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Rental reimbursement scheme

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  1. #1

    Join Date
    Oct 2012
    Posts
    4,770

    Rental reimbursement scheme

    Hi all - just want to confirm my understanding of how the rental reimbursement scheme works for tax purposes (and whether I should use it).

    My company (like many others) allows me elect to take part in their rental reimbursement scheme. Effectively, as I understand it, this means that the rent I pay is deducted from the total taxable income (it appears on the tax return as my employer paying it), and instead I take the remaining income (post deduction) and add on an extra 10%, i.e. the total taxable income becomes (AnnualIncome - AnnualRental) * 110%.

    On the other hand, if I don't elect to take part, then my total taxable income is simply AnnualIncome.

    So the break even point is (AnnualIncome - AnnualRental) * 110% = Annual Income

    And therefore (rearranging the above), I should only elect to use the rental reimbursement scheme if AnnualRental > 1/11 AnnualRental, i.e. my rent is over ~9% of my income.

    Is that right or am I missing something? I ask because I'm below the 9% threshold and don't want to end up losing out by opting out...

    Thanks!


  2. #2

    Join Date
    Oct 2010
    Posts
    20,119

    You are right.

    shri likes this.

  3. #3

    Join Date
    Dec 2009
    Location
    Hong Kong
    Posts
    1,435

    Correct, I would only participate if your rent is significantly more than 10% of your salary. Sometimes it can be a right pain to chase your landlord to give you rental receipts every month.......


  4. #4

    Join Date
    Mar 2007
    Posts
    270

    I see no downside apart from the hassle of getting the rental receipts (my landlord give me once every 3 months). Any cash received over and above the rent paid is taxable as cash income anyway. My company now allows us to adjust the rental reimbursement up to 50% of my monthly salary once every year, which is really just an admin process.

    SalseroHK likes this.

  5. #5

    Join Date
    Oct 2014
    Posts
    2,825

    You must have seriously cheap rent or an amazingly high income if your rent is less than 10% of your salary!


  6. #6

    Join Date
    Oct 2012
    Posts
    4,770
    Quote Originally Posted by merchantms:
    You must have seriously cheap rent or an amazingly high income if your rent is less than 10% of your salary!
    Sorry, was posted on behalf of someone. Not me personally.
    michaelxu likes this.

  7. #7

    Join Date
    Oct 2014
    Posts
    2,825
    Original Post Deleted
    This is exactly why some companies give this as a benefit - to avoid giving a real salary increase that the employee will expect upon return home (or on transfer to a place with a cheaper cost of living).

  8. #8

    Join Date
    Oct 2014
    Posts
    298
    Original Post Deleted
    Very true. But, in other hand, someone could do internal transfer from no home allowance country to Hong Kong, got the salary converted/adjusted to Hong Kong and then get home allowance on top of that. I am lucky to be in that category. You see, not every companies/employers are evil and not every employees are saint.

  9. #9

    Join Date
    Dec 2013
    Location
    Hong Kong
    Posts
    10,568
    Quote Originally Posted by muzzdang:
    I see no downside apart from the hassle of getting the rental receipts (my landlord give me once every 3 months). Any cash received over and above the rent paid is taxable as cash income anyway. My company now allows us to adjust the rental reimbursement up to 50% of my monthly salary once every year, which is really just an admin process.
    If her rent is less than 10percent of her income there is absolutely a downside. I had an employee in this position and had to advise then to not claim it. They were not aware.

  10. #10

    Join Date
    Jan 2016
    Posts
    1

    Hi all,


    Is there any limit for rental in terms of percentage of the income?


    I earn 50k per month and would like to rent a 34k per month apartment.


    Would it be possible to benefit from my company's rental reimbursement scheme with such a high percentage of my annual income going to the rental?


    Does it mean that my taxable income would be: (50,000 x 12 - 34,000 x 12) * 110% = HKD 290,400 instead of 600,000?


    Many thanks for your help.


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