[Meerkat]

Hello all,

First post so don't flame me if I have missed something...

I am relocating to Hong Kong with my company from the UK and am trying to understand what are the most important parts of a moving package and which bits are nice to have. I have done some searching on this and don't seem to be able to pick up the best threads. Respond here or point me in the right direction...

Also on the question of getting rent support off the my company: are there any Tax or other benefits to having a rent allowance rather than just a larger salary?

Appeciate your time
Meerkat

[PDLM]

Welcome Meerkat,

I think I recognise you from another board, but I must admit I thought you had been here for a while, what with your CX status and all...

Anyway, the key question is are you coming here on an "expat" package (i.e. still employed by the UK company) or on a "local" package (employed by a HK company).

And are you coming alone or with family? Having family adds a lot to cost, both in accommodation and education. If single then basically it's all money - the more the merrier. Try to avoid "tax equalisation" which would result in about double the deductions being made from your salary.

You should get an amount equivalent to at least what you expect to pay as rent defined as housing allowance in your contract, and then you will get some tax benefit if (but only if) your employer has "effective controls" (Inland Revenue's words) to ensure that you do spend it on rent.

[Meerkat]

Thanks PDLM,

You mean there is someone like me around here already??? Oh no!

I am being moved by my american company, so I think that makes it an expat package, and I will be allowing my lovely wife to come with me no kids at the moment.

I own a place in the UK and would probably want to sell it and move my belongings (post car boot sale) to HK.

Looking at the Tax efficieny of an effectively controlled house allowance: am I right in saying that the current rate for a rented apartment is 10% and the current salary tax is 16%? Hence a saving of 6%.

What is the incentive for my company to Tax equalise? How common is this? Are they taking the benefit of the lower taxation in HK?

Cheers
Meerkat

[andy8002001]

That is what I have heard too - can someone else please confirm that here ?

Your rental allowance is taxed at 10%, but the salary component is taxed at 16% ?

May I also ask - what happens if you spend above your housing allowance? E.g, you pay $25K for rent, when you have a $20K housing allowance. I'm assuming only the $20K would be taxed at 10%, and the extra $5K would have to come out of your ordinary salary which is taxed at 16% ? ?

Thanks in advance

[PDLM]

No - if your company provides you with an apartment then the "value" of that apartment for tax purposes is 10% of the rest of your income, regardless of how much the company actually pays for it.

Similarly if they give you a housing allowance and "effectively control" that you spend all of it on housing then the tax is calculated in the same way.

So if you have a salary of 300K per year plus a company-provided apartment then you will pay tax on the 300K as normal PLUS you will pay tax on 10% of 300K (i.e. tax on 30K - about 5K of tax) for the property.

If instead you have a housing allowance (of any amount) and you do spend exactly the same amount on housing (and your compnay has "effective controls" in place which the IRD is happy with) then you will be taxed as above, regardless of how much the housing allowance is.

If you spend more than the housing allowance on rent then the extra just comes from your normal taxable salary.

If you have a housing allowance of, say, 25K/month but only spend 20K on rent then the extra 5K will be taxed as income.

If you are moving from the UK to HK then yes the company would take a benefit on tax equalisation. The idea is that it gives you the certainty of knowing what your deductions will be. Of course, with a simple tax regime like HK this isn't really a benefit, so there is no point in tax equalisation from the UK unless as a result you get a load more allowances bundled in which more than offset the extra "tax" that you would have to pay.

PS Meerkat - there's someone with your alias, based in HK, who posts on some frequent flier websites I go to.

[andy8002001]

thanks for explaining.

the HK tax system seems great..........it seems effectively you're getting rental allowance tax free (because tax on 10% of my ex-rent base salary is less than tax on the full housing allowance)