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Calculating Rental value for rental reimbursement program

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  1. #1

    Join Date
    Apr 2021
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    3

    Calculating Rental value for rental reimbursement program

    Hi my company rewarded me a rental reimbursement program effective January this year.
    I got two salary, one salary received monthly e.g. + one annual bonus received this Jan.

    So to calculate rental value, how much should I calculate? using yearly income or just proportionated income for the three months Jan to Mar 2021? I was thinking 4 different possible ways
    1) (annual income - 3months rental reimbursement)*10%.
    2) (monthly salary-rent)*3*10%
    3) ((monthly salary-rent)*3+bonus)*10%
    4) (monthly proportioned bonus+monthly salary-rent)*3*10%

    Thanks so much for your help if you can provide any answer! It has really confused me a lot.


  2. #2

    Join Date
    May 2009
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    1,293

    For 3 months it is most likely not in your favour to claim rental reimbursement. Unless +\- 15% of your 3 months rent is bigger than 10% of your total annual income -/- the 3 months rent.


  3. #3

    Join Date
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    Doesnt your company calculate this and give you the form IR56F that has everything on it? Then you just need to copy/paste these numbers from the IR56F onto your tax return?


  4. #4

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    Apr 2021
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    Thanks for reply, actually I thought whole year for calculating rental value may not apply to me since the program didn't start last year... I got friends replied with similar situation they have monthly salary for calculating monthly income except for a bonus


  5. #5

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    May 2009
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    Quote Originally Posted by wgzeyes:
    Thanks for reply, actually I thought whole year for calculating rental value may not apply to me since the program didn't start last year... I got friends replied with similar situation they have monthly salary for calculating monthly income except for a bonus
    As far as I know you always have to take a full year income, no matter how many months you use the reimbursement programme. The only way to use a few months income is if you didn’t work before or just arrived in HK (which then it’s still your total salary in a fiscal year)
    But maybe you can double check this on the IRD website. They have some examples there but not sure if this example is also covered.
    shri likes this.

  6. #6

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    May 2009
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    Quote Originally Posted by bdw:
    Doesnt your company calculate this and give you the form IR56F that has everything on it? Then you just need to copy/paste these numbers from the IR56F onto your tax return?
    On the IR56 form usually they don’t provide the 10% you have to add. Just the split between salary/bonus and rental. At least I have never seen that.

  7. #7

    Join Date
    Apr 2021
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    Quote Originally Posted by Sith:
    As far as I know you always have to take a full year income, no matter how many months you use the reimbursement programme. The only way to use a few months income is if you didn’t work before or just arrived in HK (which then it’s still your total salary in a fiscal year)
    But maybe you can double check this on the IRD website. They have some examples there but not sure if this example is also covered.
    Yes they didn't cover my case, but my friend's case is that he changed a new job, and after two months get into a rental reimbursement program and his rental value got calculated since the program started. As Company side would provide the program info, that will be a basis for calculation.

  8. #8

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    May 2009
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    Quote Originally Posted by wgzeyes:
    Yes they didn't cover my case, but my friend's case is that he changed a new job, and after two months get into a rental reimbursement program and his rental value got calculated since the program started. As Company side would provide the program info, that will be a basis for calculation.
    You might be on to something here (I didn’t know) as I see in example 5 something closest to your case (even though it’s different but they do calculate just a portion of the income)
    The problem is that you yourself have to calculate the rental value, IRD will just check it if it’s correct, so indeed you should find out for certain. I recommend to give them a call as what I understood from others is that they are very helpful. They have a number there for info.

    Example 5

    Ms L was employed by a foreign company, S Ltd. During the year of assessment 2019/20, her annual income was $600,000 and she stayed in Hong Kong for 250 days. While in Hong Kong she lived in a flat provided by her employer and a rent of $1,000 per month was deducted from her salary.If the Assessor accepted Ms L’s claim and assessed her income on a day-in-day-out basis, Ms L’s assessable income would be computed as follows.
    $
    Income computed for the 250 days $(600,000 x 250/366)
    409,836
    RV $(409,836 x 10% - 1,000 x 12)
    28,983
    Assessable Income
    438,819