The Scope of the Charge
Property Tax is charged on the owners of land and/or buildings in Hong Kong and is computed at the standard rate of 15% on the net assessable value of the property.
The Basis of Assessment
The assessable value is computed by reference to the actual rental income 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 license, lump sum premium, service charges and management fee paid to the owner, and owner’s expenditure (e.g. repairs) borne by the tenant. The net assessable value is the assessable value (after deduction of rates paid by the owner) less an allowance of 20% for repairs and outgoings.
The following items can be claimed as deductions:
(1) Rates if the owner is responsible for the payment of rates of the property;
(2) Consideration chargeable to tax which has become irrecoverable during the year of assessment (sums so deducted as irrecoverable rent and later recovered should be included in arriving at the assessable value in the year of recovery);
(3) A 20% notional allowance for repair and outgoings. This is a flat rate deduction irrespective of the actual amount spent and is to be given after deduction of rates and irrecoverable consideration.
Note: No other expenses are allowable for Property Tax purposes.
Properties for Owner’s Business Use
If the income from property chargeable to Property Tax is included in the taxpayer’s profits for Profits Tax purposes, or if the property owned by the taxpayer is occupied by him/her 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, may be exempt from paying the Property Tax which would otherwise be set off against their Profits Tax.