In Hong Kong’s corporate sector, understanding the nuances of various tax-related forms is crucial for employers. One such form, the IR56G, plays a vital role when an employee decides to leave not just their job, but also Hong Kong itself. The IR56G form is part of the Tax Clearance process when leaving Hong Kong.

What is an IR56G form?

The IR56G form, officially titled “Notification by an Employer of an Employee Who is About to Depart from Hong Kong,” is crucial under two specific circumstances: when an employee is ending their employment and when they plan to leave Hong Kong (also for a short period, i.e. more than one month).

Similar to the IR56F form (for employment termination), the employer must file the IR56G with the Inland Revenue Department (IRD) at least one month before the employee’s planned departure.

It’s important to note that two copies of this form need to be prepared, one of which is for the employee.

Details required on the IR56G form

Completing the IR56G form requires specific information:

• Basic personal details;
• Date and reason for departure and whether the employee will return to Hong Kong. Reasons for departure can include return to homeland, emigration or secondment.
• Detailed income report from April 1 of the current tax year until the employee’s last day, excluding certain payments like severance and long service pay made in accordance with the Hong Kong Employment Ordinance.

Key income details on the form include:

• For item (f) Back Pay, Payment in Lieu of Notice, Terminal Awards or Gratuition, severance payment or long service payment made in accordance with the Employment Ordinance should not be included. The amount to be reported specifically refers to:
  1. a lump sum payment / gratuity paid upon retirement or termination;
  2. payment in lieu of notice, whether paid under the term of an employment contract or the Employment Ordinance; and
  3. deferred pay or arrears of pay resulting from a salaries or wages award.
• Item (g) Certain Payments from Retirement Schemes would refer to any employer contribution via the following:
  1. Occupational Retirement Schemes provided by the company and unrecognised by the Hong Kong government
  2. Occupational Retirement Schemes provided and recognised by the Hong Kong government for any reason other than termination of service with 10 years of service or more, death, incapacity, terminal illness or retirement
  3. Mandatory Provident Fund (MPF) Scheme for any reasons other than permanent departure from Hong Kong, death, incapacity, terminal illness or retirement (applicable to employer’s mandatory contributions)
  4. MPF Scheme for termination of service with less than 10 years of service (applicable to employer’s voluntary contributions)
  5. MPF Scheme for any reasons other than retirement, death, incapacity, terminal illness or termination of services with 10 years of service or more (applicable to employer’s voluntary contributions)
  6. Proportionate Benefit Rule
• Place of residence provided (if any)
• Similar to IR56F, you should only fill up this field if the company provides the place of residence on the basis of either rent-free or rent-subsidised (can be through rental reimbursement).

Considerations

When filling out the IR56G, there are several critical points employers must keep in mind:

• Reporting Share Options: If the employee possesses share options granted by the employer or any related corporation that have not been exercised, assigned, or released prior to their departure from Hong Kong, these must be reported. The report should include details on the unexercised shares and the date they were granted.
• Avoiding Duplication with IR56B: If an IR56G form has already been filed for an employee, there’s no need to file the IR56B form for the same income period, provided the income has already been reported in the IR56G.
• Employee Copies and Tax Clearance: It’s the employer’s responsibility to provide the departing employee with a copy of the completed IR56G form. Additionally, employers should remind employees to contact the IRD for tax clearance procedures before they leave Hong Kong.
• Withholding payment to the employee for tax payment purpose: From the date of filing IR56G form to the IRD to the date of receipt of a ‘letter of release’ issued by the IRD, employer is obliged to withhold all amounts due to be paid to the employee (including salaries, commission, bonus, reimbursement of rent/expense, money or money’s worth). It is also required to report in the IR56G form the amount of money withheld.
• Reporting of additional remuneration payment: In case there is additional employment remuneration payment (including but not limited to vesting of share awards) to the employee after the termination of employment, the employer is obliged to report those additional remunerations to the IRD by filing a revised IR56G form. In case share options previously granted are exercised by the employee after tax clearance, the share option benefits are required to be reported to the IRD through the IR56B form, instead of IR56G form.

Should You Engage a Professional Service Provider?

Handling HR and payroll administration can be intricate and time-consuming. Although these tasks divert resources from primary business activities, they are essential for smooth operation and compliance.

HKWJ Tax Law is at your service to manage these critical functions. We can assist in accurately completing your IR56G forms, and other Employer’s Return Forms, as well as execute payroll and other HR services.

Contact us via the form below or [email protected] for more information.