How to file Form BIRS15 for eligible carried interest in Hong Kong

Form BIRS15 Eligible Carried Interest Hong Kong

Form BIRS15 is the statutory form for individuals to apply for the profits tax concession on eligible carried interest in Hong Kong. It is submitted to the Inland Revenue Department (IRD) to claim the reduced tax rate on income from qualifying carried interest arrangements.

What Is Eligible Carried Interest for Tax Purposes

Eligible carried interest is the share of profits an investment manager or key individual receives from a qualifying fund, provided the fund meets the conditions in the Inland Revenue Ordinance (Cap. 112). The carried interest must arise from a fund certified as a qualifying fund under the tax concession framework. The IRD defines it as the portion of the fund's returns attributable to the individual's role in managing the fund's investments, not a return on their own capital contribution.

To qualify, the fund must be a private fund investing in assets like equities or bonds. The carried interest must derive from the fund's investment activities. The individual must be a natural person providing investment management services to the fund, as an employee, director, or partner of the fund manager. The concession applies to carried interest accrued on or after 1 April 2021.

BIRS15 Form Guide

The IRD's BIRS15 form guide provides detailed instructions for completing the form. It explains the information required in each section, including taxpayer particulars, fund details, and the calculation of eligible carried interest. Supporting documents must accompany the form, such as a certified true copy of the fund's financial statements and a tax computation showing how the eligible income was derived.

The form must be submitted through the Business Tax Portal for electronic filing. Paper submissions are not accepted. The portal allows taxpayers to upload the form, attach supporting documents in iXBRL format, and submit the application electronically. Taxpayers must retain all original documents for audit purposes.

Carried Interest Tax Concession

The carried interest tax concession provides a reduced profits tax rate of 0% on eligible carried interest, effectively exempting this income from profits tax. This concession is designed to attract and retain investment management talent in Hong Kong by aligning its tax treatment with other financial hubs. It applies to carried interest derived from qualifying funds, provided the fund manager meets the conditions in the Inland Revenue Ordinance.

To benefit, the individual must file Form BIRS15 for each assessment year in which eligible carried interest is received. The form must be submitted within the time limit specified in the profits tax return for that year. The IRD will assess the application and issue a notice of assessment confirming the concession.

Hong Kong Carried Interest Form

Form BIRS15 is the specific Hong Kong carried interest form used to claim the tax concession. It is distinct from other IRD forms such as BIR51 (profits tax return for corporations) or BIR60 (individual tax return). The form is for individuals only; corporations or partnerships receiving carried interest must use other forms, such as BIRS1 for the two-tiered profits tax regime.

The form requires the taxpayer's Hong Kong identity card number or business registration number, the fund's name and registration details, and a breakdown of the carried interest received. The taxpayer must also declare that the carried interest is eligible under the concession and that the fund meets the qualifying conditions.

Form BIRS15 Instructions

Instructions for Form BIRS15 are on the IRD's website and are updated periodically. They cover these key steps:

1. Gather supporting documents: Obtain a certified true copy of the fund's financial statements, a tax computation showing the eligible carried interest, and any other documents required by the IRD.

2. Complete the form: Fill in taxpayer particulars, fund details, and the calculation of eligible carried interest. Ensure all figures are in Hong Kong dollars.

3. Submit through the Business Tax Portal: Log in to the portal, upload the completed form and supporting documents in iXBRL format, and submit the application.

4. Retain records: Keep all original documents for at least seven years after the assessment year.

The IRD may request additional information or documents to verify the application. Respond promptly to avoid processing delays.

Assessment Year and Filing Deadline

File Form BIRS15 for each assessment year in which eligible carried interest is received. The assessment year runs from 1 April to 31 March. The filing deadline is the same as for the profits tax return for that year, generally one month after the return's issue date. Apply for an extension through the Business Tax Portal if more time is needed.

The IRD will process the application and issue a notice of assessment confirming the concession. If the application is rejected, the taxpayer will be notified in writing and may appeal the decision.

Supporting Documents Required

The following supporting documents must accompany Form BIRS15:

• A certified true copy of the fund's financial statements for the relevant assessment year.
• A tax computation showing the calculation of eligible carried interest.
• A copy of the fund's certification as a qualifying fund under the tax concession framework.
• Any other documents specified in the IRD's instructions.

Submit the documents in iXBRL format through the Business Tax Portal. The IRD may also request original documents for verification.

Common Mistakes to Avoid

Avoid these common mistakes when filing Form BIRS15:

• Submitting the form for a fund that does not meet the qualifying conditions.
• Failing to include all supporting documents.
• Using incorrect figures or calculations for the eligible carried interest.
• Submitting the form after the deadline without an extension.
• Filing the form in paper format instead of through the Business Tax Portal.

The IRD may reject incomplete or incorrect applications, requiring the taxpayer to resubmit.

Contacting the Inland Revenue Department

For questions about Form BIRS15 or the carried interest tax concession, contact the IRD through the Business Tax Portal or by calling the IRD's enquiry hotline. The IRD's website also provides a list of frequently asked questions and guidance notes.

The official form and instructions are on the IRD's forms index at https://www.ird.gov.hk/eng/paf/bus.htm. Always download the latest version from the IRD's website to ensure compliance with current requirements.