Q:
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What is the meaning of fringe benefits?
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A:
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There is no explicit definition of fringe benefits in the Hong Kong Inland Revenue Ordinance. But in layman’s terms, fringe benefit pertains to extra compensation that companies give to their employees for their service, in addition to their wage/salary. The Hong Kong Inland Revenue Department (“IRD”) issued the Departmental Interpretation and Practice Notes No.16 (Revised) which provide details on how IRD views the taxation of various common fringe benefits derived by employees or office holders.
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Q:
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If an employee borrows money from an employer at a rate less than the market interest rate, will this be a chargeable benefit?
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A:
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IRD accepts that interest-free and low interest loans provided by employers to employees are not chargeable benefits where the cost involved in providing the benefit is the sole liability of the employer and the benefit received by the employee is not convertible into money.
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Q:
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A car was made available by an employer for the private use of an employee. Is this a chargeable benefit?
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A:
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If the benefit is not convertible into money, then the benefit will not be chargeable to Hong Kong Salaries Tax. However, if the ownership of the car is transferred to the employee, the benefit will be chargeable to Hong Kong Salaries Tax at its convertible value at the time of receipt.
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Q:
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If an employer pays the cost of utilities provided to an employee’s residence, will this be a chargeable benefit?
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A:
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When the employer is the only party liable to pay the cost of utilities provided to an employee’s residence (i.e. the account rendered by the utility company is in the name of the employer) and such utilities provided cannot be converted by the employee into money, then IRD will accept that no chargeable benefits arises.
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Q:
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If a credit card is provided by an employer to an employee and expenses using the card are billed to and paid by the employer, will this be a chargeable benefit?
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A:
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With the employee as the card holder, where such card is used for private purposes by the employee and expenses were billed to and paid by the employer, IRD considers that the benefit obtained is chargeable to Hong Kong Salaries Tax.
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