The law specifically provides that lease premium is assessable to property tax in the same way as rent. If you have received lease premium, the amount shall be included in the assessable value of the property in the year of commencement of the lease concerned.
However, if the period of the lease is not contained within any one year of assessment, you should spread the lease premium into equal monthly instalments over the period of the lease or a period of 3 years, whichever is shorter, and include the relevant amount as rental income for the years of assessment concerned.
Government Rent and Rates
Only rates agreed to be paid and paid by owner is deductible for tax purposes, while the government rent levied in the “Demand for Rates and/or Government Rent” is not deductible. It is advisable for the property owner to keep all the receipts for payment of rates for at least 7 years.
Management Fees
If it is provided in the tenancy agreement that the tenant is responsible for the payment of the management fee, then where the tenant pays management fees to the management service provider through the landlord, the fee so paid should not be included as considerable payable in respect of the right of use of the relevant property.
Election for Personal Assessment
The landlord may reduce his tax liability by election for Personal Assessment which brings all his income including property income, salaries income and business income into a single assessment, making adjustments for deductions such as basic allowance, married person’s allowance, child allowance, dependent parent allowance, etc. from the chargeable income. Besides, he can claim mortgage interest on loans for purchase of the property under Personal Assessment, such interest is not deductible under Property Tax.
If the landlord has property income only, it is always advisable for him to elect for Personal Assessment. If he has other income, he can also make the election in his tax return because such election will not take effect if it is not advantageous for him.
Source：Hong Kong Inland Revenue Department’s website
All information in this article is only for the purpose of information sharing, instead of professional suggestion. Kaizen will not assume any responsibility for loss or damage.
The assessable value is computed by reference to the actual consideration payable to the owner in respect of the right of use of the property. Examples of consideration to be included in the assessable value are rent, payment for the right of use of premises under licence, lump sum premium, services charges and management fee paid to the owner, and owner’s expenditure (e.g. repairs) borne by the tenant.
Hong Kong property tax is levied annually on the owner(s). If the property is owned by two or more persons, tax assessment will be in the name of joint-owners/co-owners and liability to pay Hong Kong property tax and provisional property tax is joint and several.Rates are tax levied on the occupation of property and are charged at a percentage of the rateable value of the property.
Section 5 of the Hong Kong Inland Revenue Ordinance (“IRO”) levies property tax on the property owner in respect of the rental income of his land or buildings or land and buildings in Hong Kong. In general, the tax will be equal to: (Rental income less rates paid by owner and irrecoverable rents) x 80% x Standard rate.
If you are the individual sole property owner, you should report your rental income in your Tax Return – Individuals. If the property is owned by corporations and/or bodies of persons, rental income must be reported through Property Tax Return – Corporations and Bodies of Persons.
