Tax on property income in Hong Kong
Taxation Researcher | January 13, 2023
Tax Rate on Rental Income
|Click here to see a worked example|
Global Property Guide research
Taxation in Hong Kong is based on the territorial source principle; i.e., where the income was earned. Income derived from outside Hong Kong is not taxed in Hong Kong. Married couples are assessed and taxed separately unless they elect for joint taxation.
The tax year in Hong Kong starts on 01 April and ends on 31 March the following year. The tax year 2014-2015 is from 01 April 2014 to 31 March 2015. The tax year 2015-2016 is from 01 April 2015 to 31 March 2016.
Taxable income is classified into different categories. Applicable income tax rates depend on the income classification. When renting out a property, the landlord will pay property tax instead of income tax.
Income derived from renting out property is subject to property tax. Property tax is charged at a standard rate of 15% of the property´s net assessable value. The net assessable value (NAV) is the assessable value (after deduction of rates paid by the owner, if applicable, and irrecoverable rent), and then less an allowance of 20% of that assessable value for repairs and outgoings, regardless of whether or not repairs and outgoings were actually incurred.
|Less:||Rates Paid By Owners|
|Less:||Statutory Allowance for Repairs and Outgoings (20% of Assessable Value)|
|=||Net Assessable Value|
Property tax is levied on the owner of the property. The owner is obliged to keep sufficient records of rent received, such as lease agreements and duplicates of rent receipts, receipts for rates, correspondence relating to modification of lease terms and recovery of rents in arrears etc, for at least 7 years.
STAMP DUTY ON PROPERTY LEASESFor property leases, stamp duty is calculated at a specified rate of the annual rental value, which varies with the term or duration of the lease.
STAMP DUTY ON PROPERTY LEASES
|Lease term is undefined or uncertain|
|Up to 1 year|
|1 year - 3 years|
|Over 3 years|
No capital gains tax exists in Hong Kong.