Rental deduction and tax

[MovingIn07]

I can see the benefits of a housing allowance if rent is greater than 10% of a persons salary. Question: is there a LOSS if someone claims a housing allowance but their rent is actually less than 10% of their salary? Or does the IRD make the calculation and just ignore it?

[PDLM]

Generally IRD gives you the better deal if there are two possible ways of calculating tax. However, I've never actually heard of a situation such as you describe. But if both the employer and the employee simply declare all their income as income and none as "residence provided" then that would clearly avoid any potential issue. I don't think you MUST declare something as housing allowance just because it's written in your contract that way.

[MovingIn07]

The question was asked in order to provide the answer to what should be declared on the form (I'm filling in the employee IR56B's right now and it's an actual issue!). I think going through some previous threads where you had put the calculation down, it's possible an employee would be worse off if they declared a sub-10% housing so, as you note, the right thing to do is not declare it. (The employee in question has never looked at the tax rules and had no idea how they worked, they just "assumed" a housing allowance was a good thing.......)

[lingc]

Can you actually claim your rent on your income tax? Haven't been here long enough to actually file a return.

[PDLM]

Only in certain circumstances, and only if your employer handles the paperwork in the correct way. See here: http://www.ird.gov.hk/eng/pdf/pam44e.pdf

[lingc]

Thanks!!