[MovingIn07]

I'm newly arrived with a quite large "housing allowance" - however I have purchased a junk and so am not actually renting. So, if I do nothing, then the housing allowing is just income and taxed, right? Question: Can I "rent to myself" (do it properly, obviously and stamped etc) and get the benefit or do they just look through that? I did read the Government pamflet on it and it seemed that you MIGHT be able to do it but it was not certain .. any views?

[JBO]

Hi

I have heard so many things about tax in HK but still don't understand what would I will have to pay exactly this year ??? 1 or 2 years ???

To summurize my situation, I started work in HK in May last year (2007) and have 32,500 of salary and 21,000 of housing allowance.

So what will be the sum I wld have to pay for my tax and when ???

Wld really appreciate your help

Brgds

[PDLM]

Er, last year was 2006. So when did you arrive? May 2006 or May 2007?

[JBO]

I did arrive in May 2007

Many thnks in advance

Brgds

JB

[PDLM]

If you haven't already been sent a tax return to complete, then you will most likely not receive one until April/May 2008. You will need to return this tax return within a few weeks, and then some time later you will be sent a tax assessment. This tax assessment will cover the tax that you will have to pay retrospectively for the tax year April 2007 - March 2008, and provisional tax for the tax year April 2008 - March 2009. You will be required to pay 75% of this tax bill in January 2009 and the remaining 25% in April 2009. (At which point you will have been here for two years and paid two years tax.)

The amount you will have to pay depends on how you employer handles the "housing allowance". Do they:
a) provide accommodation leased in the company's name with a rental of HK$21K, or
b) just give you HK$21K per month and not care what you do with it, or
c) give you $21K, you take a lease of $21K, they keep a copy of the lease and all your rental receipts, or
d) give you $21K, you take a lease of some other amount (higher or lower), they keep a copy of the lease and all the rental receipts.

The tax bill will be different in each of these cases.

[MovingIn07]

I'm still keen to find out if my self-renting junk idea makes any sense....!

[Crocodile]

Originally Posted by MovingIn07

I'm still keen to find out if my self-renting junk idea makes any sense....!

I am not up with HK Tax Law, but there is a difference between "tax minimisation" and "tax avoidance". Tax avoidance is illegal - they will penalise and fine you. If you are renting to yourself you are avoiding tax - entering into a scheme where the only benefit is for reducing your tax.

The way around this, is to have your parents (or someone not living on the junk) own the junk and rent it off them. You will have to pay them each month to show they are your landlords, but it wouldn't stop them putting the money aside and gifting the money back to you at a later date (but not the next month!).

[JBO]

Many thanks PDLM,

My company give 21,000 as a house allowance and my rent is 32.500.... The contract of my flat is under my company name ....

Does it make a big dif if the contract is under my company name ??

Does it make a big dif if I pay more for my flat ???

Many thnks in advance for your help

JB

[PDLM]

Sorry - just to be clear...

The company pays you 32500+21000 = 53500 each month. You then pay 32500 for the rent directly to the landlord?

Or does it work some other way?

(In any case I have to say that spending 60% of your gross income on rent seems a bit onerous to me!)

[JBO]

The company pays me 53.500 per month which they take off 32.500 for my rent .... as an allowance ...

I don t pay anything to the landlord, it is my company that take care of that ...

Hope that it answer to your question

Awaiting yours

Brgds

JB