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Illustration of Computation of Property Tax and Application for Holdover of Provisional Property Tax

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Illustration of Computation of Property Tax and Application for Holdover of Provisional Property Tax

1.       Illustration of Computation of Property Tax
Example:
Rental income for 1 July 2019 to 31 March 2020: HK$38,000 per month
Rates paid by owner for the 3 quarters ending 31 March 2020: HK$12,000
Provisional Tax per last tax assessment for 2019/20: HK$35,000

Property tax for 2019/20 can be computed as follows:

Amount (HK$)

Assessable Value (HK$38,000 x 9)

342,000

Less: Rates paid by owner

12,000

330,000

Less: 20% statutory allowance for repairs and outgoings

(66,000)

Net Assessable Value

264,000

Property tax for 2019/20 @ 15%

39,600

Less: Net provisional tax 2019/20 previously charged

(35,000)

Balance of tax payable

4,600

Add: Provisional tax for 2020/21 (HK$264,000 x 12/9 x 15%)

52,800

Total tax payable

57,400


On the notice of assessment, two due dates for tax payment can be found. Normally the first payment date will fall in November of the same year of the issue date and the second payment date will fall in April of the next year. This is because insofar as provisional tax is concerned, property owner will have received 7 months’ rent (i.e., rent for April to October) by the end of October and the full year’s rent by the end of March next year.

2.       Application for Holdover of Provisional Tax
In the above sample, the taxpayer can apply for holding over of provisional property tax if any of the following condition is met:
a)
The assessable value for 2020/21 was less than or likely to be less than 90% of the assessable value for 2019/20 or 90% of the estimated assessable value for 2020/21; or
b)
He/she has sold the property concerned in 2020/21 and the rental income is reduced during 2020/21; or
c)
He/she applied for Personal Assessment that could reduce his/her total tax payable; or
d)
He has objected the 2019/20 assessment of Property Tax and still in progress, and the whole or part of the 2019/20 Property Tax assessment has been stoodover.

The application for holding over of Provisional Tax must be in writing and setting out the grounds for the hold-over. The application should be submitted to the Inland Revenue Department not later than 28 days before the due date of the provisional tax or 14 days after the date of issue of the notice for payment of the provisional tax, whichever is later.

Source:Hong Kong Inland Revenue Department’s website
- https://www.gov.hk/en/residents/taxes/property/propertycompute.htm
- https://www.gov.hk/en/residents/taxes/taxfiling/taxrates/propertyrates.htm



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