From 2003/2004 onwards, holiday benefits granted by employers are assessable under Section 9(2A)(a) of Inland Revenue Ordinance.
The assessable amount is the actual cost incurred by the employer in providing the benefit to the employee and / or his family.
The law provides that the charge of tax is irrespective of the following factors: (a) Whether or not the benefit is convertible into cash, (b) Whether the employer of the employee has the primary liability to pay the benefit, (c) Whether or not the benefit will add additional cost to the employer, (d) Whether or not the benefit will cause opportunity cost to the employer (for example the lost revenue arising from the sale of discounted-price air tickets by air-liner employer to employee).
The payment for the relocation of an employee and his family to Hong Kong on commencement of employment or for the relocation of an employee out of Hong Kong is not taxable.
To put it simply, the amount taxable is the amount paid by the employer in connection with the benefit. This includes the cost of the air tickets, hotel accommodation, traveling, food, package-tour fee... etc.
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Remark: Only "holiday-journey" benefits are taxable. All expenses in connection of business journey are exempt. Business journey means the employee¡¦s traveling is required by his employer to perform his duties. If a trip is substantially for business purpose, even though part of the trip is for non-business purpose, the whole journey will be exempt. However, if the non-business portion is significant and can be clearly identified, the expenses attributable to the non-business portion will be ascertained and taxable.
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The Revenue has published Departmental Interpretation and Practice Note No. 41 on the topic. If you want to read it, please click here > English > Publications > Departmental interpretation and Practice Note.
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