Exploring the IR56G Form for Employee Departure from Hong Kong

In Hong Kong’s corporate sector, being familiar with the different types of taxation forms is necessary for employers. A typical example of such a form is the IR56G, which is especially important when an employee not only leaves their job but also Hong Kong. The IR56G form is a Tax Clearance document when one leaves 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: in the case of termination of employment and in case an employee is planning to leave Hong Kong (also for a shorter period more than one month).

Much like the IR56F form (for employment termination), the employer needs to file the IR56G with the Inland Revenue Department (IRD) at least one month before the employee is expected to leave.

Keep in mind that the employee’s copy and the employer’s copy need to be prepared in duplicates.

Information Needed on the IR56G Form

The IR56G form necessitates certain details for completion:

• Fundamental Personal Information: This encompasses the employee’s basic information, including full name, Hong Kong Identity Card (HKID) number, residential address within Hong Kong (if any), date of birth, marital status, and nationality.
• Departure Date and Cause: The format must contain the date of the employee leaving Hong Kong and the reason for his/her departure which could be returning to their home country, emigration or secondment. It also must make clear whether the employee will go back to Hong Kong.
• Detailed Earnings Report: A comprehensive income report is crucial, ranging from the 1st day of April of the current tax year until the last working day of the employee, except for specific payments such as severance and long service pay mentioned in the Hong Kong Employment Ordinance. This payroll report should include a detailed breakdown of the employee’s earnings, including salary, bonuses, commissions, allowances, and any income tax deducted by the employee.

It is important to make sure that the information provided on the IR56G form is accurate and updated. This form is used by the Inland Revenue Department (IRD) of Hong Kong for tax purposes. The inaccuracy or leaving things out may lead to penalties or fines.

Key income details on the form include:

For item (f) on the IR56G form, certain payments should not be included, specifically:

1. Severance payment or long service payment made according to the Employment Ordinance.
2. Any lump sum payment or gratuity upon retirement or termination.
3. Payment in lieu of notice, whether it’s paid as per the employment contract or the Employment Ordinance.
4. Deferred pay or arrears of pay arising from a salaries or wages award.

Item (g) “Certain Payments from Retirement Schemes” includes employer contributions from:

5. The Retirement Schemes offered by the company but not recognized by the Hong Kong government.
6. Occupational Retirement Schemes certified by the Hong Kong government due to reasons other than retirement with at least 10 years of service or more, death, incapacity, terminal illness, or retirement.
7. MPF Scheme for other reasons than permanent departure from Hong Kong, death, incapacity, terminal illness, or retirement (applicable to employer’s contributions).
8. MPF Scheme for termination of employment with less than 10 years of service (applicable to employer’s voluntary contribution).
9. MPF Scheme for reasons other than retirement, death, incapacity, terminal illness, or termination of services with 10 years of service or more (including employer’s voluntary contributions).
10. Proportionate Benefit Rule.

• Place of residence provided (if any).
• Like IR56F, this should be completed only if the residence is rent-free or rent-subsidized (subsidized rents can be through reimbursement of rent).

Factors to Consider

When filling out the IR56G form, employers should remember the following key points:

• Reporting Share Options: If the employee holds share options provided by the company or by any corporation that is related to the company but which have not been exercised, assigned or released before the employee leaves Hong Kong, these must be reported. The report must contain information on the shares that were not exercised and the date they were given out.
• Avoiding Duplication with IR56B: In case an employee has already filed an IR56G form, there’s no need to file an IR56B form for the same income period, provided that the income has already been reported on the IR56G.
• Employee Copies and Tax Clearance: The employer has to submit the IR56G duly filled form to the departing employee. Furthermore, employers should also advise their employees to obtain tax clearance certificates from the IRD before they depart Hong Kong.
• Withholding payment to the employee for tax payment purpose: From the date of filing IR56G form with the IRD to the date an employee receives a ‘letter of release’ from the IRD, the employer is required to withhold all the payments due to the employee (including salaries, commission, bonuses, and reimbursements of rent and expenses). Furthermore, the form IR56G is needed to indicate the amount of money withheld.

Reporting of additional remuneration payment: In the event of any extra remuneration payment (including but not restricted to vesting of shares) to the employee after the termination of employment, the employer must report such additional remunerations to the IRD by filing a revised IR56G form. If the previous share options are exercised by the employee after tax clearance then the form IR56B is required to be used to report share option benefits to the IRD rather than the form IR56G.

Is Hiring a Professional Service Provider Advisable?

Managing HR and payroll administration is a complex and tedious process. These tasks shift the resources from the main business activities but they are imperative for the successful operation and compliance.

FastLane Group is available to handle such critical activities. We can help with the correct completion of the IR56G forms and the Employer’s Return Forms, as well as payroll and other HR services.

Get in touch with us by using our contact form or mail us at enquiry@fastlane-global.com for more details.