Hong Kong prepares for digital tax reporting using Inline XBRL
The Hong Kong Inland Revenue Department (IRD) looks set to launch Inline XBRL-based digital tax reporting for business within the next 18 months. It recently published a consultation paper detailing progress so far on its ‘e-Filing Project’ on electronic filing of ‘profits tax returns’ – those used for business rather than individual or property taxes – and setting out its proposals for moving forward.
The project has developed and consulted on an IRD Taxonomy Package to enable digital tagging of the financial statements and tax computations that support profits tax returns. It includes a Full Hong Kong Financial Reporting Standards (HKFRS) Taxonomy; an HKFRS version for private entities and SMEs; and a Tax Computational Taxonomy.
To facilitate a transition that IRD recognises “may drastically change the way taxpayers file their returns,” it also plans to provide two free conversion tools to help filers get their data into Inline XBRL format. The ‘Specified iXBRL Templates Input Tool’ is designed for small businesses, enabling input using pre-defined templates matched with default tags, while the ‘iXBRL Comprehensive Tagging Tool’ is intended for more complex tagging, and upon import will provide users with recommended tags for confirmation. At the same time, the IRD encourages companies and vendors to work towards developing and upgrading their own software programs, and will release a preliminary edition of the IRD Taxonomy Package in early 2022.
Implementation is planned in two phases. First, the existing eTax Portal will be enhanced to enable more businesses to voluntarily file their profits tax returns electronically from April 2023. The second phase aims to introduce mandatory digital filings through a newly developed Business Tax Portal for multi-national corporations in 2025, and ultimately achieve full-scale mandatory electronic filing by 2030. Comments on the proposals are sought by 31 January 2022.