Property tax is levied on income arising from the letting of immovable property in Hong Kong, which is payable by the owner(s) at the standard rate of the year of assessment on “net assessable value” (NAV). Under the provisions of the Inland Revenue Ordinance, each and every joint owner or owner in common is responsible for reporting rental income on tax returns and paying property tax as if he/she is the sole owner.
Where the owner receives only rent and no other benefit, the annual rent is the “assessable value” (AV). Rent receivable (due but not yet received) should be included in the AV. Irrecoverable rent can be excluded from tax charge in the year in which it became irrecoverable. Any amount subsequently recovered is assessable to tax as income in the year of recovery.
The property tax is paid on 15 percent of the NAV:
- If the tenant pays rates, the NAV is equal to AV less than a standard allowance of 20 percent for repairs and outgoings;
- If the owner is responsible for paying rates, rates paid can be deducted before allowing for the 20 percent
A year of assessment runs from April 1 to March 31 of the following year.
Provisional property tax
Property tax is chargeable on NAV for each year of assessment. As the NAV for any particular year cannot be known until after the end of the year concerned, a provisional tax charge has to be raised. When the NAV for the year of assessment are subsequently ascertained, an assessment will be made and the provisional property tax paid will be utilized to offset the tax liability under the assessment.
[tips title="Did You Know"]The tax payer can apply in writing for holding over of the whole or part of the provisional property tax on the grounds as specified in the Inland Revenue Ordinance.[/tips]
Grounds for application
An application for holding over of provisional salaries tax may be made on one of the following grounds:
- The assessable value for the year of assessment for which provisional tax was charged is, or is likely to be, less than 90 percent of the assessable value for the preceding year or of the estimated assessable value in respect of which you are liable to pay provisional tax. Full particulars of the rental received and receivable should be furnished in support of your application.
- You have ceased, or will before the end of the year of assessment for which provisional tax was charged cease, to be an owner of property, and the cessation of ownership will result in a reduction of the assessable value on which provisional tax was charged. Full particulars of the cessation of ownership and the rental received and receivable should be furnished in support of the application.
- You have elected to be personally assessed for the year of assessment for which provisional tax was charged, and the election is likely to reduce your liability to tax. You have objected to your property tax assessment for the year preceding the year of assessment for which provisional tax was charged. Time limit for application
Your application for holding over of provisional tax should be lodged not later than:
- 28 days before the due date for payment of the provisional tax, or
- 14 days after the date of issue of the notice for payment of the provisional tax, whichever is later.
If the provisional tax is payable by two instalments and the first instalment has been settled by the due date, an application for holding over of the whole or part of the second instalment may be made subject to the prescribed time limit and grounds for application.