Hong Kong Government Losing Out Over Property Tax Loophole

by Mary Swire, Tax-News.com, Hong Kong

15 April 2004

The Hong Kong authorities are losing billions of dollars each year as a result of a tax loophole used by companies when providing housing for employees, it has emerged.

Tax experts have pointed out that Section 9 of the Inland Revenue ordinance stipulates that any housing paid for by an employer is deemed to be worth 10% of the employee’s other cash remuneration, regardless of the value of the property.

According to reports in the regional media, this has led to a discriminatory tax structure, whereby those who are provided accommodation by their employer pay far less in taxation than those who are compensated with the equivalent amount of cash.

It has also been noted by observers that the HK$27.5 billion taken last year by the government in salaries tax would have been significantly increased if the loophole was closed.

In addition, the loophole has been blamed for keeping rent levels artificially high in certain parts of the territory, and criticised for being used by many firms as a lure to foreign executives to take up posts within the city.

Recommended