9. How is the benefit of the provision of a place of residence assessed with respect to an employee's Salaries Tax?
If the Assessor accepts that what the employer provides to the employee is a place of residence, only the “Rental Value” (“RV”) will be computed and charged to tax. If not so acceptable, the benefit provided by the employer must be assessed as a “perquisite” at its cash value (which is fully chargeable to tax under section 9(1)(a) of the Inland Revenue Ordinance).
Examples of "perquisites" (employee is not provided with a place of residence) are:
- rent allowance,
- refunds of mortgage payments, and
- subsidies on mortgage interest payments.
Employee is provided with a place of residence
Housing benefits arising from employment are part of the employee's income. If the employee is provided with a place of residence by the employer or by a corporation associated with the employer, the RV of that place of residence must be included in the employee's Assessable Income. The RV is calculated at either 4%, 8% or 10% of the total net income after deducting outgoings and expenses, depending on the type of accommodation provided:
RV = 4% , 8% or 10% x (Income from employer – outgoings and expenses and depreciation allowance)
| Type of Accommodation | Percentage |
| A residential unit | 10% |
| 2 rooms in a hotel, hostel or boarding house | 8% |
| 1 room in a hotel, hostel or boarding house | 4% |
Serviced apartments, which are typically fully furnished units or apartments with domestic facilities, such as cooking and laundry available, and which typically require a minimum period of stay, will generally attract the rate of 10% in computing the RV, subject to examination in detail on a case-by-case basis by the Inland Revenue Department.
To compute the RV, the following adjustments may apply depending on the scenarios:
| Scenario | Adjustment |
| No rent paid by the employee | No adjustment |
| Rent paid by the employee | Deduct net rent paid from RV |
| If the place of residence is a residential property | The employee may elect to include the Rateable Value of the residential unit instead of RV, if that can reduce the amount of tax to be paid |
Example 1
Mr. C earned $600,000 in a year and was provided by his employer with a flat as his place of residence. He claimed deductions for his annual subscription to the Institute of Engineers $2,000 (i.e. outgoing & expenses), contributions to MPF $18,000 and expenses of $27,500 for self-education in that year. Mr. C's Assessable Income would be computed as follows:
| $ | |
| Income | 600,000 |
| RV $(600,000 – 2,000) x 10% | 59,800 |
| Total income: | 659,800 |
| Less: Outgoings and expenses | (2,000) |
| MPF contributions | (18,000) |
| Expenses of self-education | (27,500) |
| Assessable Income | 612,300 |
Example 2
Mr. L came to work in Hong Kong on 1 April 2022. He was remunerated at salaries of $50,000 per month, plus a place of residence. During his first month in Hong Kong, he occupied one room in a hotel. The monthly rental was $8,000. On 1 May 2022, his wife and children arrived, and the family moved into a 2-bedroom suite in the hotel. The rent was $16,000 per month. On 1 July 2022, he and his family moved into a flat provided by the employer.
The RV should be computed as follows:
| $ | |
| 1/4/2022-30/4/2022 ($50,000 x 1 x 4%) | 2,000 |
| 1/5/2022-30/6/2022 ($50,000 x 2 x 8%) | 8,000 |
| 1/7/2022-31/3/2023 ($50,000 x 9 x 10%) | 45,000 |
| RV | 55,000 |
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