To prepare for the mandatory e-filing for multinationals and, ultimately, all taxpayers in 2025 and 2030, respectively, the Inland Revenue Department (IRD) has implemented voluntary e-filing of Profits Tax returns from 1 April 2023.  At the minimum, taxpayers have to file supplementary and certain forms electronically to the IRD starting this tax year.

We have been closely monitoring the development of IRD’s e-filing and continue to actively participate in various consultations and trial runs.  We have also developed in-house tools to help our clients seamlessly migrate from paper-based filing to e-filing. 

We are seeing clients taking action now to prepare for this fundamental change to the compliance process. Please refer to our latest flyer on the IRD’s changing requirements, key dates on e-Filing, and how we can support you and your organization(s).

FAQ

At this stage, taxpayers do not need to register for an account for e-Filing purposes.  They can submit the supporting documents and furnish the Profits Tax Return (PTR) using their Inland Revenue Department (IRD)’s File Number and Return Identification Number (RIN) printed on the PTR Form.

However, in order to sign and submit the profits tax return, the IRD requires an online identification of the signing person via the digital certificate, or the e-Tax Account / iAM Smart Account of the signing person.

Alternatively, the IRD accepts a semi-electronic tax return, with the printed Simplified PTR Form to be signed using a wet signature.

In coming years, the IRD will be releasing a new Business Tax Portal, we expect there might be changes and further developments to the preparation and submission process.

On IRD website, there is a list of validation error messages, which covers general validation errors in terms of mandatory values, consistency and other iXBRL tag issues.

However, there might be other messages if the iXBRL file has not been properly converted. Should that be the case you may need a technology person to help sort those issues out.

In IRD iXBRL Data Preparation Tools, there appears to be a grey-out “Tag Migration” button.

We have asked the IRD and their representative mentioned that there will roll-over and tag migration functions available from April 2024 to help roll over the data previously generated by IRD iXBRL Data Preparation Toolsto a new workplace, with details of the functions to be announced at a later time.

The IRD expects that the Financial Statements and Profits Tax Computations are provided in an iXBRL format when uploading to their website.

In IRD iXBRL Data Preparation Tools, it accepts Word File (docx) for Financial Statements and Excel File (xlsx) for Tax Computation. Files with images and other visual elements (e.g. graphs) will not be able to be ingested into IRD’s tool.

In IRD iXBRL Data Preparation Tools and the online validation will check the existence of 3 values for Financial Statements and around 60 values for Tax Computation as part of the validation. 

However, the IRD requires taxpayers to tag specific sections in terms of the Financial Statements Taxonomy and all items in terms of Tax Computation Taxonomy if such values exists in those supporting documents.

Currently the IRD requires submission of the supporting documents (Financial Statements and Tax Computation) and to furnish and submit tax returns on an individual entity basis.

The IRD will be releasing a new Business Tax Portal by 2025,  there may be a change to the preparation and submission process at that time.

We are in close contact with our Audit Team and can integrate the tags in the Audited Financial Statements for our Audit clients.

The obligation to wet-sign your financial statements is not a tax requirement.  

The tagged Financial Statements should be identical to the signed version and the IRD allows the tagged file to not be signed. However, if the IRD requests for the final version, taxpayers are required to submit the final and signed version to the IRD office.

The purposes of a Digital Certificate/eTax Account/iAM Smart account is   to identify the legal entity or the signatory.

As such, the signatory (for example, director) should be using a government-recognised digital certificate (such as the one issued by Hong Kong Post) that can identify the director, or alternatively his/her personal eTax or iAM Smart account.

By appointing a Service Provider, although taxpayer still has the ultimate responsibility to the accuracy, truthiness and liability related to the tax return, the Service Provider may provide end-to-end support from the drafting to signing, and submission of the tax return and relevant supporting documents.

In order to engage a Service Provider, taxpayer needs to sign the IR1476 form.

Currently IRD requires tagging of the Financial Statements which are prepared under HKFRS or HKFRS for Private Entities.

However, IRD also welcomes the submission of Financial Statements that are not prepared under HKFRS. In view that HKFRS is virtually equivalent to IFRS Accounting Statements, there is a possibility for IRD in future requiring tagging of the Financial Statements if it is IFRS-equivalent.

If there is no requirement to prepare financial statements under HKFRS, then a pdf of the signed financial statements may be submitted/uploaded in substitution of the tagged Financial Statements.

Currently the Profits Tax e-Filing applies to BIR 51 and BIR 52 only, however given iXBRL is a neutral medium, the IRD may be expand its usage and acceptance.

According to IRD’s guidelines, only one value may be tagged for each taxonomy item.

If there are multiple values making up a tagged amount, it is expected a sum may need to be inserted or the largest of the amounts are tagged only.

If there are multiple values being tagged, the values of the same taxonomy item should be identical. More details can be found on IRD Website.

The IRD iXBRL Data Preparation Tools and the online validation will check the essential items before allowing submission of the Tax Return, for other mandatory items.  

Taxpayer should have adequate knowledge to both IRD’s taxonomy and the structure of their Financial Statements and Tax Computation.