Understanding property tax is an essential first step in protecting your interests as a Hong Kong landlord.
Hong Kong property tax is charged on income earned by owners of land and buildings in Hong Kong. Many landlords have questions about its calculation, allowances and filing process. This article explains the latest policies for 2025, helping you manage property tax compliantly and reduce tax expenditure lawfully.
I. Property Tax Basics
Property tax is an important part of Hong Kong’s tax system, charged on property income earned by owners of local land and buildings. Under the Inland Revenue Ordinance, anyone who owns a Hong Kong property and receives rental income from it is required to pay property tax.
Unlike other taxes, property tax is charged on income from the property itself, rather than the owner’s total income. Overseas individuals and companies that own rental properties in Hong Kong and receive rent are therefore also required to pay property tax.
II. Who Must Pay Property Tax?
Under the Inland Revenue Ordinance, property tax is payable in the following cases:
- Individual owners: individuals who own and let Hong Kong properties for rental income. Corporate owners: companies that own and let Hong Kong properties for rental income.
- Partnerships: partnerships that own and let Hong Kong properties.
- Trustees: trustees holding and letting Hong Kong properties on trust.
Please note that owners of owner-occupied properties do not pay property tax, because it applies only to rental income from let properties.
III. Property Tax Rates and Calculations for 2025
1. Property Tax Rate
Hong Kong’s standard property tax rate is 15%, applied to net rental income.
2. Calculation Formula
Property tax is calculated as follows:
Property tax payable = (Annual rental income − Rates − Allowance for repairs and outgoings) × Standard rate
The calculation steps are:
- Calculate annual rental income, including rent received, rent payable and other income related to the use of the property.
- Subtract rates paid by the owner during the year of assessment.
- Deduct the allowance for repairs and outgoings, equal to 20% of rental income after deducting rates.
3. Worked Example
Suppose Mr Chan owns a residential unit with the following figures for the 2024/25 year of assessment:
Annual rental income: HK$200,000
Rates paid: HK$15,000
Allowance for repairs and outgoings: (HK$200,000 − HK$15,000) × 20% = HK$37,000
Net assessable value = HK$200,000 − HK$15,000 − HK$37,000 = HK$148,000
Property tax payable = HK$148,000 × 15% = HK$22,200
IV. Deductions and Allowances
Understanding allowable deductions helps landlords reduce tax lawfully. The main deductions are:
Rates: rates paid by the owner during the year of assessment.
Allowance for repairs and outgoings: a fixed 20% of rental income after deducting rates.
Vacancy periods: estimated rental income for a period when the property was not let may be deductible.
Bad debts: irrecoverable rent, subject to specific conditions.
Please note that property loan interest, management fees and insurance premiums and similar expenses cannot be deducted when calculating property tax.
V. Property Tax Exemptions
In certain circumstances, property income may qualify for full or partial exemption from property tax:
Owner-occupied property: the owner lives in the property and receives no rent.
Company business property: where a company owns a property used for business purposes, such as office premises, it may apply for exemption from property tax and pay profits tax instead.
Deceased owner: the property is managed by an estate representative and generates no income during estate administration.
Vacant property: the property is not let throughout the year of assessment.
To apply for exemption, owners must submit the relevant application form and supporting documents to the Inland Revenue Department.
VI. Property Tax Filing Process and Timetable
1. Filing Process
- Receive the tax return: the Inland Revenue Department usually sends property tax returns, Form BIR57, to owners in April each year.
- Complete the return: accurately report rental income and allowable expenses.
- Submit the return: normally return it to the Inland Revenue Department within 1 month of issue.
- Receive the assessment: the department calculates the tax payable and sends a notice of assessment.
- Pay the tax: pay by the date specified in the notice of assessment.
2. Provisional Property Tax
Before the end of the tax year, the Inland Revenue Department collects provisional property tax based on the previous year’s rental income. After the year ends, tax is recalculated using actual income, with any excess refunded or shortfall collected.
VII. Property Tax and Personal Assessment
Individual owners may elect for personal assessment to combine rental income with other income, such as salaries and business income, potentially resulting in a lower tax rate.
Benefits of electing for personal assessment:
Deduction of property loan interest, up to HK$100,000 a year.
Eligibility for the basic allowance and other allowances.
Tax calculated at progressive rates of 2%–17%, potentially below the standard property tax rate.
Owners should compare the tax payable under both methods and choose the more favourable option.
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Conclusion
Managing property tax is an important responsibility for every Hong Kong landlord. Understanding the calculations, allowances and filing process helps you comply with the law and reduce tax expenditure within the rules.
If you have questions about property tax filing or need professional assistance, the M&N professional team is ready to help. Our extensive Hong Kong tax experience enables us to assist with property tax filing, planning and optimisation.
Contact M&N today and let us help you manage property tax with ease.
References:
Inland Revenue Department: Property Tax—What You Need to Know as a Property Owner
https://www.ird.gov.hk/chi/tax/ind_ppt.htm
GovHK: How Property Tax Is Computed
https://www.gov.hk/tc/residents/taxes/property/propertycompute.htm
Frequently Asked Questions
A: Each joint owner calculates and pays property tax separately in proportion to their ownership interest. For example, an owner with a 50% interest declares property tax on 50% of the rental income.
A: The Inland Revenue Department specifies the deadline in the notice of assessment, usually within 1 month of issue. Late payment may incur a surcharge.
A: Report only the rental income earned during your ownership. State the sale date in the return and include rent only up to that date.
A: No property tax is payable if no rent is charged. However, where a property is let to a connected person at significantly below market rent, the Inland Revenue Department may assess it at market value.
A: Property tax is charged on rental income, while rates are charged on the property’s rateable value. They are different charges. Rates paid can be deducted from rental income when calculating property tax.
Disclaimer
This article was prepared by M&N using publicly available information and legislation for general guidance only. It should not be treated as legal or other professional advice. M&N accepts no responsibility for actions taken or losses arising from reliance on this article. Legislation changes from time to time; consult the latest official provisions or seek independent professional advice for a specific case.
