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2022 Tax Reduction for Domestic Rent

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  1. #1

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    2022 Tax Reduction for Domestic Rent

    From the press release:


    Eligible taxpayers can provide information about their expected domestic rent paid in relation to YA 2022/23 in the tax returns for YA 2021/22 to be issued this June. Upon passage of the Bill, the Inland Revenue Department will take into account the deduction when assessing the provisional salaries tax for YA 2022/23.

    To ensure that it is a targeted measure that supports taxpayers who are most in need, forestall abuse, and prevent potential double tax benefit or tax avoidance, the Bill proposes to provide for certain circumstances in which the deduction is not allowed, including:


    • the taxpayer or his/her spouse (who is not living apart from the taxpayer) is a legal and beneficial owner of any domestic premises in Hong Kong;
    • the landlord or principal tenant of the rented domestic premises is an associate of the taxpayer or his/her spouse (e.g. the landlord is the taxpayer's spouse, or a parent, child, sibling or partner of the taxpayer or his/her spouse);
    • the taxpayer or his/her spouse (who is not living apart from the taxpayer) is provided with a place of residence by his/her employer;
    • the taxpayer or his/her spouse (who is not living apart from the taxpayer) is a tenant or authorised occupant(s) of a public rental housing flat;
    • the rented premises are not allowed for residential use or the tenancy is prohibited under any law or a government lease;
    • the taxpayer or his/her spouse has entered into a lease purchase agreement in respect of the premises concerned with the landlord;
    • the sum representing the domestic rent is allowable as a deduction under any other provision of the Inland Revenue Ordinance; or
    • the taxpayer or his/her spouse (who is not living apart from the taxpayer) has been allowed deduction for any other domestic rent paid in respect of any other domestic premises for the same period.

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    https://www.info.gov.hk/gia/general/...2050400329.htm

    and

    https://www.ird.gov.hk/eng/tax/drd.htm
    Maybejames likes this.

  2. #2

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    FAQs here:

    Q: Who is eligible to claim deduction for domestic rent?

    A: A taxpayer chargeable to salaries tax or tax charged under personal assessment is eligible to claim deduction of the rent paid by him / her as a tenant under a qualifying tenancy of domestic premises.

    A taxpayer may be allowed deduction of rent paid by his / her spouse (who is not living apart from the taxpayer) as a tenant under a qualifying tenancy of domestic premises.

    Q: What types of properties qualify for the deduction of domestic rent?

    A: To qualify for the deduction, the domestic premises must be a building or any part of such a building that is not prohibited by or pursuant to any law or any specified instrument from being used for residential purposes. The premises must also be used by the taxpayer as his / her principal place of residence.

    If the qualifying tenancy is procured in respect of any domestic premises and a car parking space, and the car parking space is not sublet, the car parking space will be taken to be part and parcel of the domestic premises for the purposes of the deduction.

    Q: What is a qualifying tenancy?

    A: A qualifying tenancy of domestic premises is a tenancy (or sub-tenancy) in writing in respect of the right to the exclusive use of the premises that is stamped within the meaning of the Stamp Duty Ordinance (Cap. 117), or under which the right is given by the Government (or the Financial Secretary Incorporated as an agent of the Government) at a rent of a fair market value.

    Q: How will the amount of deduction for domestic rent allowable to a taxpayer be determined?

    A: In general, the amount of deduction allowable to a taxpayer for a year of assessment will be the amount of rent paid under a qualifying tenancy for the year of assessment, or the deduction ceiling for the tenancy for the year of assessment, whichever is less.

    If the taxpayer is married and not living apart from his / her spouse, the total amount of deduction allowable to the taxpayer or the taxpayer’s spouse (or both of them) will be the amount of rent paid under the tenancy for the year of assessment, or the deduction ceiling for the tenancy for the year of assessment, whichever is less.

    The deduction ceiling for each year of assessment is $100,000.

    Q: If a taxpayer is married during part of a year of assessment, how will the total amount of deduction allowable to the taxpayer or the taxpayer’s spouse (or both of them) be determined for the year of assessment?

    A: The principle set out in the answer in Item 13 above for determining the total amount of deduction allowable to the taxpayer or the taxpayer’s spouse (or both of them) will apply to that part of the year of assessment when the taxpayer is married.

    Q: If there is more than one tenant under a qualifying tenancy, how will the amount of rent paid by each tenant and the deduction ceiling for the tenancy be determined?

    A: The rent paid under the tenancy will be taken to have been paid by the co-tenants in equal shares, whilst the deduction ceiling will be reduced in proportion to the number of co-tenants.

    Q: If the contractual period of a qualifying tenancy only covers part of a year of assessment, how will the deduction ceiling for the tenancy for the year of assessment be determined?

    A: The deduction ceiling will be reduced in proportion to the contractual period that falls within the year of assessment.


    Q: If there is more than one qualifying tenancy in relation to a year of assessment, how will the amount of deduction for domestic rent allowable to a taxpayer be determined?

    A: The amount of deduction allowable to the taxpayer for the year of assessment will be the aggregate of the amount determined in accordance with the principle set out in the answer in Item 13 above for each of the tenancies.

    Q: Is there a maximum number of years of assessment for which a taxpayer can be entitled to deduction for domestic rent?


    A: No, there is no limit for the years of entitlement.

    Q: Under what circumstances a deduction for domestic rent is not allowable?

    A: In the following circumstances, a deduction for domestic rent is not allowable:

    (a) the taxpayer or the taxpayer’s spouse (who is not living apart from the taxpayer) is a legal and beneficial owner of any domestic premises in Hong Kong;

    (b) the landlord of the tenancy concerned (or the principal tenant in the case of sub-tenancy) is an associate of the taxpayer or the taxpayer’s spouse (e.g. the landlord is the taxpayer’s spouse, or a parent, child, sibling or partner of the taxpayer or the taxpayer’s spouse, or a corporation controlled by the taxpayer or the taxpayer’s spouse);

    (c) the taxpayer or the taxpayer’s spouse (who is not living apart from the taxpayer) is provided with a place of residence by his / her employer or an associated corporation of the employer, or the rent payable or paid by the taxpayer or the taxpayer’s spouse in respect of a place of residence is wholly or partly paid or refunded by the employer or the associated corporation;

    (d) the taxpayer or the taxpayer’s spouse (who is not living apart from the taxpayer) is a tenant or an authorised occupant of a public rental housing flat of the Hong Kong Housing Authority or the Hong Kong Housing Society;

    (e) the tenancy concerned is prohibited under any law or a Government lease;

    (f) the taxpayer or the taxpayer’s spouse has entered into a lease purchase agreement in respect of the premises concerned with the landlord;

    (g) the rent is allowable as a deduction under any other provision of the Inland Revenue Ordinance (Cap. 112); or

    (h) any rent paid in respect of any other domestic premises has been allowed to the taxpayer or the taxpayer’s spouse (who is not living apart from the taxpayer) as a deduction for the same period for which the rent is paid.
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    Q: If a taxpayer claims deduction in respect of a domestic premises, how should he / she prove the premises as his / her place of residence in Hong Kong?


    A: The taxpayer should retain documentary evidence showing that the premises was used as his / her place of residence such as utility bills (including water, electricity and gas bills) and resident card. The taxpayer is not required to provide the above documents when filing his / her tax return. However, he / she should retain the documents for verification by the Inland Revenue Department.

    Q: If a taxpayer has more than one place of residence in Hong Kong, how will his / her principal place of residence be determined?

    A: A taxpayer’s principal place of residence has to be decided on the facts of each case, including the periods and pattern that the taxpayer and his / her family members have resided in all places of residence. Generally, the place of residence in which the taxpayer and his / her family have spent the majority of their time is taken as their principal place of residence.


    Q: What is the expected effective date of the proposed tax deduction for domestic rent?

    A: The bill on tax deductions for domestic rent will be introduced into the Legislative Council in the second quarter of 2022, with the aim of securing its passage within the current legislative session. The legislation is intended to apply to the year of assessment commencing on 1 April 2022 and to all subsequent years of assessment.

    Q: How can a taxpayer claim deduction for domestic rents for the provisional year 2022/23?


    A: A taxpayer can provide the estimated amount of domestic rent to be paid in relation to the year of assessment 2022/23 in his / her Tax Return – Individuals for the year of assessment 2021/22 to be issued in June 2022. Upon the passage of the relevant amendment bill by the Legislative Council, the Inland Revenue Department will take into account the deduction in assessing the provisional salaries tax for the year of assessment 2022/23.

    If a taxpayer does not provide the above information in his / her Tax Return – Individuals for the year of assessment 2021/22, he / she can still, after receipt of the salaries tax demand note, apply for the holding over of payment of the provisional salaries tax for the year of assessment 2022/23 in respect of the deduction. The tax limit for the application is 28 days before the due date for payment of the provisional tax, or 14 days after the date of the notice for payment of the provisional tax, whichever is later.
    https://www.ird.gov.hk/eng/faq/budget2022_23.htm#drd
    Cheeky Kiwi and qhank like this.

  3. #3

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    isnt this part going to confuse the hell out of everyone ? >>
    "the taxpayer or his/her spouse (who is not living apart from the taxpayer) is provided with a place of residence by his/her employer"

    IIRC when we put into the income tax forms, the part where rental reimbursement deduction is allowed is arranged where the employer technically 'pays' for the rental amount the employee is due.. so how to segregate these two and make it optimal ?


  4. #4

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    - yes, it has me confused too. Lets see what additional clarifications come out on this in a few days.


  5. #5

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    Thought the exact same thing freeier. I mean if we can only claim one of the two, this is a big nothing hamburger.

    Since the max deduction as I take it under this is 100k*15%=15 000 HKD lower tax. Whereas as an example someone paying like 50k per month in rent and has a 1.5m HKD income then gets a reduction of 600k-1.5m*0.1=450K which you do not need to pay 15% tax on.

    So if thats the case one can calculate a limit of when one is preferable over the other? And that limit becomes so low that this would not be relevant for most expats that has a company that tax wise 'pays' for the rental amount.

    If its double deduction its obviously happy days, it means instant 15k extra in pocket.


  6. #6

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    If we can only pick one, then its a bigger problem because all employers are currently wired to the old scheme in splitting your rental reimbursement.. the IR8B will determine how that rental will be classified... won't have enough time for them to change it to suit each different case.


  7. #7

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    Confusing as fuck.

    No surprise there.


  8. #8
    Quote Originally Posted by RobRoy:
    Since the max deduction as I take it under this is 100k*15%=15 000 HKD lower tax. Whereas as an example someone paying like 50k per month in rent and has a 1.5m HKD income then gets a reduction of 600k-(1.5m-600K)*0.1=510K which you do not need to pay 15% tax on.
    The extra 10% is on income after rent amount !

  9. #9

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    Quote Originally Posted by vyral_143:
    The extra 10% is on income after rent amount !
    Ahh ok I remembered the formula wrong, thanks!

  10. #10

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    Also 15% all over the place should be 17% considering most people would fall in that group after deduction/allowances!!


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