Take a flat let out for HK$360,000 a year, where the owner pays HK$12,000 of rates and has no irrecoverable rent. Start with the rent of HK$360,000 and subtract the HK$12,000 of owner-paid rates, leaving an assessable value of HK$348,000. The law then grants a flat 20 percent allowance for repairs and outgoings, so the net assessable value is 80 percent of HK$348,000, which is HK$278,400. Property tax is the 15 percent standard rate on that figure, which is HK$41,760. After paying the rates and the property tax, the owner keeps HK$306,240 of the rent before any mortgage interest, which is not deductible against property tax.
How it is calculated
Property tax is charged at the 15 percent standard rate on the net assessable value of a let property, not on the gross rent. The starting point is the rent and any related payments received, from which you deduct rates paid by the owner and any rent that has proved irrecoverable. A flat 20 percent of that figure is then allowed for repairs and outgoings, whether or not you actually spent it, so only the remaining 80 percent is taxed. Mortgage interest cannot be deducted under property tax, which is why many landlords elect for personal assessment instead, where loan interest and the progressive rates can reduce the bill. The 20 percent allowance is a notional figure set in law, so good record keeping on rates and irrecoverable rent matters more than tracking repair receipts.
Frequently asked questions
How is property tax calculated in Hong Kong?
Property tax is 15% of the net assessable value. Start with the rent received, subtract any rates you paid as owner and any irrecoverable rent, then deduct a flat 20% statutory allowance for repairs and outgoings. The remaining 80% is taxed at the 15% standard rate. Mortgage interest is not deductible against property tax, though it can be under personal assessment.
Who is liable to pay property tax in Hong Kong?
Property tax is levied on the owner of land or buildings situated in Hong Kong that are let for rent. The obligation falls on the registered legal owner, not the tenant. If a property is jointly owned, each co-owner is assessed on their proportionate share of the rental income.
Can I deduct mortgage interest from property tax?
Mortgage interest cannot be deducted when computing property tax liability. However, if you elect for personal assessment, you may offset mortgage interest paid on the property against your total income. Personal assessment is available to Hong Kong residents and can reduce the overall tax bill when the progressive salaries tax rate is lower than 15 percent.
What is the 20 percent statutory allowance for?
The Inland Revenue Ordinance grants a flat 20 percent deduction from the assessable value to cover repairs, maintenance, and other outgoings related to the property. This allowance is fixed by law and applies regardless of actual repair expenditure, so no receipts are required to claim it. It means only 80 percent of the assessable value is subject to the 15 percent tax rate.