Filing Form BIRS14 for licensed insurance broker companies in Hong Kong

Form BIRS14 Licensed Insurance Broker Company Hong Kong

Form BIRS14 is the supplementary form a licensed insurance broker company files with its profits tax return to claim the special tax concession under the Inland Revenue Ordinance (Cap. 112). This filing reports eligible insurance brokerage income and computes the concessionary profits tax rate of 8.25 per cent on that income, not the standard 16.5 per cent rate.

Eligibility for the Insurance Broker Tax Concession

A company qualifies for the tax concession if it holds a valid licence from the Insurance Authority under the Insurance Ordinance (Cap. 41). It must be authorised to carry on insurance broker business in Hong Kong. The concession applies only to income from insurance brokerage services arranged or negotiated in Hong Kong.

The Inland Revenue Department examines if the company's income meets the definition of "eligible income" under Cap. 112. Eligible income comprises commissions and fees from arranging insurance contracts. Income from other activities, such as investment income or unrelated consultancy services, does not qualify for the concessionary rate.

BIRS14 Form Guide

The Inland Revenue Department's guide explains the form's structure and required information. The form has four parts:

• Part A: Company particulars, including the business registration number and the profits tax return reference number.
• Part B: Calculation of eligible insurance brokerage income for the year of assessment.
• Part C: Computation of the concessionary profits tax payable on eligible income.
• Part D: Declaration by the company's authorised representative.

Prepare the tax computation according to the principles in the Department's practice notes. Figures on Form BIRS14 must agree with those in the profits tax return and the audited financial statements.

Hong Kong Licensed Insurance Broker Requirements

A Hong Kong licensed insurance broker must meet the Insurance Authority's ongoing regulatory requirements. These include maintaining adequate professional indemnity insurance, keeping proper books of account, and submitting annual returns to the regulator. The tax concession on Form BIRS14 is a separate tax code benefit and does not replace these obligations.

The company must hold its licence for the entire year of assessment to claim the concession for that year. If the licence is granted or revoked part-way through the year, the company may need to apportion its income and claim the concession only for the period it held a valid licence.

Form BIRS14 Instructions

The Inland Revenue Department provides detailed instructions on its website. Key points include:

• The form must be signed by the company's director, company secretary, or an authorised representative.
• Attach a certified true copy of the Insurance Authority licence if the Department has not previously seen it.
• Prepare the tax computation in a format that clearly separates eligible from non-eligible income.
• Retain all supporting documents, including client contracts and commission statements, for at least seven years after the year of assessment ends.

The Department may request more information to verify the income claimed. Respond promptly to any request to avoid assessment delays.

Filing Form BIRS14 with the Profits Tax Return

Form BIRS14 accompanies the profits tax return (BIR51). File both documents together through the Business Tax Portal or on paper. The Inland Revenue Department has mandated electronic filing for certain entities from the year of assessment 2025-26; check if your company falls within that mandate.

For electronic filing, tag financial statements and the tax computation in iXBRL format. The BIRS14 data must be included in the iXBRL submission. The Business Tax Portal runs a validation check to alert you to missing or inconsistent data before accepting the submission.

Tax Computation for the Concession

Prepare a tax computation showing the calculation of eligible income and the resulting concessionary tax. Start with the total profits from the audited financial statements. Deduct any income that does not qualify for the concession, such as investment returns or non-brokerage service fees.

The remaining eligible income is taxed at 8.25 per cent. Tax non-eligible income at the standard 16.5 per cent. Apportion any overhead expenses relating to both income types using a reasonable basis, such as turnover or staff time.

Assessment Year and Filing Deadline

Form BIRS14 relates to a specific year of assessment and is filed with the profits tax return for that year. The Inland Revenue Department issues the profits tax return on the first working day of April each year. File the return and any supplementary forms within one month of the issue date, unless an extension is granted.

The Department may grant an automatic extension of up to eight months for companies with accounting periods ending between 1 April and 30 November. Companies with accounting periods ending between 1 December and 31 March must file by the original deadline or apply for a specific extension.

Record Keeping and Compliance

Maintain records that support the figures on Form BIRS14. These records include:

• Copies of all insurance policies arranged through the company.
• Commission statements from insurers.
• Client invoices and receipts.
• Internal management accounts showing the split between eligible and non-eligible income.

The Inland Revenue Department may conduct a field or desk audit. During an audit, the Department will examine supporting records and may challenge the allocation of income or expenses. Ensure your records are complete and accurate to withstand scrutiny.

Penalties for Incorrect Filing

Submitting an incorrect Form BIRS14 may result in penalties under the Inland Revenue Ordinance. If the company overstates eligible income or understates non-eligible income, the Department may impose additional tax equal to the difference between the concessionary and standard rates, plus a penalty of up to three times the additional tax. Engage a tax adviser to review the form before filing if there is any uncertainty about the eligibility of particular income items.