{"id":1516,"date":"2022-06-14T18:02:10","date_gmt":"2022-06-14T10:02:10","guid":{"rendered":"https:\/\/pacersconsulting.com\/?p=1516"},"modified":"2022-07-14T17:15:25","modified_gmt":"2022-07-14T09:15:25","slug":"a-comprehensive-guide-to-property-tax-in-hong-kong","status":"publish","type":"post","link":"https:\/\/pacersconsulting.com\/en\/blog-en\/taxation-en\/a-comprehensive-guide-to-property-tax-in-hong-kong\/1516\/","title":{"rendered":"A Comprehensive Guide to Property Tax in Hong Kong"},"content":{"rendered":"\n<p>Recently, when I was helping my doctor friend who I have known for more than ten years to deal with his property tax, I realized that there is something that we may ignore when filing property tax. Therefore, we would like to share some information on property tax in Hong Kong, and we hope you can have a deeper understanding of it.<\/p>\n\n\n\n<p>Before we start, let\u2019s have a quick test to see your understanding of property tax.<\/p>\n\n\n\n<ol type=\"1\"><li>Are direct expenditures on the property tax deductible?<\/li><li>Should \u201clease premium\u201d and \u201crental deposit\u201d be included in the assessable value for property tax?<\/li><li>Can I include the uncollectible tax if the tenant fails to pay rent?<\/li><\/ol>\n\n\n\n<p>Want to know if your answers are correct? No worries, we will explain them to you at the end of this article.<\/p>\n\n\n\n<h2>Introduction to Property tax<\/h2>\n\n\n\n<figure class=\"wp-block-table is-style-regular\"><table><tbody><tr><td>Chargeable to\uff1a<\/td><td>Property owners who derive rental income from letting properties situated in Hong Kong<\/td><\/tr><tr><td>Year of Assessment\uff1a<\/td><td>From 1<sup>st<\/sup> April to 31<sup>st<\/sup> March in the following year<\/td><\/tr><tr><td>Tax Returns\uff1a<\/td><td>i.   Property solely owned by yourself \u2013Tax Return \u2013 Individual (BIR60)<br>ii.  Property jointly owned or co-owned by yourself with other people \u2013 Property Tax Return (BIR57)<br>iii. Property owned by corporations or body of persons \u2013 Property Tax Return (BIR57)<\/td><\/tr><tr><td>Tax Rates\uff1a<\/td><td>Fixed tax rate (15% of the assessable value for the property)<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<h2>Can I evade tax by not filing related tax items?<\/h2>\n\n\n\n<p>When letting properties, the property owner is required to submit the \u201cNet Letting or Renewal Agreement (Form CR109)\u201d and stamp property documents. Somebody may have the illusion that tax can be evaded by not filing tax. In fact, submitting \u201cNet Letting or Renewal Agreement (Form CR109)\u201d, stamping property documents and filing property tax are three separate procedures.<\/p>\n\n\n\n<p>1. New Letting or Renewal Agreement (\u201dCR109\u201d)<\/p>\n\n\n\n<figure class=\"wp-block-table is-style-regular\"><table><tbody><tr><td>Uses:<\/td><td>To protect the rights of property owners. If the tenant fails to pay rent, the property owner is required to show the stamped tenancy agreement and form CR109 to Land Tribunal to apply for recovering the outstanding rent. The Land Tribunal will not approve of the application if any required document is not provided.<\/td><\/tr><tr><td>Department:<\/td><td>Rating and Valuation Department<\/td><\/tr><tr><td>Fee:<\/td><td>Free of charge<\/td><\/tr><tr><td>Application methods<\/td><td>i.   Submit the completed form CR109 online<br>ii.  Submit the completed form CR109 to the Rating and Valuation Department in person<br>iii. Submit the completed form CR109 by post<\/td><\/tr><tr><td>Deadline of submission:<\/td><td>Within one month of signing a new tenancy or reaching agreement on a renewal<\/td><\/tr><tr><td>Penalty for late submission\uff1a<\/td><td>HK$310<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<p>2. Stamp<\/p>\n\n\n\n<figure class=\"wp-block-table is-style-regular\"><table><tbody><tr><td>Uses:<\/td><td>After stamping, the tenancy agreement will become legally binding. When facing tenancy disputes, the stamped agreement can be used as court evidence.<\/td><\/tr><tr><td>Department:<\/td><td>The Inland Revenue Department<\/td><\/tr><tr><td>Fee:<\/td><td>Levied based on the term of the lease (0.25%-1% of the yearly or average yearly rent) Any lease premium or construction fee stated in the agreement will be levied at 4.25% of the consideration<\/td><\/tr><tr><td>Application methods:<\/td><td>i.   By online system<br>ii.  By going to the Inland Revenue Department in person<br>iii. By post<\/td><\/tr><tr><td>Deadline of submission:<\/td><td>Being stamped within one month after the agreement is dually signed<\/td><\/tr><tr><td>Penalty for late stamping\uff1a<\/td><td>Depends on the length of delay <br>i.   Not exceeding one month &#8211; double the amount of stamp duty<br>ii.  Exceeding one month but not exceeding two months &#8211; four times the amount of stamp duty<br>iii. In any other case \u2013 ten times the amount of stamp duty<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<p>3. Filing of Property Tax Returns<\/p>\n\n\n\n<figure class=\"wp-block-table is-style-regular\"><table><tbody><tr><td>Uses:<\/td><td>Fulfil tax obligations of a property owner and report the rental income<\/td><\/tr><tr><td>Department:<\/td><td>The Inland Revenue Department<\/td><\/tr><tr><td>Tax:<\/td><td>Computed based on rental income<\/td><\/tr><tr><td>Filing methods:<\/td><td>i.   Submit by post<br>ii.  Submit by online system<br>iii. Submit by visiting the Inland Revenue Department<\/td><\/tr><tr><td>Time limit for filing:<\/td><td>Tax Return \u2013 Individual \/ Property Tax Returns should be filed within one month of the date of issue.<\/td><\/tr><tr><td>Late filing penalty:<\/td><td>May be subject to a fine of $10,000 and a further fine of treble the amount of the tax undercharged<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<p>When assessing property tax, the Inland Revenue Department mainly relies on the<\/p>\n\n\n\n<p>tax filing of taxpayers. Reporting rental income truthfully is one of the tax obligations<\/p>\n\n\n\n<p>of a property owner. If any tax evasion is revealed, not only fine will be imposed, but<\/p>\n\n\n\n<p>imprisonment may also result. Therefore, to bear your civic responsibility, report<\/p>\n\n\n\n<p>your tax truthfully.<\/p>\n\n\n\n<h2>Other tax obligations<\/h2>\n\n\n\n<p>Except for filing and submitting the tax return with reliable and accurate rental income, there are other tax obligations that a property owner should fulfil.<\/p>\n\n\n\n<ol type=\"i\"><li>Keep sufficient rent records for at least seven years<\/li><li>Notify liability to tax unless you have already received the tax return from the Inland Revenue Department<\/li><li>Notify cessation of ownership within one month of such cessation<\/li><li>Notify change of address within one month of charge<\/li><li>Pay the tax issued on time<\/li><\/ol>\n\n\n\n<h2>Answers<\/h2>\n\n\n\n<h3>1. Are direct expenditures on the property tax deductible?<\/h3>\n\n\n\n<p>They are not tax deductible. As 20% statutory allowance on the property&#8217;s assessable value for repair and outgoings has been allowed by the Inland Revenue Department. Therefore, no direct expenditures on the property are allowable as deductions for property tax.<\/p>\n\n\n\n<p>Deduction for mortgage interest incurred on the acquisition of the property can only be claimed as deductions by property owners who are eligible for and have chosen Personal Assessment.<\/p>\n\n\n\n<h3>2. Should \u201clease premium\u201d and \u201crental deposit\u201d be included in the assessable value for property tax?<\/h3>\n\n\n\n<p>Lease premium is chargeable to property tax as it is non-refundable. Therefore, it is treated as part of the rental income. Owners may choose to have lease. premium spread over the lease period (up to 36 months)<\/p>\n\n\n\n<p>Rental deposit should not be included in property tax as it is returnable. Therefore, it is not a part of the rental income. But if the rental deposit is used to set off part of the unpaid rent, then the balance of recovered rent will become tax chargeable.<\/p>\n\n\n\n<h3>3. Can I include the uncollectible tax if the tenant fails to pay rent?<\/h3>\n\n\n\n<p>Unpaid rent should still be included in property tax. From the perspective of the Inland Revenue Department, that is merely a delay of payment and is a temporary situation. The outstanding rent can be recovered in the future. Therefore, if the tenant fails to pay rent but has not moved, the owner is still letting properties to generate income. Only if the property owner can prove that the outstanding rent is \u201cirrecoverable\u201d, then the rent can be claimed as a deduction for property tax.<\/p>\n\n\n\n<p>If the outstanding tax is reported in the last year of assessment but can be proved to be \u201cirrecoverable\u201d in the current year, the deduction will be approved and included in the current year of assessment.<\/p>\n\n\n\n<h2>Conclusion<\/h2>\n\n\n\n<p>That\u2019s all the knowledge of property tax in Hong Kong we would like to share. We hope you can find a good tenant and have a deeper and more sophisticated understanding of property tax, which can help avoid all unnecessary penalties.<\/p>\n\n\n\n<p>Pacers is a diversified company providing professional consultancy services. We always think a step further for our clients. If you have encountered any difficulties when filing tax, please feel free to contact us directly on our website or email <a href=\"mailto:info@pacersconsulting.com\">info@pacersconsulting.com<\/a>.<\/p>\n\n\n\n<p>Want to hear more techniques and examples of tax filing? Follow us on <a href=\"https:\/\/www.facebook.com\/pacersconsulting\/\" target=\"_blank\" rel=\"noreferrer noopener\">Facebook<\/a>, <a href=\"https:\/\/www.instagram.com\/pacersconsulting\/\" target=\"_blank\" rel=\"noreferrer noopener\">Instagram<\/a>, and Google now to stay on top of our latest news!<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Recently, when I was helping my doctor friend who I have known for more than ten years to deal with his property tax, I realized that there is something that we may ignore when filing property tax. Therefore, we would like to share some information on property tax in Hong Kong, and we hope you [&hellip;]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"","_et_pb_old_content":"","_et_gb_content_width":""},"categories":[27],"tags":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v20.4 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>A Comprehensive Guide to Property Tax in Hong Kong - Pacers Consulting<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/pacersconsulting.com\/en\/blog-en\/taxation-en\/a-comprehensive-guide-to-property-tax-in-hong-kong\/1516\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"A Comprehensive Guide to Property Tax in Hong Kong - Pacers Consulting\" \/>\n<meta property=\"og:description\" content=\"Recently, when I was helping my doctor friend who I have known for more than ten years to deal with his property tax, I realized that there is something that we may ignore when filing property tax. 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