Form IR6177 notification of accrued carried interest

Purpose of the Form IR6177 Notification of Accrued Carried Interest

Form IR6177 is the prescribed method for an individual to notify the Commissioner of an accrual of eligible carried interest. It is the only way to claim the salaries tax concession for carried interest, a formal declaration required under the framework introduced by the Inland Revenue (Amendment) (Tax Concessions for Carried Interest) Ordinance 2021.

The concession reduces the assessable value of eligible carried interest received by qualifying employees of private equity and venture capital funds. Without this filing, the taxpayer cannot access the concession. The full amount of carried interest remains chargeable to salaries tax at standard marginal rates.

Who Must File Form IR6177

Any individual deriving carried interest from an investment fund and intending to claim the salaries tax concession must submit Form IR6177. This applies to both employees and former employees of fund management entities who receive carried interest meeting the legislative definition of eligible carried interest.

The taxpayer, not the employer, must complete and submit the form. Employers must provide the particulars necessary for accurate completion, including details of the fund structure, the accrual event, and the calculation of the accrued carried interest.

Carried Interest Salaries Tax Concession Hong Kong

This concession strengthens Hong Kong's competitiveness as an international asset management hub. Under the concession, 0% of eligible carried interest is subject to salaries tax, a full exemption, provided certain conditions are met. It applies to carried interest received by employees of qualifying fund management entities that manage private equity or venture capital funds.

To qualify, the carried interest must arise from an investment fund satisfying the definition of a qualifying fund under the Inland Revenue Ordinance (Cap. 112). The fund must be certified by the Hong Kong Monetary Authority or the Securities and Futures Commission. The carried interest must be derived from the fund's investment returns.

The Inland Revenue Department publishes guidance on the required conditions. These include a requirement for the fund manager to hold a valid licence or registration and for the fund to meet a minimum asset threshold.

Notification of Accrued Carried Interest

This notification is how the Inland Revenue Department learns of the taxpayer's entitlement to the concession. The taxpayer must declare the amount of carried interest accrued during the relevant period, the date of accrual, and the source fund.

The department uses the information on Form IR6177 to verify eligibility. An incomplete or inaccurate declaration may result in rejection. The full salaries tax treatment will then apply to the carried interest received.

The form requires a detailed breakdown of the carried interest calculation, including any adjustments or deductions. Retain supporting documentation, such as fund certificates and fund manager statements. Produce them if the Inland Revenue Department requests them.

IR6177 Filing Deadline

The IR6177 filing deadline is tied to the taxpayer's individual tax return, not a fixed date. The form must be submitted within one month after the end of the year of assessment in which the carried interest accrual occurs. For most individuals, the year of assessment ends on 31 March. The notification is therefore due by 30 April of the following year.

Failure to file by the deadline means the department may assess the carried interest without the concession. Late submissions are not accepted unless the taxpayer demonstrates reasonable cause for the delay.

Submit the form in paper format. There is no electronic filing facility for Form IR6177, though the department has stated an intention to extend electronic submission options.

Information Required on the Form

Form IR6177 requests the following particulars:

• Full name and Hong Kong Identity Card number
• Tax file number (if different from the identity card number)
• Employer details, including the name and business registration number of the fund management entity
• Description of the carried interest scheme, including the name of the fund and the fund manager
• Date of accrual of the carried interest
• Amount of carried interest accrued, stated in Hong Kong dollars
• Calculation method used to determine the accrued amount
• Declaration that the carried interest is eligible for the concession
• Signature and date

The taxpayer must certify the information is true, correct, and complete. Knowingly making a false declaration may result in penalties under the Inland Revenue Ordinance (Cap. 112).

Submission to the Inland Revenue Department

Submit the completed Form IR6177 to this address:

Inland Revenue Department
Inland Revenue Centre
5 Concorde Road
Kai Tak, Kowloon
Hong Kong

Retain a copy of the submitted form and all supporting documents for at least seven years. The Inland Revenue Department may request these documents during a tax audit or investigation.

Connection to the Tax Return

Filing Form IR6177 is a separate obligation from filing the annual salaries tax return (BIR60). The information on the form, however, directly affects the BIR60 tax computation. When completing the salaries tax return, report the carried interest as assessable income and claim the concession by referencing the amount declared on Form IR6177.

If Form IR6177 is not filed, the Inland Revenue Department will not allow the concession on the carried interest reported in the BIR60. The department treats the form as a pre-condition to the concession, not a supplementary record.

Eligible Carried Interest and Fund Conditions

Eligible carried interest is defined by the Inland Revenue Ordinance (Cap. 112) as carried interest paid by a qualifying fund to an employee of a qualifying fund management entity. The fund must satisfy these conditions:

• The fund is certified by the Hong Kong Monetary Authority or the Securities and Futures Commission as a qualifying fund
• The fund has minimum assets under management of HK$300 million, or such other amount as prescribed
• The fund is not a public fund or a listed fund
• The fund's investment strategy focuses on private equity or venture capital investments

The fund management entity must hold a valid licence under the Securities and Futures Ordinance (Cap. 571) or be registered with the Hong Kong Monetary Authority. The entity must also have at least 60% of its employees based in Hong Kong, or such other percentage as prescribed.