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
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]
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.]
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.
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.
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.
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.
What should I do if I disagree with the tax assessment
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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