III. Property Tax
Under section 5(1) of the Inland Revenue Ordinance, Property Tax is charged on the owners of land and/or buildings in Hong Kong who let out their properties in return for rental income and/or other charges. This tax is payable by the owner(s) at the standard rate (15% for the year of assessment 2008/09 onwards) for the relevant year of assessment on the net assessable value of the relevant property.
The net assessable value is the assessable value (after deduction of rates paid by the owner, if applicable), and then less an allowance of 20% of that assessable value for repairs and outgoings.
The assessable value is computed by reference to the rent and other charges payable to the owner in respect of the right of use of the property. Such items include:
- rent, including rent received or receivable (due but not yet received);
- payment for the right of use of premises under licence (i.e. licence fee);
- a lump sum premium;
- service charges and management fees paid to the owner;
- owner's expenditure (e.g. repairs) borne by the tenant; and
- sums previously deducted as irrecoverable rent but now recovered.
The above calculation is generally described as follow:
| (a) | Rental Income | |
| (b) | Less: | Irrecoverable Rent |
| (c) | Assessable Value (a - b) | |
| (d) | Less: | Rates paid by owner(s) |
| (e) | (c - d) | |
| (f) | Statutory standard allowance for repairs and outgoings (e x 20%) | |
| Net Assessable Value (e – f) | ||
| (g) | Property Tax: Net Assessable Value x 15% | |
A year of assessment runs from 1 April to 31 March of the following year.
Similar to the situations in Salaries Tax and Profits Tax, provisional property tax would be raised during the course of the year as the rental income for any particular year cannot be confirmed until after the year end.
Properties for Owner's Business Use
If the income from property chargeable to Property Tax is included in the taxpayer's assessable profits for Profits Tax purposes (e.g. the rental income is received from a trade/business), or if you occupy the property you own for business purposes, the amount of Property Tax paid may be deducted from the amount of Profits Tax assessed. Corporations carrying on a trade, profession or business in Hong Kong, on application made in writing to the Commissioner of Inland Revenue, may be exempted from paying the Property Tax which would otherwise be set off against their Profits Tax.
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