An employee can opt to provide its employees with housing benefits. For tax purposes, this benefit is assessible for Salaries Tax.

### Provision of Place of Residence

If the employer provides the employee with a place of residence, the employee must include the rental value (RV) of that place of residence in it's tax return.

The Rental Value is calculated as a percentage of total net income after deducting certain outgoings and expenses (excluding expenses of self-education).

| Type of Accommodation                        | Percentage |
|----------------------------------------------|------------|
| Residential unit/serviced apartment          | 10%        |
| 2 rooms in a hotel, hostel or boarding house | 8%         |
| 1 room in a hotel, hostel or boarding house  | 4%         |


So if your employee provides you with an apartment and you earn HK$400,000 per annum, an RV of 400000 × 10% = HK$40000 is assessible for Salaries Tax.

##### Using Rateable Value

For employees with relatively high salaries, the RV can be quite substantial. If the rateable value, which is the estimated annual rental value of a property at a designated valuation reference date, is lower than the RV, then the rateable value can be used in calculations instead.

For example, an employee earns HK$1,200,000 per annum, but he lives in an apartment which costs HK$7200 a month. Thus, the RV will be HK$120,000, whereas the rateable value would be 7200 × 12 = HK$86400, so the employee may choose to use the rateable value instead of the RV when assessing taxes.

### Allowances

Instead of providing the place of residence themselves, the employer may, instead, issue housing allowances or refunds on rent for the employee to find residence themselves. This allowance or refunds may be the full amount or only a partial amount.

In such cases, if the employer sets out clear guidelines in the employment contract regarding:

• Which employees are entitled to housing benefits
• Limits to their entitlements
• The mode of residence allowed
• The limit of rental reimbursement

And the employer examines the tenacy agreement and keep records of the rent receipts, then the employer is said to have proper control. This means that the allowances or reimbursements will be regarded in the same manner as if the employer provided the residence itself.

If the employer does not eastablish proper control, then the allowance or refund is regarded as income and all of it would be assessible for Salaries Tax.

If the allowances exceeds the rent paid for the residence, the remainder will be considered as a cash allowance and that part would be assessible for Salaries tax.

### Employee Contribution

If however, if the employee must contribute partly to the rent, or the allowance or reimbursement is only partial, the amount paid by the employee deducted from the RV.

For example, an employee earning HK$600,000 per annum and being provided an apartment but must contribute HK$3000 each month for the rent, the RV would then be (600000 × 10%) - (3000 × 12) = 60000 - 36000 = HK$24000 In another example, an employee earning HK$300,000 per annum and given HK$5000 housing allowance but is paying HK$6000 a month in rent would need to contribute (300000 × 10%) - (1000 × 12) = 30000 - 12000 = HK\$18000