Rental Reimbursements (RR) provide HR and employees with a tax-efficient means of remuneration. RR is where the employer reimburses the rent paid by an employee on their place of residence. Employers are able to leverage RR to help them provide market-competitive remuneration to attract, retain and incentivise staff.
By allocating part of an employee’s remuneration to rental reimbursement, rather than base salary, employees working in Hong Kong are able to reduce their tax burden, as the base salary amount is lowered as such payment is afforded preferential tax treatment in Hong Kong.
The Hong Kong Inland Revenue Department also requires and expects the employer to operate a system of control, so employers need to be mindful when establishing an RR policy. Important considerations for HR in this regard include market practice, employee experience, exception handling, acceptance proof, stamping requirements, process design.
KPMG People Services, who provide a full range of RR solutions shared some simple tips for HR to look out for when introducing a RR scheme:
- Policy & scheme compliance: HR should strike a balance between HR policy, administrative process and employee experience.
- Market and industry insights: HR should research to ensure they stay abreast of RR knowledge, latest trends and best market practice.
- Employee entitlement to Rental Reimbursement: it is the employer that exercises control and is responsible for the verification and the retention of relevant documentation.
Paul Arkwright
Publisher
