director income

Housing benefits arising from employment are part of the employee’s income. A salaried director is in fact an employee of a company. If the employee is provided with a place of residence by the employer or an associated corporation of the employer, the “Rental Value” (RV) of that place of residence should be included in his/her Assessable Income. The RV is calculated at 4%, 8% or 10% of his/her total net income after deducting outgoings and expenses (except expenses of self-education), depending on the type of accommodation provided.

A residential unit / service apartment - 10%
2 rooms in a hotel, hostel or boarding house - 8%
1 room in a hotel, hostel or boarding house - 4%
Since the property involved is a house, therefore, the RV is calculated at 10% of the director's net income after deducting outgoings and expenses.
If the director elects personal assessment, his total income will comprise:

total net income after deducting outgoings and expenses
10% of his/her total net income after deducting outgoings and expenses (except expenses of self-education)
rental income received from the company (less 20% for Statutory allowance for repairs and outgoings plus any rates paid by the owner)
However, the Assessor of IRD (Inland Revenue Department) will examine the cases critically before accepting/rejecting the arrangement as a place of residence provided by the employer –


the employee lets his own property to himself or rents the property from some connected persons (such as spouse) and then claims rental reimbursements from his employer; or
the employee lets his own property or connected person’s property to his employer and the employer provides that property to him for use as his place of residence.
The Assessor may treat the rental as an artificial arrangement to evade tax.
Following is the information about the calculation of RV:
http://www.ird.gov.hk/eng/pdf/pam44e.pdf

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