Tax + Housing Allowance

[hello098]

Hi,

Sorry if this has been asked/discussed before, but I could not find an answer after 30 mins of searching.

- My employer agreed to to a housing allowance of 8K HKD per month.
- They do not require my housing agreement or rent receipts every month.
- I finally rented an unfurnished flat for 6K HKD.
- In the Tax Return that my employer filed, they have put: "Rent paid to Landlord by Employee: 8000 HKD | Rent refunded to Employee to Employer: 8000 HKD"

Is this an issue I need to bring up with my employer right now?

Since in the tax return that I will file, there will be a discrepancy of 2000 HKD in Rent paid to landlord.

Or, will this discrepancy mean that the leftover 2000 HKD will be treated as cash allowance since my employer does not 'exercise proper control' over the housing allowance?

Thanks!

[HK_Katherine]

I think because they did not exercise proper control, the whole amount of 8k will be treated as cash. They are basically not adhering to the rules that allow it to be treated concessionally. I would be careful if I were you.

[Claire ex-ax]

- They do not require my housing agreement or rent receipts every month.

This seems odd, unless the IRD have changed the rules.

[HK_Katherine]

This seems odd, unless the IRD have changed the rules.

It sounded more to me like his company was not bothering to comply with the rules. After all, it doesn't really affect them, it affects the OP!

[Claire ex-ax]

It sounded more to me like his company was not bothering to comply with the rules. After all, it doesn't really affect them, it affects the OP!

But the company still needs the 'paper trail' in case of IRD auditing, or summat like that...?

[hello098]

I think because they did not exercise proper control, the whole amount of 8k will be treated as cash. They are basically not adhering to the rules that allow it to be treated concessionally. I would be careful if I were you.

That's fine for me for it to be treated as cash allowance. I'm more worried that there will be a difference on the tax returns between the company's and mine.

[Fiona in HKG]

But the company still needs the 'paper trail' in case of IRD auditing, or summat like that...?

Yes, the tax concession on housing is given under certain conditions, one of which being that the Company can prove payment has been used for accommodation held in the individual's name. I have had a few of these audits and it is important for the company to have that paperwork. We are sticklers for this and won't allow an accommodation declaration on tax returns without the tenancy agreement and proper receipts. No paperwork and we declare it all as salary.

What could happen, OP, is if IRD choose to question your employer on how they exercise this declaration of pay elements and if they are found to be giving the allowance without the proper controls, you could end up being re-assessed at some point. There are probably penalties for a company failing to have proper controls in place.

[hello098]

Thanks for the info - Any advice on the best course of action right now?

Should I be adding the total housing allowance to my salary and declaring that as the total income? But again there would be a discrepancy.

[Fiona in HKG]

Thanks for the info - Any advice on the best course of action right now?

Should I be adding the total housing allowance to my salary and declaring that as the total income? But again there would be a discrepancy.

I recommend that you raise it with your employer. Their Employer's Return of Remuneration and Pensions should match with what you report. If it doesn't, it's pretty certain IRD will pick this up and look into it. At the same time you should not be falsely declaring on your submission so really, you should sort out the 'match' with the company so both parties are declaring the same information and that it is truthful, even if they haven't collected your tenancy agreement and receipts as proof of spending.