Hong Kong Property Tax - Miscellaneous Items
Lump Sum Premium
The law specifically provides that lease premium is assessable to property tax in the same way as rent. If you have received lease premium, the amount shall be included in the assessable value of the property in the year of commencement of the lease concerned.
However, if the period of the lease is not contained within any one year of assessment, you should spread the lease premium into equal monthly instalments over the period of the lease or a period of 3 years, whichever is shorter, and include the relevant amount as rental income for the years of assessment concerned.
Government Rent and Rates
Only rates agreed to be paid and paid by owner is deductible for tax purposes, while the government rent levied in the “Demand for Rates and/or Government Rent” is not deductible. It is advisable for the property owner to keep all the receipts for payment of rates for at least 7 years.
If it is provided in the tenancy agreement that the tenant is responsible for the payment of the management fee, then where the tenant pays management fees to the management service provider through the landlord, the fee so paid should not be included as considerable payable in respect of the right of use of the relevant property.
Election for Personal Assessment
The landlord may reduce his tax liability by election for Personal Assessment which brings all his income including property income, salaries income and business income into a single assessment, making adjustments for deductions such as basic allowance, married person’s allowance, child allowance, dependent parent allowance, etc. from the chargeable income. Besides, he can claim mortgage interest on loans for purchase of the property under Personal Assessment, such interest is not deductible under Property Tax.
If the landlord has property income only, it is always advisable for him to elect for Personal Assessment. If he has other income, he can also make the election in his tax return because such election will not take effect if it is not advantageous for him.
Source：Hong Kong Inland Revenue Department’s website