Hong Kong Rental Income Tax Guide: 15% Property Tax & 20% NAV Allowance
Rental income derived from Hong Kong real estate is subject to Property Tax under the Inland Revenue Ordinance (Cap. 112). Whether you own a single residential flat or a portfolio of commercial properties, understanding how the Inland Revenue Department (IRD) assesses rental income, what deductions apply, and how Personal Assessment can lower your tax bill is essential for financial efficiency.
Who Pays Rental Tax in Hong Kong?
Property tax is payable by the registered owner of land or buildings situated in Hong Kong if rental income is generated from the property. Owners include individual sole owners, joint tenants, tenants-in-common, corporations, and bodies of persons. If a property is held under joint ownership, each co-owner is assessed on their proportional share of the net assessable value recorded in the Land Registry deed.
How Rental Income is Taxed (15% Standard Rate)
Hong Kong Property Tax is levied at a flat standard rate of 15% on the Net Assessable Value (NAV) of the property. Unlike Salaries Tax, Property Tax does not use progressive rate brackets. The assessment formula is strictly defined by the IRD:
Statutory 20% Repair Allowance & Deductions
The IRD grants a statutory 20% allowance for repairs and outgoings automatically on assessable value after deducting rates paid by the owner. Key rules for deductions include:
- Rates Paid by Owner: Rates paid to the Rating and Valuation Department are deductible if paid by the landlord. Government rent is not deductible under Property Tax.
- Statutory 20% Allowance: The 20% deduction is applied automatically regardless of your actual maintenance or repair expenditure. Actual repair bills cannot be claimed separately.
- Irrecoverable Rent: Rent proved to have become irrecoverable during the year of assessment can be deducted from assessable value.
- Mortgage Interest Relief: Mortgage interest is not deductible under standard Property Tax. However, landlords can claim mortgage interest by electing Personal Assessment.
Calculation Example for Hong Kong Landlords
Suppose a landlord receives HK$25,000 monthly rent (HK$300,000 annually) and pays HK$10,000 in annual government rates:
- Gross Rent: HK$300,000
- Less Rates Paid by Owner: -HK$10,000 = HK$290,000
- Less 20% Statutory Allowance: -HK$58,000
- Net Assessable Value (NAV): HK$232,000
- Property Tax Payable (15% × HK$232,000): HK$34,800 (Effective rate on gross rent: 11.6%)
Property Tax Returns & IRD Filing Requirements
Landlords must declare rental income on Property Tax Returns (Form BIRC60 or BIR57) issued by the IRD. Electronic filing is available via the IRD eTAX Portal, offering an automatic 1-month filing extension. Keep all tenancy agreements, bank statements, and rent receipts for at least 7 years for IRD audit compliance.
Property Tax vs Stamp Duty
It is important to distinguish Property Tax from Stamp Duty:
- Property Tax: An annual tax assessed on ongoing rental income earned by property owners.
- Stamp Duty: A one-off transaction tax paid when executing tenancy agreements (lease stamping) or purchasing property. Learn more in our Hong Kong Stamp Duty Guide.