse
• Disallowed deductions: If documents cannot be produced during tax review or investigation, the IRD may disallow claimed deductions
• Reassessed tax liabilities: Inability to substantiate income and expenses may result in estimated assessments, potentially leading to higher tax burden
• Penalty tax: Additional penalties may be imposed for underreporting due to inadequate records

Preparing Your Business for Mandatory e-Filing: An 8-Step Action Plan

Successful transition to mandatory e-filing requires careful planning and systematic preparation. Follow this comprehensive action plan to ensure your organization is ready:

Step 1: Determine Your Timeline

Identify which phase applies to your business:

• Calculate your group’s consolidated revenue for the past four years to determine if you meet the €750 million threshold for Phase 1
• If your group is in-scope, determine your accounting year-end code (D, M, or N) to establish the exact year mandatory filing begins
• Monitor IRD announcements regarding Phase 2 turnover thresholds if you’re a high-revenue local business
• Plan for 2030 if you’re a smaller business not captured in earlier phases

Step 2: Register for Business Tax Portal

Even if mandatory filing doesn’t apply to you yet, early registration provides valuable familiarization time:

• Identify the Responsible Person who will oversee BTP registration
• Ensure the Responsible Person creates an Individual Tax Portal account first
• Open a BTP Business Account through the ITP
• Designate BTP Administrators to manage the account
• Appoint necessary Authorized Users based on your organization’s structure
• Set up distinct usernames and passwords different from ITP credentials

Step 3: Assess Your Current Accounting Systems

Evaluate whether your existing systems can support iXBRL filing requirements:

• Review your accounting software’s capability to export data in formats compatible with IRD tools
• Determine if your software vendor offers direct iXBRL export functionality
• If using Excel-based systems, verify compatibility with the IRD’s iXBRL Comprehensive Tagging Tool
• Identify any gaps between your current data structure and IRD Taxonomy requirements
• Consider whether system upgrades or replacements are necessary

Step 4: Download and Test IRD Tools

Familiarize yourself with the IRD’s iXBRL preparation tools well before filing deadlines:

• Download the latest version of the IRD Taxonomy Package from the IRD website
• Install the appropriate iXBRL Data Preparation Tool (Templates Tool for simple needs, Comprehensive Tool for complex requirements)
• Conduct test runs using prior year financial data to understand the tagging process
• Identify common challenges or questions that arise during test preparation
• Utilize the IRD’s e-Appointment system to schedule consultations for technical assistance

Step 5: Train Your Finance and Tax Teams

Human capability is just as important as technological readiness:

• Designate iXBRL champions within your finance team to develop expertise
• Arrange training sessions on the BTP interface and navigation
• Provide hands-on practice with iXBRL tools using realistic scenarios
• Consider engaging external tax professionals or consultants with iXBRL experience
• Develop internal documentation and standard operating procedures for e-filing processes
• Ensure backup personnel are trained in case primary filers are unavailable during filing periods

Step 6: Review and Organize Your Records

Proper record organization facilitates smoother e-filing and compliance:

• Audit your current record retention practices against the 7-year requirement
• Implement systematic filing systems (electronic or hybrid) for easy retrieval
• Establish clear procedures for capturing and storing supporting documentation
• Ensure all transaction records include required details (product descriptions, quantities, parties, pricing)
• Digitize paper records to create accessible electronic archives
• Implement regular backup procedures for electronic records

Step 7: Engage Your Tax Advisors Early

Professional guidance can significantly ease the transition:

• Discuss your mandatory e-filing timeline and obligations with your tax advisors
• Understand their capabilities and readiness for iXBRL filing
• Clarify responsibility allocation between internal teams and external advisors
• Ensure your advisors have registered for the Tax Representative Portal if they’ll file on your behalf
• Establish clear communication protocols and deadlines for information exchange
• Consider engaging advisors with Pillar Two expertise if you’re a Phase 1 taxpayer

Step 8: Develop a Compliance Calendar

Create a comprehensive timeline tracking all relevant deadlines and preparation milestones:

• Mark mandatory e-filing commencement dates based on your phase
• Include Pillar Two notification and return filing deadlines if applicable
• Schedule regular system and process review checkpoints
• Build in buffer time for unexpected technical challenges
• Coordinate e-filing deadlines with your annual audit and financial reporting schedule
• Set internal deadlines earlier than IRD deadlines to allow for issue resolution

Common Challenges and Solutions

Understanding potential obstacles and their solutions helps ensure smoother implementation:

Challenge 1: Complex Group Structures

Issue: MNE groups with multiple Hong Kong entities face coordination challenges in ensuring all entities comply with mandatory e-filing.

Solution: Establish centralized oversight of all Hong Kong entities’ tax compliance. Create a master register of all HKCEs with their year-end codes and mandatory filing start dates. Implement group-wide standards for data preparation and filing processes.

Challenge 2: Legacy Accounting Systems

Issue: Older accounting systems may not easily export data in formats compatible with iXBRL tools.

Solution: Evaluate the cost-benefit of system upgrades versus manual data preparation. The IRD’s acceptance of Excel format imports in the enhanced 2025 tools provides a workable bridge solution for many businesses. Consider phased system modernization aligned with your mandatory filing timeline.

Challenge 3: Resource Constraints

Issue: Small and medium-sized businesses may lack dedicated tax technology resources.

Solution: Leverage the IRD’s Specified iXBRL Templates Input Tool designed specifically for simpler business needs. Consider outsourcing to tax professionals who can handle iXBRL preparation and filing. Join industry associations that may offer group training or resources.

Challenge 4: Data Quality and Granularity

Issue: iXBRL filing requires more detailed data tagging than traditional paper returns.

Solution: Begin improving data capture practices now, even if your mandatory filing date is years away. Review the IRD Taxonomy to understand required data elements. Adjust chart of accounts and reporting structures to align with taxonomy requirements.

Looking Ahead: Hong Kong’s Digital Tax Future

The mandatory e-filing initiative represents just one component of Hong Kong’s broader digital transformation in tax administration. The IRD’s strategic vision encompasses several additional developments:

Enhanced Data Analytics

iXBRL data enables the IRD to conduct more sophisticated risk assessment and compliance monitoring through automated data analytics. This may result in more targeted audits and quicker identification of discrepancies.

Real-Time Compliance Monitoring

Future developments may include real-time or near-real-time transaction reporting, moving beyond annual return filing to continuous compliance oversight.

Integration with Other Government Services

The new portal infrastructure facilitates potential integration with other Hong Kong government digital services, streamlining business compliance across multiple agencies.

Alignment with International Standards

Hong Kong’s adoption of iXBRL and integration with OECD frameworks positions the jurisdiction favorably in an increasingly interconnected global tax environment, enhancing its reputation as a sophisticated financial center.

Frequently Asked Questions

What happens if I miss the mandatory e-filing deadline?

Failure to file on time may result in penalties and potential prosecution. The IRO provides for fines and, in serious cases, imprisonment for persistent non-compliance. Additionally, you may lose the automatic one-month extension benefit available to e-filers.

Can I still file paper returns after my mandatory e-filing date?

No. Once mandatory e-filing applies to your business, paper filing is no longer an option. You must submit returns electronically through the Business Tax Portal in the required iXBRL format.

Do dormant companies need to e-file?

Yes. The IRD has explicitly stated that all Hong Kong entities of in-scope MNE groups, inclusive of dormant and inactive entities, must comply with mandatory e-filing requirements if they have a Profits Tax filing obligation.

Can my tax representative file on my behalf?

Yes. Tax representatives who have registered for the Tax Representative Portal can file returns on behalf of clients, provided they have proper authorization. This is a common arrangement for businesses using professional tax advisors.

Is there a fee for using the Business Tax Portal?

No. Registration and use of the Business Tax Portal is free of charge. However, there may be fees for specific services such as obtaining certified extracts of business registration information.

What if I need to amend a return after e-filing?

The BTP allows for submission of amended returns. You should prepare a revised iXBRL file with corrected information and submit it through the portal, clearly indicating it is an amended return.

How secure is the Business Tax Portal?

The IRD employs multiple security measures including encrypted data transmission, secure authentication, and regular security audits. The multi-user access system with designated administrators and authorized users provides additional internal controls.

Conclusion

Hong Kong’s transition to mandatory electronic filing of Profits Tax returns represents a fundamental shift in tax administration, bringing the jurisdiction in line with international digital compliance standards. While the phased implementation provides businesses with time to prepare, the complexity of iXBRL requirements and the technical nature of the new portal systems demand proactive planning and preparation.

For Phase 1 taxpayers—in-scope MNE groups—the time for preparation has already passed into the realm of urgent implementation. These organizations must ensure full compliance for the 2025/26 year of assessment, with the first filings due in 2026.

For Phase 2 and Phase 3 taxpayers, the luxury of time provides an opportunity to prepare methodically. By taking action now—registering for portals, testing tools, training teams, and upgrading systems—businesses can transform what might otherwise be a stressful compliance burden into a smooth, efficient process.

The benefits of Hong Kong’s digital tax transformation extend beyond mere regulatory compliance. Businesses that embrace electronic filing can enjoy streamlined processes, reduced errors, enhanced data quality, and improved efficiency in tax compliance workflows. The 7-year record retention requirement, while demanding, creates opportunities for businesses to implement sophisticated document management systems that serve broader operational purposes beyond tax compliance.

As Hong Kong Commissioner of Inland Revenue Benjamin Chan has emphasized, the IRD is committed to “keeping it simple and effective” while balancing the need for comprehensive tax compliance with practical considerations for businesses. The provision of free tools, comprehensive technical support, and a phased implementation timeline demonstrates this commitment.

Success in this new digital tax environment requires a combination of technological readiness, human capability, process optimization, and strategic planning. Businesses that approach mandatory e-filing as an opportunity for modernization—rather than merely a compliance burden—will be best positioned to thrive in Hong Kong’s evolving tax landscape.

The journey to full digital tax compliance by 2030 has begun. The question is not whether your business will need to adapt, but how well-prepared you will be when your mandatory filing date arrives.