Hong Kong Package

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  1. #1

    Join Date
    Dec 2008
    Posts
    13

    Hong Kong Package

    Hi all,

    I have been offered a relocation to Hong Kong by my current employer, an investment bank (I currently work in the UK). I wanted to get an idea of whether this sounds like a good offer.

    They have offered me a 'local' HKD package.

    They have taken my original UK salary, converted it to HKD and adjusted it downwards to offset the difference in tax rate.

    On top they have added a monthly housing allowance of HKD 40,000.

    a) Is it typical to offset the difference in tax in this way? I was hoping to benefit from the tax regime...

    b) Does HKD 40,000 seem like a good housing allowance for a 2-bedroom flat in Midlevels for me and my girlfriend?

    c) Will I have to pay 15% tax on my housing allowance (bearing in mind it will be paid as part of my salary)? Therefore is my effective housing allowance actually HKD 34,000?

    d) Given current world economic events, does anyone have any advice about clauses or guarantees within the contract? Specifically, I'm worried about the scenario where I get made redundant after say 6 months, forcing me to return to the UK. In a scenario like this, I would end up having to pay full UK tax on my earnings, plus personally covering the cost of a year's worth of Hong Kong rental (I hear rental agreements are usually 12-month). Has anyone considered this when looking at a relocation package?


    Thanks!


  2. #2

    Join Date
    Aug 2008
    Location
    Fei Ngo Shan
    Posts
    120

    hi

    Hi,
    We were in a similar position just 3 mths back when my husband was offered a move to HK.

    He was offered a offshore contract, but paid in HKD.
    They also took his original UK salary (b4 tax) and said they will do the COLA & tax adjustment, but in the end, he ended up having a slight salary increase even after taking account of after tax? and we are not complaining.

    For the housing allowance, yes you are taxable on it, but I don't think it is on the whole amount. I'm not too sure about that as they have assigned him a tax specialist to help with the first year tax.

    With the 2 of you, I think 40k housing allowance is feasible in midlevels. Have a look at squarefoot website where you can find rentals and see if you are happy with the type of place you can get for 40k.


    Quote Originally Posted by cjsceats
    Hi all,

    I have been offered a relocation to Hong Kong by my current employer, an investment bank (I currently work in the UK). I wanted to get an idea of whether this sounds like a good offer.

    They have offered me a 'local' HKD package.

    They have taken my original UK salary, converted it to HKD and adjusted it downwards to offset the difference in tax rate.

    On top they have added a monthly housing allowance of HKD 40,000.

    a) Is it typical to offset the difference in tax in this way? I was hoping to benefit from the tax regime...

    b) Does HKD 40,000 seem like a good housing allowance for a 2-bedroom flat in Midlevels for me and my girlfriend?

    c) Will I have to pay 15% tax on my housing allowance (bearing in mind it will be paid as part of my salary)? Therefore is my effective housing allowance actually HKD 34,000?

    d) Given current world economic events, does anyone have any advice about clauses or guarantees within the contract? Specifically, I'm worried about the scenario where I get made redundant after say 6 months, forcing me to return to the UK. In a scenario like this, I would end up having to pay full UK tax on my earnings, plus personally covering the cost of a year's worth of Hong Kong rental (I hear rental agreements are usually 12-month). Has anyone considered this when looking at a relocation package?


    Thanks!

  3. #3

    Join Date
    Oct 2006
    Location
    Hong Kong
    Posts
    13,907

    if its HK$40k a month, then you will have NO problems finding a very comfortable flat in midlevels, esp as rentals are coming down.


  4. #4

    Join Date
    Oct 2006
    Location
    Sarcasm - because beating the crap out of people is illegal
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    14,644

    I believe it's 10% of annual rental up to a maximum of 40% of your salary.

    BTW, does you girlfriend have a job? Or is she a Hong Kong resident?


  5. #5

    Join Date
    Oct 2005
    Posts
    14,254
    Quote Originally Posted by Claire ex-ax
    BTW, does you girlfriend have a job? Or is she a Hong Kong resident?
    Yup as she won't be able to work without a visa sponsorship otherwise.

    And also consider other places apart from Mid Levels to live as its a bit of a cliche.

  6. #6

    Join Date
    Aug 2006
    Location
    soon to be Hong Kong
    Posts
    372

    " They have taken my original UK salary, converted it to HKD and adjusted it downwards to offset the difference in tax rate"

    hmm ... i would advise caution on this ..

    point 1. what exchange rate was used?.. the pounds has recently devalued over 30% in the last year from 16HKD = 1 to about 11.5 HKD = 1 ....

    you might find things quite expensive here in HK now in comparison .. like a 4 slices of bread for 20 dollars (thats nealy 2 pounds)

    point 2. adjusting for lower taxation seems very harsh .. so the company are making the savings and you are not getting any benefit .. in reality they are paying you less as they don't pay your tax ...

    point 3. what is your contract situation and how long have you worked for the bank? if you are put on a local contract I belive it it is very easy to dismiss you here without redundnacy ... whereas in the uk if you worked 5 years you would expected 5 months redunancy payments .. as you know markets are very vulnerable now and job preservation is probably the key thing for you to take into account

    point 4 .. 40k housing allowance is very reasonable ... you will be able to find a more than suitable place

    so all in I would advise you to renogiate .. particualry the tax issue and exchange rate used to convert (if in fact it is low) ... ask them to use a 2 year or one year average rather than the spot exchange of 11.5 ...


  7. #7

    Join Date
    Jun 2005
    Location
    Hong Kong
    Posts
    23,221

    The tax on your housing allowance is, strangely, independent of how big it is. Assuming your employer defines it in your contract as housing allowance and ensures that you do spend it all on housing (by keeping copies of the lease and receipts) then the taxable value of the allowance is 10% of the rest of your salary.

    So if, for example, you get paid $60,000 per month plus housing allowance of any amount which is actually spent on housing, then you will be taxed as if you earned $66,000 per month.

    Details here: http://www.ird.gov.hk/eng/pdf/pam44e.pdf

    Also read the guide for taxpayers moving to HK: http://www.ird.gov.hk/eng/pdf/pam42e.pdf


  8. #8

    Join Date
    Dec 2008
    Posts
    13

    Hong Kong Package

    Thanks for your replies folks!

    - I was under the impression that (unfortunately) it was pretty standard to adjust your salary to offset the benefits of the tax regime. Can anyone else comment on this, so I can get a feel for how common it is?

    - Claire ex-ax, jimbo, my girlfriend is not a Hong Kong resident - am I right in thinking she'll have no right to work from my visa unless we are married?


    Thanks,
    Chris


  9. #9

    Join Date
    May 2006
    Location
    Pampanga, Philippines
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    21,623
    Quote Originally Posted by cjsceats
    Thanks for your replies folks!

    - I was under the impression that (unfortunately) it was pretty standard to adjust your salary to offset the benefits of the tax regime. Can anyone else comment on this, so I can get a feel for how common it is?

    - Claire ex-ax, jimbo, my girlfriend is not a Hong Kong resident - am I right in thinking she'll have no right to work from my visa unless we are married?


    Thanks,
    Chris

    Not only will she have no right to work on a tourist visa, her stay is officially limited to 6 months (though you can get round this temporarily but going in and out of the country). I am assuming she has a UK passport as well.

    My company did not offset the tax.

  10. #10

    Join Date
    Jan 2008
    Posts
    862
    Quote Originally Posted by cjsceats
    Thanks for your replies folks!

    - I was under the impression that (unfortunately) it was pretty standard to adjust your salary to offset the benefits of the tax regime. Can anyone else comment on this, so I can get a feel for how common it is?

    - Claire ex-ax, jimbo, my girlfriend is not a Hong Kong resident - am I right in thinking she'll have no right to work from my visa unless we are married?


    Thanks,
    Chris
    The company should be compensating you for relocating so it's absurd to think you should take a pay cut to offset the tax benefits.

    Marriage? I doubt that but are you sure your girlfriend didn't just make that one up?

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