How to file Form BIRSP1 for two-tiered profits tax in Hong Kong

Form BIRSP1 Two-Tiered Profits Tax Hong Kong

Form BIRSP1 is the prescribed election form for a corporation opting into the two-tiered profits tax regime under the Inland Revenue Ordinance (Cap. 112). This regime reduces the tax burden on the first HK$2 million of assessable profits for eligible entities. The sections below cover eligibility, the election process, and the correct completion and filing of Form BIRSP1.

BIRSP1 Form Guide

The Inland Revenue Department (IRD) issues Form BIRSP1 as a supplementary form to accompany a corporation's Profits Tax Return (BIR51). It is used to elect the two-tiered profits tax rate for a specific year of assessment. The election is not automatic. A corporation must actively file the form to benefit from the reduced rate.

The two-tiered profits tax regime applies a lower rate of 8.25% on the first HK$2 million of assessable profits, with the standard rate of 16.5% on any excess. Unincorporated businesses are taxed at 7.5% on the first HK$2 million and 15% on the remainder. Form BIRSP1 is exclusively for corporations; unincorporated businesses must use Form BIRS1.

Two-Tiered Profits Tax Election

A corporation must make the two-tiered profits tax election in writing to the IRD using the prescribed form, Form BIRSP1. The election is specific to each year of assessment and must be submitted with the profits tax return and all supporting documents, including the tax computation and financial statements.

Eligibility hinges on having no associated entity carrying on business in Hong Kong. The IRD defines an associated entity as another corporation or partnership under common control or ownership. If a group of companies has multiple entities, only one may elect for the two-tiered rate. This election is therefore most advantageous for standalone businesses or groups where only one entity is active.

Hong Kong Form BIRSP1

Form BIRSP1 is available for download from the IRD website. It requires the taxpayer to provide basic particulars: the business registration number, the year of assessment, and a declaration confirming the entity meets the eligibility conditions. An authorised representative, such as a director or company secretary, must sign the form.

The IRD accepts Form BIRSP1 in paper format or through electronic filing via the Business Tax Portal. Electronic filing requires the form to be submitted in iXBRL format, the standard for tagging financial statements and tax computations. The IRD intends to achieve full electronic filing by 2030. Mandatory electronic filing began on 1 April 2026 for relevant entities of in-scope multinational enterprise groups from the year of assessment 2025-26.

Two-Tiered Tax Rate Election

The election process is straightforward but demands careful attention to eligibility. A corporation electing for the two-tiered rate must confirm it is not part of a group where another entity has already made the same election. If the IRD discovers multiple associated entities have elected, it may disallow the election and apply the standard rate to all profits.

Form BIRSP1, a supplementary form to the Profits Tax Return (BIR51), must be filed by the same deadline as the profits tax return. This deadline is generally one month from the date of issue, unless an extension has been granted. Late filing may result in penalties.

Eligibility for the Two-Tiered Profits Tax Regime

To be eligible, a corporation must be chargeable to profits tax under Cap. 112 and must not have any associated entity also carrying on business in Hong Kong. The IRD defines an associated entity as:

• A corporation that controls the taxpayer, is controlled by the taxpayer, or is under common control with the taxpayer.
• A partnership in which the taxpayer or an associated corporation is a partner.

The election is available for each year of assessment separately. A corporation that elected in a previous year must file a new Form BIRSP1 for the current year to continue benefiting from the lower rate. There is no automatic renewal.

Completing Form BIRSP1

Form BIRSP1 requires the following information:

• The corporation's name and business registration number.
• The year of assessment for the election.
• A declaration that the corporation is eligible and has no associated entity that has elected for the two-tiered rate.
• The signature of an authorised person, such as a director or company secretary.

A certified true copy of the tax computation and the financial statements for the relevant year must accompany the form. The tax computation must show the calculation of assessable profits and the application of the two-tiered rate.

Filing Form BIRSP1

File Form BIRSP1 in paper format by post or in person at the IRD office. Alternatively, file electronically through the Business Tax Portal. Electronic filing requires the form to be in iXBRL format, the standard for tagging financial statements and tax computations.

The IRD recommends electronic filing for faster processing and to reduce errors. The Business Tax Portal allows the taxpayer to upload the form, the tax computation, and the financial statements in a single submission and provides a confirmation of receipt.

Consequences of Incorrect Election

If a corporation elects for the two-tiered rate but is later found to have an associated entity that has also elected, the IRD may disallow the election. The corporation will then be assessed at the standard rate of 16.5% on all profits. The IRD may also impose penalties for incorrect returns.

A corporation should review its group structure before filing Form BIRSP1 to avoid this outcome. If multiple entities are under common control, only one should elect for the two-tiered rate. The others must file their profits tax returns at the standard rate.

Record Keeping

A corporation that files Form BIRSP1 must retain a copy of the form, the tax computation, and the financial statements for at least seven years after the end of the year of assessment. The IRD may request these documents during a tax audit or investigation.

The form is a prescribed form under Cap. 112, and the IRD may require the taxpayer to produce it on demand. Failure to maintain proper records may result in penalties.