How to Streamline Payroll Tax Reporting with Hong Kong’s eTAX System

Managing payroll tax obligations in Hong Kong has undergone a significant digital transformation in recent years. The Inland Revenue Department’s (IRD) eTAX system now offers employers a comprehensive platform to handle employer returns, employee tax reporting, and compliance obligations efficiently. With the launch of new tax portals in July 2025 and enhanced filing capabilities, understanding how to leverage these digital tools has become essential for businesses operating in Hong Kong.

This comprehensive guide examines the current state of Hong Kong’s eTAX payroll reporting system, walking you through the requirements, procedures, deadlines, and best practices that every employer needs to know for the 2024/25 year of assessment and beyond.

Understanding Hong Kong’s Employer Tax Reporting Framework

Hong Kong operates a territorial tax system where employers play a crucial role in the tax administration process. All employers in Hong Kong must fulfill specific reporting obligations to the IRD, regardless of company size or whether they have employees on the payroll during a particular tax year.

The Two Core Forms: BIR56A and IR56B

The Hong Kong employer tax reporting system centers around two primary forms:

Form BIR56A (Employer’s Return) serves as the master document or cover sheet that summarizes all employee income reporting for the tax year. The IRD typically issues this form to all registered employers on the first working day of April each year, covering the year of assessment from April 1 of the previous year through March 31 of the current year. For instance, BIR56A forms issued in April 2025 cover the period from April 1, 2024, to March 31, 2025.

Form IR56B (Return of Remuneration and Pensions) is the detailed individual employee income report. Employers must submit a separate IR56B form for each employee who meets the reporting criteria, documenting their total remuneration, allowances, benefits, bonuses, and other taxable payments received during the year of assessment.

Who Must File IR56B Forms?

The reporting requirements extend beyond simple income thresholds. Employers must file IR56B forms for:

• Employees earning above the Basic Allowance: Any employee whose total income exceeds HK$132,000 for the 2024/25 year of assessment
• All directors: Regardless of income amount received
• Married persons: Even if their individual income falls below the threshold
• Part-time employees: If they are likely to have other chargeable income, regardless of the amount paid by your company
• Former employees: Anyone who worked at your company during the tax year must be reported, even if they have since resigned or been terminated
• Non-resident employees: Including those who rendered services outside Hong Kong, provided they received remuneration from your Hong Kong entity

Importantly, employers must report the full remuneration accrued to an employee irrespective of whether the employee may be entitled to claim exemption from Salaries Tax. The responsibility for claiming exemptions rests with the individual taxpayer, not the employer.

What Income Must Be Reported?

The IR56B form requires comprehensive reporting of all forms of employee compensation, including but not limited to:

All amounts must be reported in Hong Kong dollars. Where remuneration is paid in foreign currency, employers must convert the amounts to HKD using appropriate exchange rates for the payment dates.

Critical Deadlines and Filing Requirements

The Annual Filing Calendar

Understanding and adhering to Hong Kong’s employer return deadlines is crucial to avoid penalties and maintain compliance. The annual cycle follows a predictable pattern:

Important Note: Unlike individual tax returns where eTAX filing provides an automatic one-month extension, employer returns receive no such extension. The one-month deadline is strict and applies to all employers regardless of filing method.

What If You Don’t Receive BIR56A?

Employers remain responsible for filing even if they don’t receive Form BIR56A by mid-April. If your BIR56A has not arrived or has been lost or damaged, you should immediately request a replacement by:

• Completing Form IR6163 (Request for Employer’s Return)
• Submitting the signed form to the IRD by post, email, or fax
• Waiting for the IRD to process your request and issue the forms

The filing deadline remains unchanged even when requesting replacement forms, so prompt action is essential.

Nil Returns: Still Required

A common misconception among employers is that filing requirements only apply when there are employees to report. This is incorrect. Even if your company had no employees during the year of assessment, you must still submit Form BIR56A marked as a “Nil Return.” Failure to submit a Nil Return can result in penalties and prosecution, just as failing to submit employee data would.

The eTAX System: Hong Kong’s Digital Tax Portal Revolution

In July 2025, the IRD launched a comprehensive suite of new tax portals under the eTAX umbrella, representing a significant advancement in Hong Kong’s tax administration infrastructure. This modernization initiative transformed how employers interact with the tax system, offering enhanced functionality, improved user experience, and mobile accessibility.

The Three New Tax Portals

The eTAX ecosystem now comprises three specialized portals, each designed for specific user groups:

1. Individual Tax Portal (ITP)

Designed for individual taxpayers to manage personal tax matters, including salaries tax returns, personal particulars updates, and viewing tax positions. Employees can access their tax information and file individual returns through this portal.

2. Business Tax Portal (BTP)

Specifically tailored for businesses to handle tax matters and compliance obligations electronically. This is the primary portal employers use for filing BIR56A, IR56B, and other employer-related forms. The BTP provides centralized access to all business tax functions including profits tax, property tax, and employer returns.

3. Tax Representative Portal

Created for tax professionals, accountants, and authorized representatives who manage tax affairs on behalf of clients. This portal enables efficient handling of multiple client accounts and streamlined professional service delivery.

Key Features of the 2025 eTAX Portals

The modernized eTAX system offers employers a range of powerful features designed to simplify payroll tax reporting:

Mandatory E-Filing Requirements

As of April 2024, the IRD has implemented stricter e-filing requirements to streamline processing and improve efficiency:

• Employers with 20+ employees: E-filing is mandatory for the 2024/25 year of assessment and beyond
• Removable storage devices discontinued: The IRD ceased accepting IR56B forms via USB drives, CDs, or other removable media from April 1, 2024
• Online submission only: All IR56B records must be submitted through the ER e-Filing Services portal
• Smaller employers encouraged: While employers with fewer than 20 employees may still file on paper, the IRD strongly encourages all employers to adopt e-filing for its speed, accuracy, and environmental benefits

Step-by-Step Guide to Filing Through eTAX

Setting Up Your eTAX Account

Before you can file employer returns through eTAX, you need to establish access to the Business Tax Portal:

1. Visit the official eTAX website at etax.ird.gov.hk
2. Select the Business Tax Portal option
3. Register for an account using your company’s Business Registration Number
4. Set up authentication using iAM Smart credentials or traditional username/password
5. Verify your identity and company information
6. Complete the registration process and receive confirmation

Using the IR56 Forms Preparation Tool

The IRD provides a dedicated web-based application called the IR56 Forms Preparation Tool to help employers create electronic IR56 forms efficiently:

1. Log into the Business Tax Portal
2. Click “View All Services” on the main dashboard
3. Navigate to “Employer’s Matters” and select “IR56 Forms Preparation Tool”
4. Enter employee details for each person requiring an IR56B form
5. Complete all required fields including remuneration, allowances, and benefits
6. Review the data for accuracy and completeness
7. Save the prepared forms electronically

The tool guides you through each section of the IR56B form, providing field descriptions and validation to minimize errors.

Submitting Your Employer’s Return

Once you’ve prepared all required IR56B forms, you can submit your complete employer’s return:

1. Access “Employer’s Matters” from the BTP main menu
2. Select “Filing of Employer’s Return / Notification”
3. Choose “Online Mode” for fully electronic submission or “Mixed Mode” if combining electronic and paper submissions
4. Upload your prepared IR56B files (up to 5,000 records total)
5. Complete the BIR56A summary information
6. Review all submissions for completeness
7. Submit the employer’s return electronically
8. Save and print the acknowledgement receipt for your records

The system will validate your submission and provide immediate confirmation of successful filing. You can retrieve the acknowledgement and filed forms through the portal at any time within the three-year retention period.

Filing Amendments and Corrections

If you discover errors after filing your employer’s return, the eTAX system allows you to submit amended IR56 forms. Access the amendment function through the Business Tax Portal, select the forms requiring correction, make the necessary changes, and resubmit. The system will update your submission and provide a new acknowledgement reflecting the amendments.

Compliance Considerations and Special Situations

Handling Multi-Jurisdictional Employees

When employees work partly in Hong Kong and partly outside Hong Kong, or receive payments from both Hong Kong and non-Hong Kong entities, special reporting rules apply. Where an employee is partly paid by a non-Hong Kong subsidiary for services rendered outside Hong Kong, the Hong Kong company should report the aggregate amount of total income in item 11 of Form IR56B, and then separately state the amount paid by the non-Hong Kong subsidiary in item 13. This allows the IRD to properly assess the portion of income chargeable to Hong Kong salaries tax.

Avoiding Duplicate Reporting

To prevent duplication in reporting employee income, you are not required to file Form IR56B for employees if a Form IR56F (notification of commencement or cessation of employment) or IR56G (notification of employee secondment) has already been submitted for the same employee for the same year. The IRD systems track these submissions to ensure each employee’s income is reported once and only once per year of assessment.

Record Retention Requirements

Hong Kong law requires employers to maintain comprehensive payroll records for all employees and retain these records for at least 7 years. This retention period applies to all documentation supporting the information reported on BIR56A and IR56B forms, including:

• Salary records and payment vouchers
• Bonus calculation worksheets
• Allowance authorization and payment records
• Benefits valuation documentation
• Employment contracts and amendments
• Termination payment calculations
• MPF and retirement scheme contribution records

The IRD may request these supporting documents during tax audits or reviews, so maintaining organized, accessible records is essential for compliance.

Penalties for Non-Compliance and Late Filing

The IRD takes employer return filing obligations seriously and imposes significant penalties for non-compliance. Understanding the consequences of late or incorrect filing helps emphasize the importance of timely, accurate submissions.

Financial Penalties

Late filing and non-compliance attract substantial financial penalties:

• HK$10,000 fixed penalty: Applied for each late employer’s return
• Daily default fines: Additional penalties accumulate daily until submission is complete
• Up to HK$50,000 maximum: Total penalties can reach this amount depending on circumstances and delay duration
• HK$1,000 daily surcharge: Imposed for persistent non-payment of assessed penalties

Criminal Prosecution

Beyond financial penalties, the IRD has the authority to prosecute employers who fail to fulfill their filing obligations. Persistent non-compliance, intentional avoidance, or fraudulent reporting can result in criminal charges, potentially leading to court appearances, criminal records, and reputational damage to both the company and responsible individuals.

Additional Tax Assessments

When employers fail to report employee income accurately or completely, the IRD may issue additional tax assessments to collect taxes that should have been paid. These assessments can include penalties and interest charges, significantly increasing the ultimate cost of non-compliance beyond the original tax liability.

Future Developments: The Path to Mandatory E-Filing

Hong Kong’s tax administration is progressively moving toward comprehensive mandatory electronic filing across all tax types. Understanding the roadmap helps employers prepare for upcoming changes:

Profits Tax E-Filing Mandate Timeline

While this timeline specifically addresses profits tax, it signals the IRD’s broader commitment to digital transformation. Employers should anticipate that similar mandatory e-filing requirements may extend to other aspects of tax reporting in the coming years.

XML/iXBRL Format Requirements

From the 2024/25 year of assessment, supplementary forms and financial statements must be filed electronically in XML or iXBRL format, even if the main tax return is submitted on paper. This structured data requirement enables automated processing, improves accuracy, and facilitates data analysis by the IRD. Employers working with accounting software should verify that their systems can generate compliant XML/iXBRL files for tax submissions.

Best Practices for Streamlining Your Payroll Tax Reporting

1. Implement Year-Round Record Keeping

Rather than scrambling to compile employee income data in April, maintain organized payroll records throughout the year. Modern payroll software can automatically track all reportable income categories, generate reports, and even prepare IR56B data in the required format for electronic submission.

2. Establish Internal Filing Calendars

Create company-specific deadlines that fall well before the IRD’s one-month filing deadline. For example, set an internal target of completing all IR56B preparation within two weeks of receiving BIR56A, leaving two weeks for review, corrections, and timely submission. This buffer protects against last-minute complications.

3. Conduct Pre-Filing Reviews

Before submitting your employer’s return, conduct comprehensive internal reviews to identify potential errors or omissions. Common issues to check include:

• Completeness: Have all employees who meet reporting criteria been included?
• Accuracy: Do the reported amounts match payroll records and supporting documentation?
• Currency conversion: Are all foreign currency amounts properly converted to HKD?
• Fringe benefits: Have all non-cash benefits been properly valued and reported?
• Termination payments: Are severance calculations correct and properly categorized?

4. Leverage Technology Integration

Many modern payroll and HR systems offer direct integration with the IRD’s eTAX platform or can export data in formats compatible with the IR56 Forms Preparation Tool. Investing in integrated systems reduces manual data entry, minimizes transcription errors, and significantly streamlines the annual filing process.

5. Train Responsible Staff

Ensure that payroll administrators, HR personnel, and accounting staff responsible for employer return filing receive proper training on eTAX system usage, IR56 reporting requirements, and compliance obligations. The IRD offers guides, tutorials, and support resources to help users navigate the electronic filing system effectively.

6. Consider Professional Assistance

For companies with complex payroll structures, numerous employees, or limited internal resources, engaging professional tax advisors or payroll service providers can ensure accurate, timely compliance while freeing internal staff to focus on core business activities. Professional firms maintain expertise in current regulations, handle technical filing requirements, and provide valuable advisory support.

Understanding Salaries Tax Implications for Your Employees

While employer return filing focuses on reporting employee income to the IRD, understanding how this reported information affects your employees’ salaries tax obligations helps you provide better support and guidance to your workforce.

Hong Kong Salaries Tax Rates

Hong Kong employs a two-tier salaries tax system, with taxpayers paying whichever calculation results in lower tax:

Progressive Rates (after allowances and deductions):

Standard Rate:

Alternatively, tax is calculated at a flat 15% standard rate on net assessable income (after deducting allowable expenses but before personal allowances). The IRD automatically calculates both methods and charges whichever results in lower tax liability.

Why Accurate Employer Reporting Matters to Employees

The information you report on IR56B forms becomes the foundation for each employee’s individual salaries tax assessment. Errors in reported income can lead to incorrect tax calculations, requiring employees to file amendments or objections. Accurate, timely employer reporting helps ensure your employees receive correct tax assessments, avoid unnecessary complications, and maintain good standing with the IRD.

Conclusion: Embracing Digital Transformation in Tax Compliance

Hong Kong’s eTAX system represents a significant advancement in tax administration, offering employers powerful tools to streamline payroll tax reporting while improving accuracy and compliance. The July 2025 launch of the new Business Tax Portal, enhanced filing capacities, and mobile accessibility demonstrate the IRD’s commitment to modernizing tax services for the digital age.

For employers, the transition to mandatory electronic filing creates both challenges and opportunities. While adapting to new systems and requirements demands initial investment in training, software, and process redesign, the long-term benefits of automated reporting, real-time validation, reduced errors, and improved efficiency far outweigh these transitional costs.

Success in this evolving landscape requires proactive engagement with the eTAX platform, maintenance of comprehensive payroll records, adherence to strict filing deadlines, and ongoing attention to regulatory changes. Whether you’re managing a small business with a handful of employees or a large corporation with thousands of staff members, understanding and effectively utilizing Hong Kong’s eTAX system for payroll tax reporting has become an essential component of sound business administration and tax compliance.

As Hong Kong continues its journey toward comprehensive digital tax administration, employers who embrace these changes early, invest in appropriate systems and training, and maintain rigorous compliance practices will find themselves well-positioned to navigate the future of tax reporting with confidence and efficiency.