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 (16% for the year of assessment 2004/05 onwards), by the 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, payment for the right of use of premises under license (license fee), a lump sum premium, service charges and management fees paid to the owner, and owner¡¦s expenditure (e.g. repairs) borne by the tenant. Rent receivable (due but not yet received) should also be included in the assessable value. The above calculation is generally described as follow:
|(b)||Less:||Allowable Deductions (including rates paid by the property owner)|
|(c)||Assessable Value (a – b)|
|(d)||Less:||20% of Assessable Value for repairs and outgoings|
|Net Assessable Value (c – d)|