Q:
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What are the tax obligations as a property owner who has derived rental income from letting properties situated in Hong Kong?
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A:
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You need to:
1.
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keep sufficient records for at least 7 years of rent received, such as rental agreements, rental receipts, receipts for payment of rates, correspondence relating to modification of lease terms and recovery of rent in arrears;
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2.
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complete and submit a tax return for reporting rental income;
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3.
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if you have liability to property tax but have not received the tax return from the Inland Revenue Department, you need to notify them your liability to tax;
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4.
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notify cessation of ownership within 1 month of such cessation;
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5.
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notify change of address within 1 month of change; and
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6.
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pay your tax.
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Q:
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In which tax return should I report for my rental income?
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A:
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There are different types of tax returns and you need to report your tax liabilities on the appropriate one:
1.
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If you are the sole owner of the property, you should report your rental income in Tax Return – Individuals (BIR60)
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2.
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If you are the joint owners or co-owners of the property, you should report your rental income in Property Tax Return – Property Jointly Owned or Co-owned by Individuals (BIR57)
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3.
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If the property is owned by corporations or bodies of persons, you should report your rental income in Property Tax Return – Corporations and Bodies of Persons (BIR58)
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4.
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If you carry on busines in the form of a corporation, partnership business or if a non-resident person is chargeable to profits tax in your name, you should report the profits on Profits Tax Return – Corporations (BIR51), Profits Tax Return – Persons Other Than Corporations (BIR52) and Profits Tax Return – In Respect Of Non-Resident Persons (BIR54) respectively
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Q:
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How Property Tax is computed?
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A:
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Property Tax is computed at the standard rate on the net assessable value of the property for the relevant year of assessment. A year of assessment is from 1 April to 31 March of the following year. The net assessable value is computed as: Rental Income less Irrecoverable Rent less Rates paid by owner(s) less statutory allowance for repairs and outgoings.
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Q:
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What kind of rental income should be assessable?
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A:
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Rental income should include the following:
1.
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gross rent received or receivable;
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2.
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payment for the right of use of premises under licence;
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3.
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service charges or management fees paid to the owner;
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4.
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owner's expenditure borne by the tenant, e.g. repairs and property tax paid by the tenant;
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5.
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sums previously deducted as irrecoverable rent and now recovered; and
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6.
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lump sum premium.
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Q:
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What is the meaning of statutory allowance for repairs and outgoings?
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A:
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A deduction of 20% of the balance of the rental income after deducting the irrecoverable rent and the rates paid by the owner(s) will be automatically granted to you every year to simplify the administration of tax assessments. The 20% statutory allowance for repairs and outgoings is an all-inclusive element. You cannot claim deductions separately for government rent, decoration fees, rent-collection fees, building management fees, insurance and mortgage interests.
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