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Tax Information : Property Tax - What you need to know as a Property Owner

Property Tax - What you need to know as a Property Owner
  What are my tax obligations as a property owner
  Which tax return is for reporting rental income and how to complete
  How Property Tax is computed
  What is rental income
  What deductions can I claim
  Can I pay less tax by electing Personal Assessment
  Is there any relief if the property is for owner's business use
  What should I do if I disagree with the tax assessment
 
  Pamphlets and related Public Forms

What are my tax obligations as a property owner


1.
If you have derived rental income from letting of properties situated in Hong Kong, you need to:

(a)
Keep sufficient records of rent received, such as lease agreements and duplicates of rent receipts, receipts for rates, correspondence relating to modification of lease terms and recovery of rent in arrears etc, for at least 7 years;
(b) Complete and submit a tax return for reporting rental income;
(c)
Notify liability to tax (see Notification of Chargeability for time limit and other details) unless you have already received the tax return from us, see Examples;
(d) Notify cessation of ownership within 1 month of such cessation; and
(e) Notify change of address within 1 month of change; and
(f) Pay the tax.

2.
If you receive a tax return from us, you must complete and submit it in time even if you do not have any income from property letting.

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Which tax return is for reporting rental income and how to complete


1.
Property Tax Return - Property Jointly Owned or Co-owned by Individuals (B.I.R. 57)

You should report the rental income from a property jointly owned or co-owned by you and other persons in B.I.R. 57. [How to complete -SEE : Completion and Filing of Property Tax Returns]


2. Property Tax Return - Corporations and Bodies of Persons (B.I.R. 58)

You should report the rental income from a property owned by a corporation or a body of persons in B.I.R. 58. [How to complete -SEE :Completion and Filing of Property Tax Returns ]


3. Tax Return - Individuals (B.I.R. 60)
  • You should report the rental income from all properties solely owned by you in Part 3 of B.I.R. 60. [How to complet - SEE : Completion and Filing of Tax Return - Individuals (B.I.R. 60)]


  • In case you are the executor of the estate of a deceased owner of a property, you should declare income from properties owned by the deceased in the return issued to you in the capacity of the executor of the estate of the deceased owner, not in your own return.
    [How to complete - Please CLICK HERE ]

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How Property Tax is computed
 

Property Tax is computed at the standard rate on the net assessable value for the relevant year of assessment (see below) of the property.

[A year of assessment runs from 1 April to 31 March of the following year.]


[A}

 

Rental Income
[B] Less: Irrecoverable Rent
[C]   (A - B)
[D] Less: Rates paid by owner(s)
[E]   (C - D)
[F]   Statutory allowance for repairs and outgoings (E x 20%)
    Net Assessable Value (E - F)


For further information, see

 

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What is rental income


Rental income includes:
  • Gross rent received or receivable;

  • Payment for the right of use of premises under licence;

  • Service charges or management fees paid to the owner;

  • Owner's expenditure borne by the tenant, e.g. repairs and Property Tax paid by the tenant;

  • Sums previously deducted as irrecoverable rent and now recovered; and

  • Lump sum premium.

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What deductions can I claim


1. You can claim the following items as deductions:

(a) Rates paid by owner(s)

Only rates agreed to be paid and paid by you is deductible.

Note:
Government rent charged with rates under the same quarterly "Demand for Rates and/or Government Rent" is not deductible for Property Tax purposes. Please make sure not to include the amount of government rent in the claim for deduction of rates so as to avoid an incorrect claim.

(b) Irrecoverable rent

Only the amount of rent confirmed to be irrecoverable during the year is deductible.
(Attention : You need to report the amount of rent recovered as rental income for the year of recovery in the relevant tax return for that year of assessment. )


2. Statutory Allowance for Repairs and Outgoings
     
 
Repairing costs on properties vary from one year to another. Little may be paid on new property units. Significant amounts may have to be borne/shared by owners of individual units, say when the exterior walls of a building have to undergo repairs.
   
 
To simplify the administration of tax assessments, a broad-brush deduction of 20% of the balance of the rental income after deducting the rates paid by the owner(s) and the irrecoverable rent will be automatically granted to you every year.
     
 
You do not have to tell the Assessor how much have been incurred on repairs and outgoings for any year. For the purpose of Property Tax assessments, the Assessor will not ask for evidence of the actual expenses incurred.
     
 
The 20% is an all-inclusive element ¡V so you cannot claim deductions separately for government rent, decoration fees, rent-collection fees, building management fees, insurance and mortgage interests.
   
   

(N.B. Mortgage interest can be claimed by those owners who are eligible (please click here ) to and have elected for Personal Assessment.)

[Please see Example]

   

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Can I pay less tax by electing Personal Assessment


See

  • Personal Assessment

    You can Click HERE for a brief guide to Personal Assessment, where you can find examples of how Personal Assessment may reduce your tax liabilities.

    You can also use our tax computation program to check whether it is to your advantage to elect Personal Assessment.

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Is there any relief if the property is for owner's business use


If the income from property chargeable to Property Tax is included in your profits for Profits Tax purposes, or if the property you owned is occupied by you 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 may make application in writing for exemption from paying the Property Tax, which would otherwise be set off against their Profits Tax.

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What should I do if I disagree with the tax assessment


See

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What is the tax implication on individual owners of a building if the common areas are let out


Normally, the common areas of a building such as side shop, carpark, external wall, roof top etc are collectively owned by the individual owners of the building. If any part of the common areas is let out, the rental income derived is chargeable to Property Tax. The owners are responsible for reporting the rental income and paying the tax. If the owners have not received a tax return relating to the common areas let, they are required to notify us in writing.

However, when an owners' corporation is formed, section 16 of the Building Management Ordinance provides that the rights and duties of the owners relating to the common parts of the building shall be exercised and performed by the incorporated owners of the building. Therefore, the owners' corporation is required, on behalf of all the owners of the building, to report the income and pay the tax.

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Related Information and Pamphlets


See

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2003 | Important notices | Privacy policy Last revision date: 23 December 2008