Hong Kong Tax Planning Guide for High-Income Earners - How “Reimbursement with Proper Control” Can Legally Reduce Your Salary Tax

Vivien Chung
Nov 24
3 min read

How “Reimbursement with Proper Control” Can Legally Reduce Your Salary Tax

For high-income professionals in Hong Kong facing the top 17% salaries tax rate, finding legal and compliant ways to reduce tax is a perfectly reasonable priority. But many people still confuse tax avoidance (合法節稅) with tax evasion (違法逃稅) — and the line can be dangerously thin if you don’t follow the rules.

One of the most misunderstood yet powerful tax-efficient arrangements available to employees is the Reimbursement with Proper Control (受監管的租金報銷).It’s fully legal when structured correctly and can significantly reduce your assessable income — without changing your take-home pay.

In this guide, we break down how it works and how much tax high-income earners can save.

Myth #1: “Employees can only rely on basic allowances to reduce tax.”

Not true.

Besides personal allowances, dependent parent allowances, and charitable donations, one of the most effective tax-saving strategies for employees is the Reimbursement with Proper Control, also known as the regulated rental reimbursement arrangement.

This method allows you to restructure how your salary is composed — turning part of your monthly cash salary into a housing benefit, which is taxed differently and usually more favourably.

What Exactly Is “Reimbursement with Proper Control”?

It’s an arrangement where:

You pay rent as usual
Your employer verifies your lease & receipts
Your employer reimburses the rental amount under a regulated policy
The IRD treats this as housing benefit rather than salary

This matters because housing benefits are assessed using Rental Value (RV) — generally about 10% of net income for residential units — instead of taxing the entire rental amount as cash income.

Example: How High-Income Earners Can Cut Tax Significantly

Current monthly take-home: HK$50,000Monthly rent: HK$30,000

After restructuring your salary:

HK$20,000 → Taxable salary
HK$30,000 → Rental reimbursement (受監管報銷)

Why this reduces tax:

Rental reimbursement is not taxed as salary income.Instead, IRD adds only the rental value (RV) — approx. 10% of salary.

Using a simplified illustration:

Monthly salary: HK$20,000
RV (approx. 10%): HK$2,000
Taxable amount per month: HK$22,000 (instead of HK$50,000)

Annual Tax Comparison

Before rental reimbursement

Annual salary: HK$600,000
Less basic allowance: HK$132,000
Net chargeable income: HK$468,000
Estimated tax: HK$50,000+

After rental reimbursement

(20,000 salary + rental reimbursement structure)

Annual assessable income: HK$264,000
Less basic allowance: HK$132,000
Net chargeable income: HK$132,000
Estimated tax: HK$13,480

Tax saved each year: ~HK$36,000 or more

(All figures are simplified for illustration.)

Important Compliance Requirements

To qualify as properly controlled, the employer must:

Have clear written policies on who is eligible
Set reimbursement limits
Verify leases and rental receipts regularly
Maintain a structured approval and audit process

Without these controls, IRD may treat the arrangement as cash salary, eliminating all tax benefits.

Additionally:

You cannot claim personal rental deduction on the same lease if you are already receiving rental reimbursement.
You must ensure the structure is implemented through a legitimate employer policy, not a personal arrangement.

Should You Use This Tax Strategy?

If you are:

A high-income employee
Paying moderate to high rent
Working for a company willing to structure benefits properly

…then Reimbursement with Proper Control can offer substantial legal tax savings.

But every case is different, and incorrect structuring can cause serious tax risks for both employees and employers.

Need a Safe, Legal, and Fully Compliant Setup?

At IMSG, we help high-income individuals and employers:

Assess eligibility for rental reimbursement
Structure salary packages in a compliant way
Draft internal policy frameworks
Prepare proper documentation for IRD
Ensure tax efficiency without crossing legal boundaries

If you're considering using this arrangement or want to review your existing salary structure, our team can walk you through the options safely and professionally.

📩 Book a consultation with IMSG to review your salary package and explore legal tax-efficient strategies.