How to prepare IR56M

Hong Kong companies must submit Form IR56M when reporting remuneration payments made to individuals who are not considered employees. This applies to payments for services provided by:

1. Subcontractors

2. Consultants

3. Agents

4. Brokers

5. Contributing artists, entertainers, athletes, and writers

Since these recipients do not fall under the employee classification, all qualifying remuneration should be reported using Form IR56M.

IR56M Overview: Notification of Non-Employee Remuneration

Form IR56M is specifically used to notify the Inland Revenue Department (IRD) of payments made to persons other than employees for their rendered services.

Step-by-Step Setup in Taxation and Payroll Modules

1. Define Tax Information

   • Enter your Tax File Number, Name, and Designation into the Taxation Module Setup.

2. Income Limit Preference

   • Choose whether to ignore the $25,000 income threshold within the Taxation Module Setup.

3. Configure Pay Types for IR56M

   • Set up the pay types designated for IR56M reporting in the Payroll Module Setup’s Pay Type tab.

   • Assign the correct IRD Category (NE) to each pay item, ensuring it aligns with non-employee remuneration as stipulated by IR56M.

4. Select Appropriate IRD Category (NE)

   • If the Pay Type Table feature is active, select the matching non-employee category for each pay item in the IR56M form within the Pay Type Table.

This process ensures that all payments to non-employees are accurately reported to the Hong Kong IRD in compliance with regulatory requirements.

5. Define the Non-Employee for IR56M: Enable the "Non-Employee for IR56M" in Employee Master, Inland Revenue tab.

6. Generate IR56M Batch: Create the IR56M Batch and ensure the income data for non-employees (covering April to March) is secured.

7. Print IR56M Checklist: Produce the checklist for review and verification.

8. Distribute Taxable Income Report: Print and distribute the Taxable Income Report (by IRD Category or Pay Type) to non-employees.

9. Modify IR56M Batch (if applicable): Export, edit, and re-import batch data if needed.

10. Perform IR56M Amendments (if required): Make necessary adjustments to the IR56M records.

11. Generate Data File and Control List: Produce the IR56M Data File and Control List, then submit the disk along with the control list to the Inland Revenue Department.

12. Distribute IR56M Forms: You must provide each non-employee with a copy of their IR56M form. This can be done using any of the following methods:

1. Print hard copies of the IR56M forms from the IR56M Amendment function and distribute them manually.

2. Use the Output to Email function in the IR56M report to send the forms directly to employees via email.

3. Implement and enable the Download IR56M function in the Employee Portal, allowing employees to access their forms online.

13. Repeat for Multiple Employers: If the database includes multiple employers, repeat the batch generation process for each.

14. Finalize Taxation Year: Once all tasks are complete, click the Protect button on the IR56M Amendment toolbar to close the taxation year.