The following are some frequently asked questions that we often encounter:
Do you happen to have any information on how any of your Hong Kong clients are processing the rental reimbursement subsidies via Talenox i.e. is it monthly or annually?
I want to ask if Talenox has a function/option for a “Rental reimbursement scheme” in Hong Kong?
We have employees that have housing or rental allowance. We see that Talenox has defaulted the setting, and it falls directly under IR56B Form 11(k). When should it be reflected in Section 12?
What are Housing/Rental Allowances?
Usually, if there is the provision of a place of residence or housing benefits to an employee, these amounts will be classified as housing/rental allowances and assessed to salaries tax.
The taxable value of housing rental allowances is generally calculated based on:
The actual rent paid by the employer
The rental value of the accommodation
If the housing is owned by the employer, the IRD provides guidelines for determining the fair market rental value.
Housing benefits derived from your employment are part of your income.
How are Housing Benefits Submitted for Tax Assessment?
Employers are required to complete the IR56B form annually, providing details about the housing benefits extended to each employee.
This form is part of the comprehensive reporting system aimed at ensuring transparency in income tax assessments.
Tax Treatment and Employee Obligations
The value of housing rental allowances is considered part of the employee's total income to calculate salary tax. Both employers and employees must accurately report this information to the IRD.
Refer to IRD’s website for more information on housing benefit tax: https://www.gov.hk/en/residents/taxes/salaries/salariestax/chargeable/residence.htm
Process Housing/Rental Allowance in Payroll
Here are the steps you’ll need to include housing/rental allowance paid to your employees each month in payroll:
1) Include the ”Housing/ Rental Allowance” pay item under the Monthly Payments/Deductions tab when processing payroll.
2) When IR56B is generated, the”Any other Rewards, Allowances or Perquisites” field under Section 11 (Particulars of income accruing for the year from 1 April 2022 to 31 March 2023) in the IR56B form will be populated with the amounts keyed into payroll for the entire financial year.
NOTE: Currently, if you have processed this amount in payroll using the "Housing/Rental Allowance" pay item, we don't pull the housing allowance into IR56B's section 12 because we are populating the values under Section 11(k) Any other Rewards, Allowances or Perquisites instead.
What if I want to input Housing Benefit Amounts into Section 12 (Particulars of Place of Residence provided) of Form IR56B instead?
As instructed by IRD on the guideline, if the housing allowance is reported under Section 11 in IR56B form, there is no need to input into Section 12 (Particulars of Place of Residence provided): https://www.ird.gov.hk/eng/pdf/ir56b_completion_e.pdf
However, if you want to report it under Section 12 instead, you will have to do it manually. 😄
And you can also refer to the example provided by IRD here: https://www.ird.gov.hk/chi/tax/ere_house.htm
How to Edit the Tax Form?
To manually input the fields in Section 12 for reporting Place of Residence particulars, you can “Edit” the form directly for the employee (under Payroll > IR56B > View/Edit > Edit):
If you need further help on how to edit Tax forms, you can follow this guide: https://help.talenox.com/en/articles/7192960-how-to-view-edit-any-tax-form-in-talenox
We also allow you to mass update tax forms through the steps in these guides here: https://help.talenox.com/en/articles/5967491-mass-editing-tax-forms-ir56b-ir56e-ir56f
Happy tax season! 😎