Rental Reinbursement for HK Taxes

Hi,


Not sure if I am posting this to the right section. Anyway, I have a question related to my filing for rental reimbursement. My company gave me a deadline to submit my rental receipts for reimbursement so that I do file for taxes under Section 4.2 of the tax return.


I missed the deadline and I admit it was my absent-mindedness. I talked to the Inland Revenue Dept (IRD) and the officer told me that I could ask my company to provide a supplement letter explaining the place provided, amount I paid to landlord and amount company reimbursed. However my company had refused to do that saying that I missed the deadline and I am not entitled to that benefit. Also, I was told that doing that may cause the IRD to suspect my company's "control" policy. I didn't understand what the "control" policy meant but HR explained that it shows the IRD how inefficient my company is handling tax filling deadlines.


As a result, I am left with a huge tax bill.. Any advice here?

Thanks!

It probably means that others in the company are submitting large claims for the reimbursement and your company doesn't want closer scrutiny.


When you are assessed and the demand notice comes, file an IR831 here


http://www.ird.gov.hk/eng/paf/for.htm#st


And attach your receipts at this point directly to the IRD asking to lower the assessment.


Forget the company, they don't want the red flag for it.

In answer to your question about "control" policy.


Any company that runs a rent reimbursement scheme is required by IRD to exercise "proper controls" over the policy and those receiving the benefits. This includes, amongst other things, having a written policy outlining which employees may be eligible, keeping a copy of your lease and requiring you to provide copies of your rent receipts. Only with those receipts can the company then correctly fill in the IR56 which has to be submitted to IRD within one month of the end of the year (ie by end May). If you failed to provide receipts they have no "proof" that you paid rent and therefore cannot put it on the IR56.

If the company fails to exercise proper controls, in the sole discretion of the IRD, then the Rent Reimbursement scheme can be invalidated for ALL employees of the company.

This is why they won't rewrite the IR56, because to do so will (in their eyes) show the IRD that they are not exercising proper controls. To be frank, if they were, then you would be providing rent receipts each month, not at the end of the year.

I have recently heard of all employees in a company losing their rent reimbursement benefit as a result of IRD declaring the company did not exercise proper controls, so it does happen.

Consider carefully if you want to follow Studio1's advice because the very first thing IRD will do is to write to your company and ask if you were granted this benefit by the company. I am assuming they will say "No". Therefore you won't get it. What you might then do is queer the pitch for other employees, if IRD wants to find out why you think you did whilst the company says no.


It might sound harsh but Rent Reimbursement benefit is a perk that is at a company's discretion (subject to the written policy that they have in place) to give, not a legal right for you.


Advice: ensure you get your rent receipts in on time next year.

[UPDATE] Please note that fee quotes stated in historic postings may be out-of-date.


Please note that the IRD’s criteria for an eligible tax deduction of your rental reimbursement is whether your employer has a “proper control” over the rental reimbursement programme, i.e. your employer has established clear guideline to control and has exercised proper supervision over the reimbursements.


What you have been told now is that if your employer provides a supplement letter, the IRD will regard the supplement letter as a factor to show that your employer does not have a proper control over the rental reimbursement and then the IRD will regard the reimbursement as cash allowance and then include the full amount as your income in the assessable income.


However, please note that the provision of supplement letter is only one of the factors for the IRD’s determination, the other more significant factors are: a clearly defined system in place by your employer; mode and limitation of the rental reimbursement; provision of tenancy agreement and rental receipt; verification of the actual payment; etc.


Your best position is to seek immediate professional advice on the exact documents.


Weir & Associates

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